Tenet Healthcare
Annual Report 2016

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Morningstar® Document Research℠ FORM 10-KTENET HEALTHCARE CORP - THCFiled: February 27, 2017 (period: December 31, 2016)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 ☒☒Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016 OR ☐☐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) Nevada 95-2557091(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 class Name of each exchange on which registeredCommon stock, $0.05 par value New York Stock Exchange6⅞% Senior Notes due 2031 New 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 ☒ No ☐ 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 ☐ No ☒ 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 preceding12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ☒ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (asdefined in Exchange Act Rule 12b-2). Large accelerated filer ☒Accelerated filer ☐Non-accelerated filer ☐Smaller reporting company ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☒ As of June 30, 2016, the aggregate market value of the shares of common stock held by non-affiliates of the Registrant (treating directors, executive officerswho were SEC reporting persons, and holders of 10% or more of the common stock outstanding as of that date, for this purpose, as affiliates) was approximately$1.9 billion based on the closing price of the Registrant’s shares on the New York Stock Exchange on that day. As of January 31, 2017, there were 99,813,435shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive proxy statement for the 2017 annual meeting of shareholders are incorporated by reference into Part III of thisForm 10-K. Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 Page PART I Item 1. Business 1 Item 1A. Risk Factors 25 Item 1B. Unresolved Staff Comments 38 Item 2. Properties 38 Item 3. Legal Proceedings 38 Item 4. Mine Safety Disclosures 38 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 39 Item 6. Selected Financial Data 41 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 43 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 99 Item 8. Financial Statements and Supplementary Data 101 Consolidated Financial Statements 104 Notes to Consolidated Financial Statements 109 Supplemental Financial Information 149 Item 9. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure 150 Item 9A. Controls and Procedures 150 Item 9B. Other Information 150 PART III Item 10. Directors, Executive Officers and Corporate Governance 151 Item 11. Executive Compensation 151 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 151 Item 13. Certain Relationships and Related Transactions, and Director Independence 151 Item 14. Principal Accounting Fees and Services 151 PART IV Item 15. Exhibits and Financial Statement Schedules 152 Signatures 159 i Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 adiversified healthcare services company. We operate regionally focused, integrated healthcare delivery networks, primarilyin large urban and suburban markets in the United States. At December 31, 2016, we operated 79 hospitals, 20 short-staysurgical hospitals, over 470 outpatient centers, and nine facilities in the United Kingdom through our subsidiaries,partnerships and joint ventures, including USPI Holding Company, Inc. (“USPI joint venture”). In addition, ourConifer Holdings, Inc. (“Conifer”) subsidiary provides healthcare business process services in the areas of hospital andphysician revenue cycle management and value-based care solutions to healthcare systems, as well as individual hospitals,physician practices, self-insured organizations, health plans and other entities. For financial reporting purposes, our businesslines are classified into three separate reportable operating segments – Hospital Operations and other, Ambulatory Care andConifer. Additional information about our business segments is provided below, and financial and statistical data for thesegments can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,of Part II of this report. The healthcare industry, in general, and the acute care hospital business, in particular, are experiencing significantregulatory uncertainty based, in large part, on legislative efforts to significantly modify or repeal and potentially replace thePatient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010(“Affordable Care Act” or “ACA”). It is difficult to predict the full impact of these actions on our future revenues andoperations. However, we believe that our ultimate success in increasing our profitability depends in part on our success inexecuting the strategies discussed in detail in Item 7, Management’s Discussion and Analysis of Financial Condition andResults of Operations, of Part II of this report. In general, these strategies are intended to address the following trends shapingthe demand for healthcare services: (i) consumers, employers and insurers are actively seeking lower-cost solutions and bettervalue as they focus more on healthcare spending; (ii) patient volumes are shifting from inpatient to outpatient settings due totechnological advancements and demand for care that is more convenient, affordable and accessible; (iii) the industry ismigrating to value-based payment models with government and private payers shifting risk to providers; and(iv) consolidation continues across the entire healthcare sector through both traditional acquisition and divestiture activities,as well as joint ventures. Our ability to execute on our strategies and manage these trends is subject to a number of risks anduncertainties that may cause actual results to be materially different from expectations. For information about risks anduncertainties that could affect our results of operations, see the Forward-Looking Statements and Risk Factors sections inPart I of this report. Over the past several years, and with the aforementioned trends in mind, we have taken a number of steps to betterposition Tenet to compete more effectively in the ever evolving healthcare environment. We have set competitive prices forour services, made capital and other investments in our facilities and technology, increased our efforts to recruit and retainquality physicians, nurses and other healthcare personnel, and negotiated competitive contracts with managed care and otherprivate payers. In addition, we have expanded our network of outpatient centers, and we have increased the participation ofour hospitals in accountable care organizations. We have also entered into joint ventures with other healthcare providers inseveral of our markets to maximize effectiveness, reduce costs and build clinically integrated networks that provide qualityservices across the care continuum. Moreover, we are continuing our strategy of selling assets in non-core markets, such asour former hospitals and related operations in Georgia and North Carolina, as well as sub-scale businesses, such as our healthplans. With respect to Conifer, we have added new clients in the revenue cycle and value-based care businesses andexpanded engagements with existing clients. OPERATIONS HOSPITAL OPERATIONS AND OTHER SEGMENT Hospitals, Ancillary Outpatient Facilities and Related Businesses—At December 31, 2016, our subsidiariesoperated 79 hospitals, including three academic medical centers, two children’s hospitals, two specialty hospitals andone critical access hospital, serving primarily urban and suburban communities in 12 states. Our subsidiaries had soleownership of 62 of those hospitals, 14 were owned or leased by entities that are, in turn, jointly owned by a1 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTenet subsidiary and a healthcare system partner or group of physicians, and three were owned by third parties and leased byour wholly owned subsidiaries. Our Hospital Operations and other segment also included 177 outpatient centers atDecember 31, 2016, the majority of which are provider-based diagnostic imaging centers, freestanding urgent care centers,satellite emergency departments and provider-based ambulatory surgery centers. In addition, at December 31, 2016, oursubsidiaries owned or leased and operated: a long-term acute care hospital; a number of medical office buildings, all of whichwere located on, or nearby, our hospital campuses; approximately 650 physician practices; accountable care networks;various health plans, which we intend to divest or wind down in 2017; and other ancillary healthcare businesses. Our Hospital Operations and other segment generated approximately 86%, 91% and 94% of our consolidated netoperating revenues for the years ended December 31, 2016, 2015 and 2014, respectively. Factors that affect patient volumesand, thereby, the results of operations at our hospitals and related healthcare facilities include, but are not limited to: (1)changes in federal and state healthcare regulations; (2) the business environment, economic conditions and demographics oflocal communities in which we operate; (3) the number of uninsured and underinsured individuals in local communitiestreated at our hospitals; (4) seasonal cycles of illness; (5) climate and weather conditions; (6) physician recruitment, retentionand attrition; (7) advances in technology and treatments that reduce length of stay; (8) local healthcare competitors; (9)managed care contract negotiations or terminations; (10) the number of patients with high-deductible health insurance plans;(11) any unfavorable publicity about us, or our joint venture partners, that affects our relationships with physicians andpatients; 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, clinical laboratories and pharmacies; in addition, most have intensive care, critical care and/orcoronary care units, physical therapy, and orthopedic, oncology and outpatient services. Many of our hospitals providetertiary care services, such as open-heart surgery, neonatal intensive care and neurosciences, and some also offer quaternarycare in areas such as heart, liver, kidney and bone marrow transplants. Our children’s hospitals provide tertiary andquaternary pediatric services, including bone marrow and kidney transplants, as well as burn services. Moreover, a number ofour hospitals offer advanced treatment options for patients, including limb-salvaging vascular procedures, acute level 1trauma services, comprehensive intravascular stroke care, minimally invasive cardiac valve replacement, cutting edgeimaging technology, and telemedicine access for selected medical specialties. Except as set forth in the table below, each of our hospitals is accredited by The Joint Commission. With suchaccreditation, our hospitals are deemed to meet the Medicare Conditions of Participation and are eligible to participate ingovernment-sponsored provider programs, such as the Medicare and Medicaid programs. The following table lists, by state, the hospitals wholly owned, operated as part of a joint venture, or leased andoperated by our wholly owned subsidiaries at December 31, 2016: Licensed Hospital Location Beds Status Alabama Brookwood Medical Center Birmingham 607 JVCitizens Baptist Medical Center Talladega 122 JVPrinceton Baptist Medical Center Birmingham 505 JVShelby Baptist Medical Center Alabaster 252 JVWalker Baptist Medical Center Jasper 267 JV Arizona Abrazo Arizona Heart Hospital Phoenix 59 OwnedAbrazo Arrowhead Campus Glendale 217 OwnedAbrazo Central Campus Phoenix 221 OwnedAbrazo Maryvale Campus Phoenix 232 OwnedAbrazo Scottsdale Campus Phoenix 136 OwnedAbrazo West Campus Goodyear 188 OwnedHoly Cross Hospital Nogales 25 JVSt. Joseph's Hospital Tucson 486 JVSt. Mary's Hospital Tucson 400 JV2 (1)(1)(1)(1)(1)(2)(3), (4)(3)(3)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Licensed Hospital Location Beds Status California Desert Regional Medical Center Palm Springs 385 LeasedDoctors Hospital of Manteca Manteca 73 OwnedDoctors Medical Center Modesto 461 OwnedEmanuel Medical Center Turlock 209 OwnedFountain Valley Regional Hospital and Medical Center Fountain Valley 400 OwnedHi-Desert Medical Center Joshua Tree 179 LeasedJohn F. Kennedy Memorial Hospital Indio 145 OwnedLakewood Regional Medical Center Lakewood 172 OwnedLos Alamitos Medical Center Los Alamitos 167 OwnedPlacentia Linda Hospital Placentia 114 OwnedSan Ramon Regional Medical Center San Ramon 123 JVSierra Vista Regional Medical Center San Luis Obispo 164 OwnedTwin Cities Community Hospital Templeton 122 Owned Florida Coral Gables Hospital Coral Gables 245 OwnedDelray Medical Center Delray Beach 493 OwnedFlorida Medical Center – a campus of North Shore Lauderdale Lakes 459 OwnedGood Samaritan Medical Center West Palm Beach 333 OwnedHialeah Hospital Hialeah 378 OwnedNorth Shore Medical Center Miami 357 OwnedPalm Beach Gardens Medical Center Palm Beach Gardens 199 LeasedPalmetto General Hospital Hialeah 368 OwnedSt. Mary’s Medical Center West Palm Beach 464 OwnedWest Boca Medical Center Boca Raton 195 Owned Illinois Louis A. Weiss Memorial Hospital Chicago 236 OwnedMacNeal Hospital Berwyn 368 OwnedWest Suburban Medical Center Oak Park 234 OwnedWestlake Hospital Melrose Park 230 Owned Massachusetts MetroWest Medical Center – Framingham Union Campus Framingham 147 OwnedMetroWest Medical Center – Leonard Morse Campus Natick 152 OwnedSaint Vincent Hospital Worcester 283 Owned Michigan Children’s Hospital of Michigan Detroit 228 OwnedDetroit Receiving Hospital Detroit 273 OwnedHarper University Hospital Detroit 470 OwnedHuron Valley-Sinai Hospital Commerce Township 158 OwnedHutzel Women’s Hospital Detroit 114 OwnedRehabilitation Institute of Michigan Detroit 69 OwnedSinai-Grace Hospital Detroit 404 Owned 3 (5)(6)(7)(8)(2)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Licensed Hospital Location Beds Status Missouri Des Peres Hospital St. Louis 143 Owned Pennsylvania Hahnemann University Hospital Philadelphia 496 OwnedSt. Christopher’s Hospital for Children Philadelphia 189 Owned South Carolina Coastal Carolina Hospital Hardeeville 41 OwnedEast Cooper Medical Center Mount Pleasant 140 OwnedHilton Head Hospital Hilton Head 93 OwnedPiedmont Medical Center Rock Hill 288 Owned Tennessee Saint Francis Hospital Memphis 479 OwnedSaint Francis Hospital – Bartlett Bartlett 196 Owned Texas Baptist Medical Center San Antonio 623 OwnedBaylor Scott & White Medical Center – Centennial Frisco — JVBaylor Scott & White Medical Center – Lake Pointe Rowlett — JVBaylor Scott & White Medical Center – Sunnyvale Sunnyvale — JVBaylor Scott & White Medical Center – White Rock Dallas — JVCypress Fairbanks Medical Center Houston 181 OwnedThe Hospitals of Providence East Campus El Paso 182 OwnedThe Hospitals of Providence Memorial Campus El Paso 480 OwnedThe Hospitals of Providence Sierra Campus El Paso 329 OwnedHouston Northwest Medical Center Houston 423 JVMission Trail Baptist Hospital San Antonio 110 OwnedNacogdoches Medical Center Nacogdoches 153 OwnedNorth Central Baptist Hospital San Antonio 429 OwnedNortheast Baptist Hospital San Antonio 371 OwnedPark Plaza Hospital Houston 444 OwnedResolute Health New Braunfels 128 OwnedSt. Luke’s Baptist Hospital San Antonio 282 OwnedValley Baptist Medical Center Harlingen 586 OwnedValley Baptist Medical Center – Brownsville Brownsville 280 Owned Total Licensed Beds 20,354 (1)Operated by a limited liability company formed as part of a joint venture with Baptist Health System, Inc. (“BHS”), a not-for-profithealthcare system in Alabama; a Tenet subsidiary owned a 60% interest in the entity at December 31, 2016, and BHS owned a 40% interest.(2)Specialty hospital.(3)Owned by a limited liability company formed as part of a joint venture with Dignity Health and Ascension Arizona, each of which is a not-for-profit healthcare system; a Tenet subsidiary owned a 60% interest in the entity at December 31, 2016, Dignity Health owned a 22.5%interest and Ascension Arizona owned a 17.5% interest.(4)Designated by the Centers for Medicare and Medicaid Services (“CMS”) as a critical access hospital. Although it has not sought to beaccredited, the hospital participates in the Medicare and Medicaid programs by otherwise meeting the Medicare Conditions of Participation.(5)Lease expires in May 2027.(6)Lease expires in July 2045.(7)Owned by a limited liability company formed as part of a joint venture with John Muir Health (“JMH”), a not-for-profit healthcare systemin the San Francisco Bay area; a Tenet subsidiary owned a 51% interest in the entity at December 31, 2016, and JMH owned a 49% interest.(8)Facility was leased at December 31, 2016; however, we exercised our purchase option under the lease in February 2016 and subsequentlypurchased the property in February 2017.(9)Managed by a Tenet subsidiary and owned by a limited partnership that is owned by a limited liability partnership (the “JV LLP”) formedas part of a joint venture with Baylor Scott & White Health (“BSW”), a not-for-profit healthcare system; at December 31, 2016, a Tenetsubsidiary owned a 25% interest in the JV LLP, and BSW owned a 75% interest.4 (9), (10)(10), (11)(10), (12)(10), (13)(14)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents(10)Although we manage the operations of this hospital, we have not included its licensed beds in the table because the statistical informationassociated with the hospital is not presented on a consolidated basis with our other facilities.(11)Managed by a Tenet subsidiary and owned by a limited liability company in which the JV LLP (in which we own a 25% interest, as setforth in footnote (9) above) indirectly owned a 94.67% interest at December 31, 2016. As a result, our ownership interest in this facility isapproximately 23.67%.(12)Managed by a Tenet subsidiary and operated by a limited liability company in which the JV LLP (in which we own a 25% interest, as setforth in footnote (9) above) indirectly owned a 60.18% interest at December 31, 2016. As a result, our ownership interest in this facility isapproximately 15%.(13)Managed by a Tenet subsidiary and owned by the JV LLP (in which we own a 25% interest, as set forth in footnote (9) above).(14)Owned by a limited liability company in which a Tenet subsidiary owned an 87.8% interest at December 31, 2016 and is the managingmember. Information regarding the utilization of licensed beds and other operating statistics at December 31, 2016, 2015 and2014 can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, ofPart II of this report. At December 31, 2016, our Hospital Operations and other segment also included 66 diagnostic imaging centers, 15satellite emergency departments, 10 ambulatory surgery centers and six urgent care centers operated as departments of ourhospitals and under the same license, as well as 80 separately licensed, freestanding outpatient centers – typically atlocations complementary to our hospitals – consisting of eight diagnostic imaging centers, seven emergency hospitals (alsoknown as microhospitals), four ambulatory surgery centers and 61 urgent care centers, the majority of which are managed byour USPI joint venture and operated under our national MedPost brand. Over half of the outpatient centers in our HospitalOperations and other segment at December 31, 2016 were in California, Florida and Texas, the same states where we had thelargest concentrations of licensed hospital beds. Strong concentrations of hospital beds and outpatient centers within marketareas may help us contract more successfully with managed care payers, reduce management, marketing and other expenses,and more efficiently utilize resources. However, these concentrations increase the risk that, should any adverse economic,regulatory, environmental or other condition occur in these areas, our overall business, financial condition, results ofoperations or cash flows could be materially adversely affected. Accountable Care Networks—We own, control or operate 18 accountable care networks – in Alabama, Arizona,California, Florida, Illinois, Michigan, Missouri, Pennsylvania and Texas – and participate in four additional accountablecare networks with other healthcare providers for select markets in Arizona, California, Massachusetts and Texas. Anaccountable care organization (“ACO”) is a network of providers and suppliers that work together to invest in infrastructureand to redesign delivery processes in an effort to achieve high quality and efficient delivery of services. Because theypromote accountability and coordination of care, ACOs are intended to produce savings as a result of improved quality andoperational efficiencies. ACOs that achieve quality performance standards established by the U.S. Department of Health andHuman Services (“HHS”) are eligible to share in a portion of the amounts saved by the Medicare program. These networksoperate using a range of payment and delivery models. Health Plans—We recently announced our intention to sell or otherwise wind down our health plan businesses bythe end of 2017 because they are not a core part of our long-term strategy and are sub-scale. Our health plans remain subjectto numerous federal and state statutes and regulations related to their business operations, and each health plan continues tobe licensed by one or more agencies in the states in which they conduct business. In addition, insurance regulators in severalof the states in which we currently operate have required us to establish cash reserves in connection with certain of our healthplans. AMBULATORY CARE SEGMENT Our Ambulatory Care segment is comprised of the operations of our USPI joint venture and our nine EuropeanSurgical Partners Limited (“Aspen”) facilities in the United Kingdom. The operations of our Ambulatory Care segmentgenerated approximately 9% of our consolidated net operating revenues for the year ended December 31, 2016. At December31, 2016, we had a 56.3% ownership interest in the USPI joint venture, while Welsh, Carson, Anderson & Stowe (“WelshCarson”), a private equity firm that specializes in healthcare investments, owned approximately 41% through twosubsidiaries, and Baylor University Medical Center (“Baylor”) owned approximately 3%. In January 2017, the subsidiaries ofWelsh Carson delivered a put notice to us for the minimum number of shares (representing a 6.25% ownership interest in ourUSPI joint venture) that they are required to put to us in 2017 according to our put/call agreement. We expect that theclosing of the put transaction will occur in the three months ending June 30, 2017 in accordance with the terms of theput/call agreement. We are currently evaluating the additional call options available to us pursuant to the put/callagreement. Also in January 2017, Baylor exercised its option to purchase an additional 1.99%5 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsof the total outstanding shares of the USPI joint venture from the subsidiaries of Welsh Carson. The closing of thattransaction will occur following receipt of necessary regulatory approvals. Our USPI Joint Venture’s Business—Our USPI joint venture acquires and develops its facilities primarily throughthe formation of joint ventures with physicians and healthcare systems. Subsidiaries of the USPI joint venture hold ownershipinterests in the facilities directly or indirectly and operate the facilities on a day-to-day basis through management servicescontracts. We believe that this acquisition and development strategy and operating model will enable our USPI joint ventureto continue to grow because of various industry trends we have seen emerge in recent years, namely that: (1) consumers areincreasingly selecting services and providers based on cost and convenience, as well as quality; (2) more procedures areshifting from inpatient to outpatient settings; (3) payer reimbursements have become more closely tied to performance onquality and service metrics; and (4) healthcare providers are entering into joint ventures to maximize effectiveness, reducecosts and build clinically integrated networks. The surgical facilities in our USPI joint venture primarily specialize in non-emergency cases and are licensed asambulatory surgery centers, specialty hospitals or hospitals. We believe surgery centers and surgical hospitals offer manyadvantages to patients and physicians, including greater affordability, predictability and convenience. Medical emergenciesat acute care hospitals often demand the unplanned use of operating rooms and result in the postponement or delay ofscheduled surgeries, disrupting physicians’ practices and inconveniencing patients. Outpatient facilities generally providephysicians with greater scheduling flexibility, more consistent nurse staffing and faster turnaround time between cases. Inaddition, many physicians choose to perform surgery in outpatient facilities because their patients prefer the comfort of a lessinstitutional atmosphere and the convenience of simplified admissions and discharge procedures. New surgical techniques and technology, as well as advances in anesthesia, have significantly expanded the typesof surgical procedures that are being performed in surgery centers and have helped drive the growth in outpatient surgery.Improved anesthesia has shortened recovery time by minimizing post-operative side effects, such as nausea and drowsiness,thereby avoiding the need for overnight hospitalization in many cases. Furthermore, some states permit surgery centers tokeep a patient for up to 23 hours, which allows for more complex surgeries, previously performed only in an inpatient setting,to be performed in a surgery center. In addition to these technological and other clinical advancements, a changing payer environment has contributedto the growth of outpatient surgery relative to all surgery performed. Government programs, private insurance companies,managed care organizations and self-insured employers have implemented cost-containment measures to limit increases inhealthcare expenditures, including procedure reimbursement. Furthermore, as self-funded employers are looking to curbannual increases in premiums, they continue to shift additional financial responsibility to patients through higher co-pays,deductibles and premium contributions. These cost-containment measures have contributed to the shift in the delivery ofhealthcare services away from traditional inpatient hospitals to more cost-effective alternate sites, including short-staysurgical facilities. We believe that surgeries performed at short-stay surgical facilities are generally less expensive thanhospital-based outpatient surgeries because of lower facility development costs, more efficient staffing and space utilization,and a specialized operating environment focused on quality of care and cost containment. We operate our USPI joint venture’s facilities, structure our joint ventures, and adopt staffing, scheduling, andclinical systems and protocols with the goal of increasing physician productivity. We believe that this focus on physiciansatisfaction, combined with providing high-quality healthcare in a friendly and convenient environment for patients, willcontinue to increase the number of procedures performed at our facilities each year. Our joint ventures also enable healthcaresystems to offer patients, physicians and payers the cost advantages, convenience and other benefits of ambulatory care in afreestanding facility and, in certain markets, establish networks needed to manage the full continuum of care for a definedpopulation. Further, these relationships allow the healthcare systems to focus their attention and resources on their corebusiness without the challenge of acquiring, developing and operating these facilities. At December 31, 2016, our USPI joint venture had interests in 239 ambulatory surgery centers, 34 urgent carecenters operated under the CareSpot brand, 21 imaging centers and 20 short-stay surgical hospitals in 27 states. Of these 314facilities, 177 are jointly owned with healthcare systems. As further described in Note 1 to our Consolidated6 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsFinancial Statements, we do not consolidate the financial results of 108 of the facilities in which our USPI joint venture hasan ownership interest, meaning that while we record a share of their net profit within our operating income as equity inearnings of unconsolidated affiliates, we do not include their revenues and expenses in the consolidated revenue andexpense line items of our consolidated financial statements. Additional financial and other information about ourAmbulatory Care operating segment can be found in Item 7, Management’s Discussion and Analysis of Financial Conditionand Results of Operations, of Part II of this report. Aspen’s Business—Aspen Healthcare’s four acute care hospitals, one cancer center and four outpatient facilities offerpatients in the United Kingdom a complete range of private healthcare and clinical services, including inpatient care,outpatient and minimally invasive treatment and surgery, and diagnostic imaging. As with our USPI joint venture, a numberof Aspen’s facilities are owned jointly with physicians and other health provider organizations. CONIFER SEGMENT Our Conifer subsidiary provides a number of services primarily to healthcare providers to assist them in generatingimprovements in their operating margins, while also enhancing patient, physician and employee satisfaction. The operationsof our Conifer segment generated approximately 5% of our consolidated net operating revenues for the year ended December31, 2016. Revenue Cycle Management—Conifer provides accounts receivable management, health information management,revenue integrity services and patient financial services, including: ·centralized insurance and benefit verification, financial clearance, pre-certification, registration and check‑inservices; ·financial counseling services, including reviews of eligibility for government healthcare programs, for bothinsured and uninsured patients; ·productivity and quality improvement programs, revenue cycle assessments and optimizationrecommendations, and accreditation preparedness services; ·coding and compliance support, billing assistance, auditing, training and data management services at everystep in the revenue cycle process; ·third-party billing and collections; and ·ongoing measurement and monitoring of key revenue cycle metrics. These revenue cycle management solutions assist hospitals, physician practices and other healthcare organizations inimproving cash flow, revenue, and physician and patient satisfaction. Patient Communications and Engagement Services—Conifer offers customized communications and engagementsolutions to optimize the relationship between providers and patients. Conifer’s trained customer service representativesprovide direct, 24-hour, multilingual support for (1) physician referrals, calls regarding maternity services and other patientinquiries, (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, seminarsand other events and services. In addition, Conifer provides clinical admission reviews that are intended to provide evidence-based support for physician decisions on patient status and reduce staffing costs. Management Services—Conifer also supports value-based performance through clinical integration, financial riskmanagement and population health management, all of which assist hospitals, physicians, ACOs, health plans, self-insuredemployers and government agencies in improving the cost and quality of healthcare delivery, as well as patient outcomes.Conifer helps clients build clinically integrated networks that provide predictive analytics and quality measures across thecare continuum. In addition, Conifer assists clients in improving both the cost and quality of care by7 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsaligning and managing financial incentives among healthcare stakeholders through risk modeling and management ofvarious payment models. Furthermore, Conifer offers clients tools and analytics to improve quality of care and provide caremanagement support for patients with chronic diseases by identifying high-risk patients and monitoring clinical outcomes. Customers—At December 31, 2016, Conifer provided one or more of the business process services described abovefrom 20 service centers to more than 800 Tenet and non-Tenet hospital and other clients in over 40 states. In 2012, weentered into agreements documenting the terms and conditions of various services Conifer provides to Tenet hospitals, aswell as certain administrative services our Hospital Operations and other segment provides to Conifer. The pricing terms forthe services provided by each party to the other under these contracts were based on estimated third-party pricing terms ineffect at the time the agreements were signed. Prior to the expiration of these contracts in December 2018, we will undertake anew fair market value analysis with respect to the pricing of these services and use that analysis in our negotiation of renewalcontracts. As a result, it is possible that the pricing under the renegotiated agreements may be different from the currentagreements. In addition, Conifer has an agreement with Catholic Health Initiatives (“CHI”) to provide patient access, revenueintegrity and patient financial services to 90 CHI hospitals through 2032. As further described in Note 15 to ourConsolidated Financial Statements, CHI has a 23.8% ownership position in Conifer’s principal operating subsidiary, ConiferHealth Solutions, LLC. For the year ended December 31, 2016, approximately 41% of Conifer’s net operating revenues were attributable toits relationship with Tenet and approximately 35% were attributable to its relationship with CHI. The loss of CHI’s business would have a material adverse impact on our Conifer segment, although not on Tenet as a whole. Additional financial andother information about our Conifer operating segment can be found in Item 7, Management’s Discussion and Analysis ofFinancial Condition and Results of Operations, of Part II of this report. We intend to continue to market and expand Conifer’s revenue cycle management, patient communications andengagement services, and management services businesses. We believe that our success in growing Conifer and increasing itsprofitability depends in part on our success in executing the following strategies: (1) attracting as new clients hospitals andother healthcare providers who currently handle their revenue cycle management processes internally; (2) generating newclient relationships through opportunities from USPI and Tenet’s acute care hospital corporate development activities;(3) expanding revenue cycle management and value-based care service offerings through organic development and smallacquisitions; (4) leveraging data from tens of millions of patient interactions to capture new opportunities and service thevalue-based care environment to drive competitive differentiation; and (5) developing services for our Ambulatory Caresegment, leveraging our USPI joint venture’s capabilities. However, there can be no assurance that Conifer will be successfulin generating new client relationships, particularly with respect to hospitals we or Conifer’s other customers sell, as therespective buyers may not continue to use Conifer’s services or, if they do, they may not do so under the same contractualterms. REAL PROPERTY The locations of our hospitals and the number of licensed beds at each hospital at December 31, 2016 are set forth inthe table beginning on page 2. We lease the majority of our outpatient facilities in both our Hospital Operations and othersegment and our Ambulatory Care segment. These leases typically have initial terms ranging from five to 20 years, and mostof the leases contain options to extend the lease periods. Our subsidiaries also operate a number of medical office buildings,all of which are located on, or nearby, our hospital campuses. We own many of these medical office buildings; the remainderare owned by third parties and leased by our subsidiaries. Our corporate headquarters are located in Dallas, Texas. In addition, we maintain administrative and regional officesin markets where we operate hospitals and other businesses, including our USPI joint venture and Conifer. We typically leaseour office space under operating lease agreements. We believe that all of our properties are suitable for their respective usesand 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 our intellectual property assets. However, third parties may develop intellectual8 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsproperty that is similar or superior to ours. We also license third-party software, other technology and certain trademarksthrough agreements that impose specific restrictions on our ability to use the licensed items, such as prohibiting reverseengineering and limiting the use of copies with respect to licensed software. We control access to and use of our software andother technology through a combination of internal and external controls. Although we do not believe the intellectualproperty we utilize infringes any intellectual property right held by a third party, we could be prevented from utilizing suchproperty and could be subject to significant damage awards if our use is found to do so. PHYSICIANS AND EMPLOYEES Physicians—Our operations depend in significant part on the number, quality, specialties, and admitting andscheduling practices of the licensed physicians who have been admitted to the medical staffs of our hospitals and whoaffiliate with us and use our facilities as an extension of their practices. Under state laws and other licensing standards,medical staffs are generally self-governing organizations subject to ultimate oversight by the facility’s local governingboard. Members of the medical staffs of our hospitals also often serve on the medical staffs of facilities we do not operate, andthey are free to terminate their association with our hospitals or admit their patients to competing facilities at any time. AtDecember 31, 2016, we owned approximately 650 physician practices, and we employed (where permitted by state law) orotherwise affiliated with nearly 2,000 physicians; however, we have no contractual relationship with the overwhelmingmajority of the physicians who practice at our hospitals and outpatient centers. It is essential to our ongoing business that weattract an appropriate number of quality physicians in the specialties required to support our services and that we maintaingood relations with those physicians. In some of our markets, physician recruitment and retention are affected by a shortageof physicians in certain specialties and the difficulties that physicians can experience in obtaining affordable malpracticeinsurance or finding insurers willing to provide such insurance. Moreover, our ability to recruit and employ physicians isclosely regulated. Employees—At December 31, 2016, we employed over 130,000 people (of which 23% were part-time employees) inour three business segments, as follows: Hospital Operations and other 98,500Ambulatory Care 17,540Conifer 15,570Total 131,610(1)Includes approximately 1,000 employees supporting the consolidated operations of our business. We are subject to federal minimum wage and hour laws and various state labor laws, and maintain a number of differentemployee benefit plans. In addition to physicians, the operations of our facilities are dependent on the efforts, abilities and experience of ourfacilities management and medical support employees, including nurses, therapists, pharmacists and lab technicians. Wecompete with other healthcare providers in recruiting and retaining qualified personnel responsible for the day-to-dayoperations of our facilities. In some markets, there is a limited availability of experienced medical support personnel, whichdrives up the local wages and benefits required to recruit and retain employees. In particular, like others in the healthcareindustry, we continue to experience a shortage of critical-care nurses in certain disciplines and geographic areas. Moreover,we hire many newly licensed nurses in addition to experienced nurses, which requires us to invest in their training. Union Activity and Labor Relations—At December 31, 2016, approximately 23% of the employees in our HospitalOperations and other segment were represented by labor unions. There were no unionized employees in our Ambulatory Caresegment, and less than 1% of Conifer’s employees belong to a union. Unionized employees – primarily registered nurses andservice and maintenance workers – are located at 34 of our hospitals, the majority of which are in California, Florida andMichigan. We currently have six expired contracts covering approximately 8% of our unionized employees and arenegotiating renewals under extension agreements. We are also negotiating first contracts at three hospitals and one physicianpractice covering approximately 5% of our unionized employees where employees recently selected union representation. Atthis time, we are unable to predict the outcome of the negotiations, but increases in salaries, wages and benefits could resultfrom these agreements. Furthermore, there is a possibility that9 (1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsstrikes could occur during the negotiation process, which could increase our labor costs and have an adverse effect on ourpatient admissions and net operating revenues. Organizing activities by labor unions could increase our level of unionrepresentation in future periods. Mandatory Nurse-Staffing Ratios—At this time, California is the only state in which we operate that requiresminimum nurse-to-patient staffing ratios to be maintained at all times in acute care hospitals. If other states in which weoperate adopt mandatory nurse-staffing ratios or if California reduces its minimum nurse-staffing ratios already in place, itcould have a significant effect on our labor costs and have an adverse impact on our net operating revenues if we are requiredto limit patient admissions in order to meet the required ratios. COMPETITION HEALTHCARE SERVICES Generally, other hospitals and outpatient centers in the local communities we serve provide services similar to thosewe offer, and, in some cases, competing facilities are more established or newer than ours. Furthermore, competing facilities(1) may offer a broader array of services to patients and physicians than ours, (2) may have larger or more specialized medicalstaffs to admit and refer patients, (3) may have a better reputation in the community, (4) may be more centrally located withbetter parking or closer proximity to public transportation or (5) may be able to negotiate more favorable reimbursement ratesthat they may use to strengthen their competitive position. In the future, we expect to encounter increased competition fromsystem-affiliated hospitals and healthcare companies, as well as health insurers and private equity companies seeking toacquire providers, in specific geographic markets. We also face competition from specialty hospitals (some of which are physician-owned) and unaffiliatedfreestanding outpatient centers for market share in high-margin services and for quality physicians and personnel. In recentyears, the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent care centers anddiagnostic imaging centers in the geographic areas in which we operate has increased significantly. Furthermore, some of thehospitals that compete with our hospitals are owned by government agencies or not-for-profit organizations. These tax-exempt competitors may have certain financial advantages not available to our facilities, such as endowments, charitablecontributions, 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 beavailable at our hospitals. Another major factor in the competitive position of a hospital or outpatient facility is the ability to negotiatecontracts with managed care plans. Health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”),third-party administrators, and other third-party payers use managed care contracts to encourage patients to use certainhospitals in exchange for discounts from the hospitals’ established charges. Our future success depends, in part, on our abilityto retain and renew our managed care contracts and enter into new managed care contracts on competitive terms. Otherhealthcare providers may affect our ability to enter into acceptable managed care contractual arrangements or negotiateincreases in our reimbursement. For example, some of our competitors may negotiate exclusivity provisions with managedcare plans or otherwise restrict the ability of managed care companies to contract with us. Furthermore, the trend towardconsolidation among non-government payers tends to increase their bargaining power over fee structures. In addition, the competitive position of hospitals and outpatient facilities is dependent in significant part on thenumber, quality, specialties, and admitting and scheduling practices of the licensed physicians who have been admitted tothe medical staffs of the hospitals and who affiliate with and use outpatient facilities as an extension of their practices.Members of the medical staffs of our hospitals also often serve on the medical staffs of facilities we do not operate, and theyare free to terminate their association with our hospitals or admit their patients to competing facilities at any time. State laws that require findings of need for construction and expansion of healthcare facilities or services (asdescribed in “Healthcare Regulation and Licensing — Certificate of Need Requirements” below) may also have the effect ofrestricting competition. In addition, in those states that do not have certificate of need requirements or that do not requirereview of healthcare capital expenditure amounts below a relatively high threshold, competition in the form of new services,facilities and capital spending is more prevalent.10 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 strategies are designed to help our hospitals and outpatient facilities remain competitive. We believe targetedcapital spending on critical growth opportunities, emphasis on higher-demand clinical service lines (including outpatientlines) and improved quality metrics at our hospitals will improve our patient volumes. Furthermore, we have significantlyexpanded our outpatient business, and we have increased our focus on operating our outpatient centers with improvedaccessibility and more convenient service for patients, increased predictability and efficiency for physicians, and lower costsfor payers. We have also sought to include all of our hospitals and other healthcare businesses in the related geographic areaor nationally when negotiating new managed care contracts, which may result in additional volumes at facilities that werenot previously a part of such managed care networks. We have made significant investments in equipment, technology, education and operational strategies designed toimprove clinical quality at all of our facilities. We believe physicians refer patients to a hospital on the basis of the qualityand scope of services it renders to patients and physicians, the quality of other physicians on the medical staff, the location ofthe hospital, and the quality of the hospital’s facilities, equipment and employees. In addition, we continually collaboratewith physicians to implement the most current evidence-based medicine techniques to improve the way we provide care,while using labor management tools and supply chain initiatives to reduce variable costs. We believe the use of thesepractices will promote the most effective and efficient utilization of resources and result in shorter lengths of stay, as well asreductions in readmissions for hospitalized patients. In general, we believe that quality of care improvements may have theeffects of: (1) reducing costs; (2) increasing payments from Medicare and certain managed care payers for our services asgovernmental and private payers move to pay-for-performance models, and the commercial market moves to more narrownetworks and other methods designed to encourage covered individuals to use certain facilities over others; and (3)increasing physician and patient satisfaction, which may improve our volumes. Moreover, in several markets, we have formed clinically integrated organizations, which are collaborations withindependent physicians and hospitals to develop ongoing clinical initiatives designed to control costs and improve thequality of care delivered to patients. Arrangements like these provide a foundation for negotiating with plans under an ACOstructure or other risk-sharing model. However, we do face competition from other healthcare systems that are implementingsimilar physician alignment strategies, such as employing physicians, acquiring physician practice groups, and participatingin ACOs or other clinical integration models. REVENUE CYCLE MANAGEMENT SOLUTIONS Our Conifer subsidiary faces competition from existing participants and new entrants to the revenue cyclemanagement market, some of which may have significantly greater capital resources than Conifer. In addition, the internalrevenue cycle management staff of hospitals and other healthcare providers, who have historically performed many of thefunctions addressed by our services, in effect compete with us. Moreover, providers who have previously made investmentsin internally developed solutions may choose to continue to rely on their own resources. We also currently compete withseveral categories of external participants in the revenue cycle market, most of which focus on small components of thehospital revenue cycle, including: ·software vendors and other technology-supported revenue cycle management business process outsourcingcompanies; ·traditional consultants, either specialized healthcare consulting firms or healthcare divisions of largeaccounting 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 basedprimarily on: (1) knowledge and understanding of the complex public and private healthcare payment and reimbursementsystems; (2) a track record of delivering revenue improvements and efficiency gains for hospitals and other healthcareproviders; (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 and flexibility of the technology platform; (6) understanding of the healthcare industry’s regulatoryenvironment; and (7) financial resources to maintain current technology and other infrastructure.11 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 has pursued a program to attract additional clients and diversify its client base. To be successful, Conifermust 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 renderConifer’s technologies or services obsolete or less marketable. Even if Conifer’s technologies and services are more effectivethan the offerings of its competitors, current or potential customers might prefer competitive technologies or services toConifer’s technologies and services. Furthermore, increased competition has resulted and may continue to result in pricingpressures, which could negatively impact Conifer’s margins, growth rate or market share. HEALTHCARE REGULATION AND LICENSING HEALTHCARE REFORM The Affordable Care Act extended health coverage to millions of uninsured legal U.S. residents through acombination of private sector health insurance reforms and public program expansion. To fund the expansion of insurancecoverage, the ACA includes measures designed to promote quality and cost efficiency in healthcare delivery and to generatebudgetary savings in the Medicare and Medicaid programs. In addition, the ACA contains provisions intended to strengthenfraud and abuse enforcement. As further discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results ofOperations, of Part II of this report, the expansion of health insurance coverage under the ACA resulted in an increase in thenumber of patients using our facilities with either private or public program coverage and a decrease in uninsured and charitycare admissions. Although a substantial portion of both our patient volumes and, as result, our revenues has historically beenderived from government healthcare programs, reductions to our reimbursement under the Medicare and Medicaid programsas a result of the ACA have been partially offset by increased revenues from providing care to previously uninsuredindividuals. In January 2017, some members of Congress began renewed efforts to modify, repeal or otherwise invalidate all orsignificant portions of the ACA. In addition, the President issued an executive order on January 20, 2017 declaring that theofficial policy of his administration will be to seek the prompt repeal of the ACA and directing the heads of all executivedepartments and agencies to minimize the economic and regulatory burdens of the ACA to the maximum extent permitted bylaw while the ACA remains in effect. The White House also sent a memorandum to federal agencies directing them to freezeany new or pending regulations. We cannot predict if or when modification or repeal of the ACA will take effect or what action, if any, Congressmight take with respect to replacing the law. We are also unable to predict the impact of legislative and regulatory changeson our future revenues and operations. However, if the ultimate impact is that significantly fewer individuals have private orpublic health coverage, we will experience decreased volumes, reduced revenues, an increase in uncompensated care and a higher level of bad debt expense, which would adversely affect our results of operations and cash flows. This negative effectwill be exacerbated if the ACA’s reductions in the growth of Medicare spending and reductions in Medicare disproportionateshare hospital (“DSH”) payments that have already taken effect are not reversed if the law is repealed or if further reductions(including Medicaid DSH reductions previously scheduled to take effect under the ACA in federal fiscal year (“FFY”) 2018)are made. ANTI-KICKBACK AND SELF-REFERRAL REGULATIONS Anti-Kickback Statute—Medicare and Medicaid anti-kickback and anti-fraud and abuse amendments codifiedunder Section 1128B(b) of the Social Security Act (the “Anti-kickback Statute”) prohibit certain business practices andrelationships that might affect the provision and cost of healthcare services payable under the Medicare and Medicaidprograms and other government programs, including the payment or receipt of remuneration for the referral of patients whosecare will be paid for by such programs. Specifically, the law prohibits any person or entity from offering, paying, soliciting orreceiving anything of value, directly or indirectly, for the referral of patients covered by Medicare, Medicaid and otherfederal healthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase ororder of any item, good, facility or service covered by these programs. In addition to addressing other12 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsmatters, as discussed below, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) also amended TitleXI (42 U.S.C. Section 1301 et seq.) to broaden the scope of fraud and abuse laws to include all health plans, whether or notpayments under such health plans are made pursuant to a federal program. Moreover, the Affordable Care Act, which remainslaw at this time, amended the Anti-kickback Statute to provide that intent to violate the Anti-kickback Statute is notrequired; rather, intent to violate the law generally is all that is required. Sanctions for violating the Anti-kickback Statute include criminal and civil penalties, as well as fines andmandatory exclusion from government programs, such as Medicare and Medicaid. In addition, submission of a claim forservices or items generated in violation of the Anti-kickback Statute constitutes a false or fraudulent claim and may besubject to additional penalties under the federal False Claims Act (“FCA”). Furthermore, it is a violation of the federal CivilMonetary Penalties Law to offer or transfer anything of value to Medicare or Medicaid beneficiaries that is likely toinfluence their decision to obtain covered goods or services from one provider or service over another. Many states havestatutes similar to the federal Anti-kickback Statute, except that the state statutes usually apply to referrals for servicesreimbursed by all third-party payers, not just federal programs. The federal government has also issued regulations that describe some of the conduct and business relationshipsthat 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 the following: investment interests; space rental; equipmentrental; 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;managed care arrangements; obstetrical malpractice insurance subsidies; investments in group practices; ambulatory surgerycenters; referral agreements for specialty services; cost-sharing waivers for pharmacies and emergency ambulance services;and local transportation. The fact that certain conduct or a given business arrangement does not meet a Safe Harbor does notnecessarily render the conduct or business arrangement illegal under the Anti-kickback Statute. Rather, such conduct andbusiness arrangements may be subject to increased scrutiny by government enforcement authorities and should be reviewedon a case-by-case basis. Stark Law—The Stark law generally restricts referrals by physicians of Medicare or Medicaid patients to entitieswith which the physician or an immediate family member has a financial relationship, unless one of several exceptionsapplies. The referral prohibition applies to a number of statutorily defined “designated health services,” such as clinicallaboratory, physical therapy, radiology, and inpatient and outpatient hospital services; the prohibition does not apply tohealth services provided by an ambulatory surgery center if those services are included in the surgery center’s compositeMedicare payment rate. However, if the ambulatory surgery center is separately billing Medicare for designated healthservices that are not covered under the ambulatory surgery center’s composite Medicare payment rate, or if either theambulatory surgery center or an affiliated physician is performing (and billing Medicare) for procedures that involvedesignated health services that Medicare has not designated as an ambulatory surgery center service, the Stark law’s self-referral prohibition would apply and such services could implicate the Stark law. Exceptions to the Stark law’s referralprohibition cover a broad range of common financial relationships. These statutory and the subsequent regulatory exceptionsare available to protect certain permitted employment relationships, relocation arrangements, leases, group practicearrangements, medical directorships, and other common relationships between physicians and providers of designated healthservices, such as hospitals. A violation of the Stark law may result in a denial of payment, required refunds to patients and theMedicare program, civil monetary penalties of up to $15,000 for each violation, civil monetary penalties of up to $100,000for “sham” arrangements, civil monetary penalties of up to $10,000 for each day that an entity fails to report requiredinformation, and exclusion from participation in the Medicare and Medicaid programs and other federal programs. Inaddition, the submission of a claim for services or items generated in violation of the Stark law may constitute a false orfraudulent claim, and thus be subject to additional penalties under the FCA. Many states have adopted self-referral statutessimilar to the Stark law, some of which extend beyond the related state Medicaid program to prohibit the payment or receiptof remuneration for the referral of patients and physician self-referrals regardless of the source of the payment for the care. Ourparticipation in and development of joint ventures and other financial relationships with physicians could be adverselyaffected by the Stark law and similar state enactments. The Affordable Care Act also made changes to the “whole hospital” exception in the Stark law, effectivelypreventing new physician-owned hospitals after March 23, 2010 and limiting the capacity and amount of physicianownership in existing physician-owned hospitals. As revised, the Stark law prohibits physicians from referring Medicarepatients to a hospital in which they have an ownership or investment interest unless the hospital had physician ownership13 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsand a Medicare provider agreement as of March 23, 2010 (or, for those hospitals under development at the time of the ACA’senactment, as of December 31, 2010). A physician-owned hospital that meets these requirements is still subject to restrictionsthat limit the hospital’s aggregate physician ownership percentage and, with certain narrow exceptions for hospitals with ahigh percentage of Medicaid patients, prohibit expansion of the number of operating rooms, procedure rooms or beds.Physician-owned hospitals are also currently subject to reporting requirements and extensive disclosure requirements on thehospital’s website and in any public advertisements. Implications of Fraud and Abuse Laws—At December 31, 2016, three of our hospitals in our Hospital Operationsand other segment, and the majority of the facilities that operate as hospitals in our Ambulatory Care segment, are owned byjoint ventures that include some physician owners and are subject to the limitations and requirements in the Affordable CareAct on physician-owned hospitals. Furthermore, the majority of ambulatory surgery centers in our Ambulatory Care segment,which are owned by joint ventures with physicians or healthcare systems, are subject to the Anti-kickback Statute and, incertain circumstances, may be subject to the Stark law. In addition, we have contracts with physicians and non-physicianreferral services providing for a variety of financial arrangements, including employment contracts, leases and professionalservice agreements, such as medical director agreements. We have also provided financial incentives to recruit physicians torelocate to communities served by our hospitals, including income and collection guarantees and reimbursement ofrelocation costs, and will continue to provide recruitment packages in the future. Furthermore, new payment structures, suchas ACOs and other arrangements involving combinations of hospitals, physicians and other providers who share paymentsavings, could potentially be seen as implicating anti-kickback and self-referral provisions. Our operations could be adversely affected by the failure of our arrangements to comply with the Anti‑kickbackStatute, the Stark law, billing requirements, current state laws, or other legislation or regulations in these areas adopted in thefuture. We are unable to predict whether other legislation or regulations at the federal or state level in any of these areas willbe adopted, what form such legislation or regulations may take or how they may impact our operations. For example, wecannot predict whether physicians may ultimately be restricted from holding ownership interests in hospitals or whether theexception relating to services provided by ambulatory surgery centers could be eliminated. We are continuing to enter intonew financial arrangements with physicians and other providers in a manner we believe complies in all material respects withapplicable anti-kickback and anti-fraud and abuse laws. However, governmental officials responsible for enforcing these lawsmay nevertheless assert that we are in violation of these provisions. In addition, these statutes or regulations may beinterpreted and enforced by the courts in a manner that is not consistent with our interpretation. An adverse determinationcould subject us to liabilities under the Social Security Act, including criminal penalties, civil monetary penalties andexclusion from participation in Medicare, Medicaid or other federal healthcare programs, any of which could have a materialadverse effect on our business, financial condition or results of operations. In addition, any determination by a federal or stateagency or court that our USPI joint venture or its subsidiaries has violated any of these laws could give certain of ourhealthcare system partners a right to terminate their relationships with us; and any similar determination with respect toConifer or any of its subsidiaries could give Conifer’s customers the right to terminate their services agreements with us.Moreover, any violations by and resulting penalties or exclusions imposed upon our USPI joint venture’s healthcare systempartners or Conifer’s customers could adversely affect their financial condition and, in turn, have a material adverse effect onour business and results of operations. Retention of Independent Compliance Monitor—As previously disclosed, in September 2016, one of oursubsidiaries, Tenet HealthSystem Medical, Inc. (“THSMI”), entered into a Non-Prosecution Agreement (“NPA”) with theCriminal Division, Fraud Section, of the U.S. Department of Justice (“DOJ”) and the U.S. Attorney’s Office for the NorthernDistrict of Georgia (together, the “Offices”). The NPA requires, among other things, (i) THSMI and the Company to fullycooperate with the Offices in any matters relating to the conduct described in the NPA and other conduct under investigationby the Offices at any time during the term of the NPA, and (ii) the Company to retain an independent compliance monitor toassess, oversee and monitor its compliance with the obligations under the NPA. On February 1, 2017, the Company retainedtwo independent co-monitors (the “Monitor”), who are partners in a national law firm. The NPA is scheduled to expire on February 1, 2020 (three years from the date on which the Monitor was retained).However, in the event the Offices determine, in their sole discretion, that the Company, or any of its subsidiaries or affiliates,has knowingly violated any provision of the NPA, the NPA could be extended by the Offices,14 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsin their sole discretion, for up to one year, without prejudice to the Offices’ other rights under the NPA. Conversely, in theevent the Offices find, in their sole discretion, that there exists a change in circumstances sufficient to eliminate the need for amonitor, or that the other provisions of the NPA have been satisfied, the oversight of the Monitor or the NPA itself may beterminated early. The Monitor’s primary responsibility is to assess, oversee and monitor the Company’s compliance with itsobligations under the NPA, so as to specifically address and reduce the risk of any recurrence of violations of the Anti-kickback Statute and Stark law (collectively, “Misconduct”) by any entity the Company owns, in whole or in part. In doingso, the Monitor will review and monitor the effectiveness of the Company’s compliance with the Anti-kickback Statute andthe Stark law, as well as respective implementing regulations, advisories and advisory opinions promulgated thereunder, andmake such recommendations as the Monitor believes are necessary to comply with the NPA. With respect to all entities inwhich the Company or one of its affiliates owns a direct or indirect equity interest of 50% or less and does not manage orcontrol the day-to-day operations, the Monitor’s access to such entities shall be co-extensive with the Company’s access orcontrol and for the purpose of reviewing the conduct. During its term, the Monitor will review and provide recommendationsfor improving compliance with the Anti-kickback Statute and Stark law, as well as the design, implementation andenforcement of the Company’s compliance and ethics programs for the purpose of preventing future criminal and ethicalviolations by the Company and its subsidiaries, including, but not limited to, violations related to the conduct giving rise tothe NPA and the Criminal Information filed in connection with the NPA. For additional information regarding the duties andauthorities of the Monitor, reference is made to the Company’s Current Report on Form 8-K filed on October 3, 2016. HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT Title II, Subtitle F of the Health Insurance Portability and Accountability Act mandates the adoption of specificstandards for electronic transactions and code sets that are used to transmit certain types of health information. HIPAA’sobjective is to encourage efficiency and reduce the cost of operations within the healthcare industry. To protect theinformation transmitted using the mandated standards and the patient information used in the daily operations of a coveredentity, HIPAA also sets forth federal rules protecting the privacy and security of protected health information (“PHI”). Theprivacy and security regulations address the use and disclosure of individually identifiable health information and the rightsof patients to understand and control how their information is used and disclosed. The law provides both criminal and civilfines and penalties for covered entities that fail to comply with HIPAA. To receive reimbursement from CMS for electronic claims, healthcare providers and health plans must use HIPAA’selectronic data transmission (transaction and code set) standards when transmitting certain healthcare informationelectronically. Effective October 1, 2015, CMS changed the formats used for certain electronic transactions and beganrequiring the use of updated standard code sets for certain diagnoses and procedures known as ICD-10 code sets. Althoughuse of the ICD-10 code sets required significant modifications to our payment systems and processes, the costs of compliancewith these regulations has not had and is not expected to have a material adverse effect on our business, financial condition,results of operations or revenues. Furthermore, our electronic data transmissions are compliant with current HHS standards foradditional electronic transactions and with HHS’ operating rules to promote uniformity in the implementation of eachstandardized electronic transaction. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect theconfidentiality, integrity and availability of electronic PHI maintained or transmitted by them or by others on their behalf.The covered entities we operate are in material compliance with the privacy, security and National Provider Identifierrequirements of HIPAA. In addition, most of Conifer’s customers are covered entities, and Conifer is a business associate tomany of those customers under HIPAA as a result of its contractual obligations to perform certain functions on behalf of andprovide certain services to those customers. As a business associate, Conifer’s use and disclosure of PHI is restricted byHIPAA and the business associate agreements Conifer 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 the HIPAA privacy and security requirements directly upon business associates of covered entitiesand significantly increase the monetary penalties for violations of HIPAA. Regulations that took effect in late 2009 alsorequire business associates such as Conifer to notify covered entities, who in turn must notify affected15 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsindividuals and government authorities, of data security breaches involving unsecured PHI. Since the passage of the HITECHAct, enforcement of HIPAA violations has increased. A knowing breach of the HIPAA privacy and security requirementsmade applicable to business associates by the HITECH Act could expose Conifer to criminal liability (as well as contractualliability to the associated covered entity), and a breach of safeguards and processes that is not due to reasonable cause orinvolves willful neglect could expose Conifer to significant civil penalties and the possibility of civil litigation underHIPAA and applicable state law. We have developed a comprehensive set of policies and procedures in our efforts to comply with HIPAA, and similarstate privacy laws, under the guidance of our ethics and compliance department. Our compliance officers and informationsecurity officers are responsible for implementing and monitoring compliance with our HIPAA privacy and security policiesand procedures throughout our company. We have also created an internal web-based HIPAA training program, which ismandatory for all U.S.-based employees. Based on existing regulations and our experience with HIPAA to this point, wecontinue to believe that the ongoing costs of complying with HIPAA will not have a material adverse effect on our business,financial condition, results of operations or cash flows. GOVERNMENT ENFORCEMENT EFFORTS AND QUI TAM LAWSUITS Both federal and state government agencies continue heightened and coordinated civil and criminal enforcementefforts against the healthcare industry. The operational mission of the Office of Inspector General (“OIG”) of HHS is to protectthe integrity of the Medicare and Medicaid programs and the well-being of program beneficiaries by: detecting andpreventing waste, fraud and abuse; identifying opportunities to improve program economy, efficiency and effectiveness; andholding accountable those who do not meet program requirements or who violate federal laws. The OIG carries out itsmission by conducting 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 facilitatecompliance in all material respects with the laws, rules and regulations affecting the healthcare industry, these policies andprocedures may not be effective. Healthcare providers are also subject to qui tam or “whistleblower” lawsuits under the federal False Claims Act,which allows private individuals to bring actions on behalf of the government, alleging that a hospital or healthcare providerhas 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, plus mandatory civilpenalties for each false claim submitted to the government. As part of the resolution of a qui tam case, the party filing theinitial complaint may 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 action independently. There are many potential bases for liability under theFCA. Liability often arises when an entity knowingly submits a false claim for reimbursement to the federal government. TheFCA defines the term “knowingly” broadly. Though simple negligence will not give rise to liability under the FCA,submitting a claim with reckless disregard to its truth or falsity constitutes a “knowing” submission under the FCA and,therefore, will qualify for liability. The Fraud Enforcement and Recovery Act of 2009 expanded the scope of the FCA by,among other things, creating liability for knowingly and improperly avoiding repayment of an overpayment received fromthe government and broadening protections for whistleblowers. It is a violation of the FCA to knowingly fail to report andreturn an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due,whichever is later. Qui tam actions can also be filed under certain state false claims laws if the fraud involves Medicaid fundsor funding from state and local agencies. As previously disclosed, in September 2016, the Company and certain of its subsidiaries, including THSMI, AtlantaMedical Center, Inc. (“AMCI”) and North Fulton Medical Center, Inc. (“NFMCI”), executed agreements with the DOJ andothers to resolve a civil qui tam action and criminal investigation. In accordance with the terms of the resolution agreements,AMCI and NFMCI pled guilty before the U.S. District Court for the Northern District of Georgia to conspiring to violate theAnti-kickback Statute and defraud the United States. In addition, in accordance with the resolution agreements, AMCI andNFMCI paid forfeiture money judgments in the total amount of approximately $146 million to the United States, and theCompany paid approximately $372 million to resolve the civil qui tam litigation. If we are alleged or found to have violatedthe terms of the NPA described above or federal healthcare laws, rules or regulations in the future, our business, financialcondition, results of operations or cash flows could be materially adversely affected. We may be required to defend qui tamactions in the future, and we are unable to predict the impact of such actions on our business, financial condition, results ofoperations or cash flows.16 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsHEALTHCARE FACILITY LICENSING REQUIREMENTS The operation of healthcare facilities is subject to federal, state and local regulations relating to personnel, operatingpolicies and procedures, fire prevention, rate-setting, the adequacy of medical care, and compliance with building codes andenvironmental protection laws. Various licenses and permits also are required in order to dispense narcotics, operatepharmacies, handle radioactive materials and operate certain equipment. Our facilities are subject to periodic inspection bygovernmental and other authorities to assure continued compliance with the various standards necessary for licensing andaccreditation. We believe that all of our healthcare facilities hold all required governmental approvals, licenses and permitsmaterial to the operation of their business. UTILIZATION REVIEW COMPLIANCE AND HOSPITAL GOVERNANCE In addition to certain statutory coverage limits and exclusions, federal regulations, specifically the MedicareConditions of Participation, generally require healthcare providers, including hospitals that furnish or order healthcareservices that may be paid for under the Medicare program or state healthcare programs, to ensure that claims forreimbursement are for services or items that are (1) provided economically and only when, and to the extent, they aremedically reasonable and necessary, (2) of a quality that meets professionally recognized standards of healthcare, and(3) supported by appropriate evidence of medical necessity and quality. The Social Security Act established the Utilizationand Quality Control Peer Review Organization program, now known as the Quality Improvement Organization (“QIO”)program, to promote the effectiveness, efficiency, economy and quality of services delivered to Medicare beneficiaries and toensure 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 theappropriate care at the appropriate time, particularly among underserved populations. The QIO program also safeguards theintegrity of the Medicare trust fund by reviewing Medicare patient admissions, treatments and discharges, and ensuringpayment is made only for medically necessary services, and investigates beneficiary complaints about quality of care. TheQIOs 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 increased scrutiny from outside auditors, government enforcement agencies and others, as well as anincreased risk of government investigations and qui tam lawsuits, related to hospitals’ Medicare observation rates andinpatient admission decisions. The term “Medicare observation rate” is defined as total unique observation claims dividedby the sum of total unique observation claims and total inpatient short-stay acute care hospital claims. A low rate may raisesuspicions that a hospital is inappropriately admitting patients that could be cared for in an observation setting. In addition,CMS has established a concept referred to as the “two-midnight rule” to guide practitioners admitting patients andcontractors on when it is appropriate to admit individuals as hospital inpatients. Under the two-midnight rule, fullimplementation and enforcement of which began on January 1, 2016, CMS has indicated that a Medicare patient shouldgenerally be admitted on an inpatient basis only when there is a reasonable expectation that the patient’s care will cross twomidnights; if not, the patient generally should be treated as an outpatient, unless an exception applies. In our affiliatedhospitals, we conduct reviews of Medicare inpatient stays of less than two midnights to determine whether a patient qualifiesfor inpatient admission. We do not believe enforcement of the two-midnight rule will have a material impact on inpatientadmission rates at our hospitals. Medical and surgical services and practices are extensively supervised by committees of staff doctors at each of ourhealthcare facilities, are overseen by each facility’s local governing board, the members of which primarily are communitymembers and physicians, and are reviewed by our clinical quality personnel. The local hospital governing board also helpsmaintain standards for quality care, develop short-term and long-range plans, and establish, review and enforce practices andprocedures, 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 healthcare facilities, includingfindings of need for additional or expanded healthcare facilities or services. Certificates or determinations of need, which areissued by governmental agencies with jurisdiction over healthcare facilities, are at times required for capital17 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsexpenditures exceeding a prescribed amount, changes in bed capacity or services, and certain other matters. Our subsidiariesoperate hospitals in eight states that require a form of state approval under certificate of need programs applicable to thosehospitals. Approximately 49% of our licensed hospital beds are located in these states (namely, Alabama, Florida, Illinois,Massachusetts, Michigan, Missouri, South Carolina and Tennessee). The certificate of need programs in most of these states,along with several others, also apply to ambulatory surgery centers. Failure to obtain necessary state approval can result in the inability to expand facilities, add services, acquire afacility or change ownership. Further, violation of such laws may result in the imposition of civil sanctions or the revocationof a facility’s license. We are unable to predict whether we will be required or able to obtain any additional certificates ofneed in any jurisdiction where they are required, or if any jurisdiction will eliminate or alter its certificate of needrequirements in a manner that will increase competition and, thereby, affect our competitive position. In those states that donot have certificate of need requirements or that do not require review of healthcare capital expenditure amounts below arelatively high threshold, competition in the form of new services, facilities and capital spending is more prevalent. ENVIRONMENTAL MATTERS Our healthcare operations are subject to a number of federal, state and local environmental laws, rules andregulations that govern, among other things, our disposal of solid waste, as well as our use, storage, transportation anddisposal of hazardous and toxic materials (including radiological materials). Our operations also generate medical waste thatmust be disposed of in compliance with statutes and regulations that vary from state to state. In addition, although we are notengaged in manufacturing or other activities that produce meaningful levels of greenhouse gas emissions, our operatingexpenses could be adversely affected if legal and regulatory developments related to climate change or other initiativesresult in increased energy or other costs. We could also be affected by climate change and other environmental issues to theextent such issues adversely affect the general economy or result in severe weather affecting the communities in which ourfacilities are located. At this time, based on current climate conditions and our assessment of existing and pendingenvironmental rules and regulations, as well as treaties and international accords relating to climate change, we do notbelieve that the costs of complying with environmental laws, including regulations relating to climate change issues, willhave a material adverse effect on our future capital expenditures, results of operations or cash flows. There were no materialcapital expenditures for environmental matters in the year ended December 31, 2016. ANTITRUST LAWS The federal government and most states have enacted antitrust laws that prohibit specific types of anti-competitiveconduct, including price fixing, wage fixing, concerted refusals to deal, price discrimination and tying arrangements, as wellas monopolization and acquisitions of competitors that have, or may have, a substantial adverse effect on competition.Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the healthcare industry is currently a priority of the U.S. Federal Trade Commission(“FTC”). In recent years, the FTC has filed multiple administrative complaints challenging hospital transactions in severalstates. The FTC has focused its enforcement efforts on preventing hospital mergers that may, in the government’s view, leaveinsufficient local options for inpatient services. In addition to hospital merger enforcement, the FTC has given increasedattention to the effect of combinations involving other healthcare providers, including physician practices. The FTC has alsoentered into numerous 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 ofour practices by courts or regulatory authorities would not result in a determination that could adversely affect ouroperations. REGULATIONS AFFECTING CONIFER’S OPERATIONS As described below, Conifer and certain of its subsidiaries are subject to statutes and regulations regarding theirconsumer finance, debt collection and credit reporting activities.18 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDEBT COLLECTION ACTIVITIES The federal Fair Debt Collection Practices Act (“FDCPA”) regulates persons who regularly collect or attempt tocollect, directly or indirectly, consumer debts owed or asserted to be owed to another person. Certain of the accountsreceivable handled by Conifer’s debt collection agency subsidiary, Syndicated Office Systems, LLC (“SOS”), are subject tothe FDCPA, which establishes specific guidelines and procedures that debt collectors must follow in communicating withconsumer debtors, including the time, place and manner of such communications. The FDCPA also places restrictions oncommunications with individuals other than consumer debtors in connection with the collection of any consumer debt. Inaddition, the FDCPA contains various notice and disclosure requirements and imposes certain limitations on lawsuits tocollect debts against consumers. Debt collection activities are also regulated at the state level. Most states have lawsregulating debt collection activities in ways that are similar to, and in some cases more stringent than, the FDCPA. Many states also regulate the collection practices of creditors who collect their own debt. These state regulations areoften the same or similar to state regulations applicable to third-party collectors. Certain of the accounts receivable Conifermanages for its clients are subject to these state regulations. In certain situations, the activities of SOS are also subject to the Fair Credit Reporting Act (“FCRA”). The FCRAregulates the collection, dissemination and use of consumer information, including consumer credit information. State creditreporting laws, to the extent they are not preempted by the FCRA, may also apply to SOS. The federal Fair and Accurate Credit Transaction Act (“FACTA”) requires Conifer to adopt (1) written guidance andprocedures for detecting, preventing and responding appropriately to mitigate identity theft, and (2) coworker policies andprocedures (including training) that address the importance of protecting non-public personal information and aid Conifer indetecting and responding to suspicious activity, including suspicious activity that may suggest a possible identity theft redflag, as appropriate. Conifer and its subsidiaries are also subject to regulation by the Federal Trade Commission and the U.S. ConsumerFinancial Protection Bureau (“CFPB”). Both the FTC and the CFPB have the authority to investigate consumer complaintsrelating to a variety of consumer protection laws, including the FDCPA, FCRA and FACTA, and to initiate enforcementactions, including actions to seek restitution and monetary penalties from, or to require changes in business practices of,regulated entities. State officials typically have authority to enforce corresponding state laws. In addition, affected consumersmay bring suits, including class action suits, to seek monetary remedies (including statutory damages) for violations of thefederal and state provisions discussed above. PAYMENT ACTIVITY RISKS Conifer accepts payments from patients of the facilities for which it provides services using a variety of methods,including credit card, debit card, direct debit from a customer’s bank account, and physical bank check. For certain paymentmethods, including credit and debit cards, Conifer pays interchange and other fees, which may increase over time, therebyraising operating costs. Conifer relies on third parties to provide payment processing services, including the processing ofcredit cards, debit cards and electronic checks, and it could disrupt Conifer’s business if these companies become unwillingor unable to provide these services. Conifer is also subject to payment card association operating rules, including datasecurity rules, certification requirements and rules governing electronic funds transfers, which could change or bereinterpreted to make it difficult or impossible for Conifer to comply. If Conifer fails to comply with these rules orrequirements, or if its data security systems are breached or compromised, Conifer may be liable for card issuing banks’ costs,be subject to fines and higher transaction fees, and lose its ability to accept credit and debit card payments from customers,process electronic funds transfers, or facilitate other types of online payments. COMPLIANCE AND ETHICS General—Our ethics and compliance department maintains our multi-faceted, values-based ethics and complianceprogram, which is designed to (1) help staff in our corporate, USPI joint venture and Conifer offices, hospitals, outpatientcenters, health plan offices and physician practices meet or exceed applicable standards established by federal and statestatutes and regulations, as well as industry practice, and (2) monitor and raise awareness of ethical19 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsissues among employees and others, and stress the importance of understanding and complying with our Standards ofConduct. The ethics and compliance department operates with independence — it has its own operating budget; it has theauthority to hire outside counsel, access any Tenet document and interview any of our personnel; and our chief complianceofficer reports directly to the quality, compliance and ethics committee of our board of directors. Program Charter—Our Quality, Compliance and Ethics Program Charter is the governing document for our ethicsand compliance program. Our adherence to the charter is intended to: ·support and maintain our present and future responsibilities with regard to participation in federal healthcareprograms; and ·further our goals of operating an organization that (1) fosters and maintains the highest ethical standards amongall employees, officers and directors, physicians practicing at Tenet facilities and contractors that furnishhealthcare items or services, (2) values compliance with all state and federal statutes and regulations as afoundation of its corporate philosophy, and (3) aligns its behaviors and decisions with Tenet’s core values ofquality, integrity, service, innovation and transparency. The primary focus of our quality, compliance and ethics program is compliance with the requirements of Medicare, Medicaidand other federally funded healthcare programs. Pursuant to the terms of the charter, our ethics and compliance department isresponsible for, among other things, the following activities: (1) ensuring, in collaboration with Tenet’s law department,facilitation of the Monitor’s activities and compliance with the provisions of the NPA and related Tenet policies; (2)assessing, critiquing, and (as appropriate) drafting and distributing company policies and procedures; (3) developing,providing, and tracking ethics and compliance training and other training programs, including job-specific training to thosewho work in clinical quality, coding, billing, cost reporting and referral source arrangements, in collaboration with therespective department responsible for oversight of each of these areas; (4) creating and disseminating the Company’sStandards of Conduct and obtaining certifications of adherence to the Standards of Conduct as a condition of employment;(5) maintaining and promoting Tenet’s Ethics Action Line, a 24-hour, toll-free hotline that allows for confidential reportingof issues on an anonymous basis and emphasizes the Company’s no-retaliation policy; and (6) responding to and ensuringresolution of all compliance-related issues that arise from the Ethics Action Line and compliance reports received fromfacilities and compliance officers (utilizing any compliance reporting software that the Company may employ for thispurpose) or any other source that results in a report to the ethics and compliance department. Standards of Conduct—All of our employees, including our chief executive officer, chief financial officer andprincipal accounting officer, are required to abide by our Standards of Conduct to advance our mission that our business beconducted in a legal and ethical manner. The members of our board of directors and many of our contractors are also requiredto abide by our Standards of Conduct. The standards reflect our basic values and form the foundation of a comprehensiveprocess that includes compliance with all corporate policies, procedures and practices. Our standards cover such areas asquality patient care, compliance with all applicable statutes and regulations, appropriate use of our assets, protection ofpatient information and avoidance of conflicts of interest. As part of the program, we provide training sessions at least annually to every employee, as well as our board ofdirectors and certain physicians and contractors. All employees are required to report incidents that they believe in goodfaith may be in violation of the Standards of Conduct or our policies, and are encouraged to contact our Ethics Action Linewhen they have questions about the standards or any ethics concerns. All reports to the Ethics Action Line are keptconfidential to the extent allowed by law, and employees have the option to remain anonymous. Incidents of allegedfinancial improprieties reported to the Ethics Action Line or the ethics and compliance department are communicated to theaudit committee of our board of directors. Reported cases that involve a possible violation of the law or regulatory policiesand procedures are referred to the ethics and compliance department for investigation. Retaliation against employees inconnection with reporting ethical concerns is considered a serious violation of our Standards of Conduct, and, if it occurs, itwill result in discipline, up to and including termination of employment. Non-Prosecution Agreement—As previously disclosed, in September 2016, our THSMI subsidiary entered into aNon-Prosecution Agreement with the DOJ’s Criminal Division, Fraud Section, and the U.S. Attorney’s Office for the NorthernDistrict of Georgia. The NPA requires, among other things, that we and THSMI (i) fully cooperate with the20 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOffices in any matters relating to the conduct described in the NPA and other conduct under investigation by the Offices atany time during the term of the NPA, (ii) retain an independent compliance monitor to assess, oversee and monitor ourcompliance with the obligations under the NPA, (iii) promptly report any evidence or allegations of actual or potentialviolations of the Anti-kickback Statute, (iv) maintain our compliance and ethics program throughout our operations,including those of our subsidiaries, affiliates, agents and joint ventures (to the extent that we manage or control or THSMImanages or controls such joint ventures), and (v) notify the DOJ and undertake certain other obligations specified in the NPArelative to, among other things, any sale, merger or transfer of all or substantially all of our and THSMI’s respective businessoperations or the business operations of our or its subsidiaries or affiliates, including an obligation to include in any contractfor sale, merger, transfer or other change in corporate form a provision binding the purchaser to retain the commitment of usor THSMI, or any successor-in-interest thereto, to comply with the NPA obligations except as may otherwise be agreed by theparties to the NPA in connection with a particular transaction. The powers, duties and responsibilities of the independentcompliance monitor are broadly defined. The NPA is scheduled to expire on February 1, 2020 (three years from the date on which the Monitor was retained),but it may be extended or terminated early as described herein and in the NPA. If, during the term of the NPA, THSMIcommits any felony under federal law, or if the Company commits any felony related to the Anti-kickback Statute, or ifTHSMI or the Company fails to cooperate or otherwise fails to fulfill the obligations set forth in the NPA, then THSMI, theCompany and our affiliates could be subject to prosecution, exclusion from participation in federal health care programs, andother substantial costs and penalties. The Offices retain sole discretion over determining whether there has been a breach ofthe NPA and whether to pursue prosecution. Any liability or consequences associated with a failure to comply with the NPAcould have a material adverse effect on our business, financial condition, results of operations or cash flows. Availability of Documents—The full text of our Quality, Compliance and Ethics Program Charter, our Standards ofConduct, and a number of our ethics and compliance policies and procedures are published on our website, atwww.tenethealth.com, under the “Ethics and Compliance” caption in the “About” section. A copy of our Standards ofConduct is also available upon written request to our corporate secretary. Information about how to contact our corporatesecretary is set forth under “Company Information” below. Amendments to the Standards of Conduct and any grant of awaiver from a provision of the Standards of Conduct requiring disclosure under applicable Securities and ExchangeCommission (“SEC”) rules will be disclosed at the same location as the Standards of Conduct on our website. A copy of theNPA is attached as an exhibit to our Current Report on Form 8-K filed with the SEC on October 3, 2016. INSURANCE Property Insurance—We have property, business interruption and related insurance coverage to mitigate thefinancial impact of catastrophic events or perils that is subject to deductible provisions based on the terms of the policies.These policies are on an occurrence basis. For the policy period April 1, 2016 through March 31, 2017, we have coveragetotaling $600 million per occurrence, after deductibles and exclusions, with annual aggregate sub-limits of $100 millioneach for floods and earthquakes and a per-occurrence sub-limit of $200 million for windstorms with no annual aggregate.With respect to fires and other perils, excluding floods, earthquakes and windstorms, the total $600 million limit of coverageper occurrence applies. Deductibles are 5% of insured values up to a maximum of $25 million for floods, Californiaearthquakes and wind-related claims, and 2% of insured values for New Madrid fault earthquakes, with a maximum per claimdeductible of $25 million. Other covered losses, including fires and other perils, have a minimum deductible of $1 million. Professional and General Liability Insurance—As is typical in the healthcare industry, we are subject to claims andlawsuits in the ordinary course of business. The healthcare industry has seen significant increases in the cost of professionalliability insurance due to increased litigation. In response, we maintain captive insurance companies to self-insure asubstantial portion of our professional and general liability risk. We also own two captive insurance companies that writeprofessional liability insurance for a small number of physicians, including employed physicians, who are on the medicalstaffs of certain of our hospitals. Claims in excess of our self-insurance retentions are insured with commercial insurance companies. If the aggregatelimit of any of our professional and general liability policies is exhausted, in whole or in part, it could deplete21 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsor reduce the limits available to pay any other material claims applicable to that policy period. Any losses not covered by orin 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 reservesfor incurred but not reported claims, for our self-insured professional liability retentions and claims in excess of the policies’aggregate limits, based on modeled estimates of losses and related expenses. Also, we provide standby letters of credit tocertain of our insurers, which can be drawn upon under certain circumstances, to collateralize the deductible and self-insuredretentions 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 currentreports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended (the“Exchange Act”). Our reports, proxy statements and other documents filed electronically with the SEC are available at thewebsite 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 (andamendments to such reports), and other filings made with, or furnished to, the SEC as soon as reasonably practicable aftersuch documents are submitted to the SEC. The information found on our website is not part of this or any other report we filewith 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, Texas 75313-9003 or by e-mail at CorporateSecretary@tenethealth.com. EXECUTIVE OFFICERS Information about our executive officers, as of February 27, 2017, is as follows: Name Position AgeTrevor Fetter Chairman, President and Chief Executive Officer 57Daniel J. Cancelmi Chief Financial Officer 54Keith B. Pitts Vice Chairman 59J. Eric Evans President of Hospital Operations 39Audrey T. Andrews Senior Vice President and General Counsel 50 Mr. Fetter was named Tenet’s president in November 2002; he was appointed chief executive officer in September2003 and chairman in May 2015. From March 2000 to November 2002, Mr. Fetter was chairman and chief executive officerof Broadlane, Inc. From October 1995 to February 2000, he served in several senior management positions at Tenet,including chief financial officer. Mr. Fetter began his career with Merrill Lynch Capital Markets, where he concentrated oncorporate finance and advisory services for the entertainment and healthcare industries. In 1988, he joined Metro-Goldwyn-Mayer, Inc., where he had a broad range of corporate and operating responsibilities, rising to executive vice president andchief financial officer. Mr. Fetter holds a bachelor’s degree in economics from Stanford University and an M.B.A. fromHarvard Business School. He is a member of the board of directors of one other public company, The Hartford FinancialServices Group, Inc. Mr. Fetter also serves on the board of directors of the Federation of American Hospitals, the board ofDean’s Advisors of the Harvard Business School, the Smithsonian National board and the Dallas Citizens Council board. Mr. Cancelmi was appointed Tenet’s chief financial officer in September 2012. He previously served as senior vicepresident from April 2009, principal accounting officer from April 2007 and controller from September 2004. Mr. Cancelmiwas a vice president and assistant controller at Tenet from September 1999 until his promotion to controller. He joined theCompany as chief financial officer of Hahnemann University Hospital. Prior to that, he held various positions atPricewaterhouseCoopers, including in the firm’s National Accounting and SEC office in New York City. Mr. Cancelmi is acertified public accountant who holds a bachelor’s degree in accounting from22 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDuquesne University in Pittsburgh. He is also a member of the American Institute of Certified Public Accountants and theFlorida and Pennsylvania Institutes of Certified Public Accountants. Mr. Pitts was appointed vice chairman following Tenet’s acquisition of Vanguard Health Systems, Inc. (“Vanguard”)in October 2013. He was Vanguard’s vice chairman from May 2001 until the acquisition and an executive vice presidentfrom August 1999 until May 2001. Mr. Pitts also served as a director of Vanguard from August 1999 until September 2004.Before joining Vanguard, Mr. Pitts was the chairman and chief executive officer of Mariner Post-Acute Network and itspredecessor, Paragon Health Network, a nursing home management company, from November 1997 until June 1999. Heserved as the executive vice president and chief financial officer for OrNda HealthCorp, prior to its acquisition by Tenet, fromAugust 1992 to January 1997, and, before that, as a consultant to many healthcare organizations, including as a partner inErnst & Young’s healthcare consulting practice. Mr. Pitts is a certified public accountant who holds a bachelor’s degree inbusiness administration from the University of Florida. He is a member of the American Institute of Certified PublicAccountants and the Florida Institute of Certified Public Accountants. Mr. Evans was appointed Tenet’s president of hospital operations in March 2016. He previously served aschief executive officer of our Texas Region from April 2015 and as market chief executive officer of The Hospitals ofProvidence (formerly known as the Sierra Providence Health Network) in El Paso from September 2012. Mr. Evans was thechief executive officer of the Dallas-area Lake Pointe Health Network from September 2010, where he previously held thepositions of chief operating officer and director of business development after he joined Tenet in August 2004 as part of ourMBA Leadership Development Program. He also served as vice president in Tenet’s executive office and chief of staff fromJune 2009 to September 2010. Earlier in his career, Mr. Evans was an industrial engineer and a material flow coordinator atSaturn Corporation, a former subsidiary of General Motors Co. He holds a bachelor’s degree in industrial management fromPurdue University and an M.B.A. from Harvard Business School. He is also a fellow in the American College of HealthcareExecutives. Beginning in 2014, Mr. Evans served a three-year term as a member of the board of directors of the El PasoBranch of the Federal Reserve Bank of Dallas, for which he acted as chair in 2016. Ms. Andrews was appointed senior vice president and general counsel in January 2013. From July 2008 until thatappointment, she served as senior vice president and chief compliance officer and, prior to that, served as vice president andchief compliance officer from November 2006. She joined Tenet in 1998 as hospital operations counsel. Ms. Andrews holds aJ.D. and a bachelor’s degree in government, both from the University of Texas at Austin. She is a member of the Americanand Texas Bar Associations and the American Health Lawyers Association. FORWARD-LOOKING STATEMENTS This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933and Section 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 (and other similar expressions) will, should or may occur in the futureare forward-looking statements. These forward-looking statements represent management’s current expectations, based oncurrently available information, as to the outcome and timing of future events. They involve known and unknown risks,uncertainties and other factors – many of which we are unable to predict or control – that may cause our actual results,performance or achievements, or healthcare industry results, to be materially different from those expressed or implied byforward-looking statements. Such factors include, but are not limited to, the following: ·The timing and impact on our business of the repeal or significant modification of the Affordable Care Act, theenactment of a replacement omnibus healthcare law, if any, and the enactment of, or changes in, other statutesand regulations affecting the healthcare industry generally; ·The effect that adverse economic conditions have on our volumes and our ability to collect outstandingreceivables on a timely basis, among other things; ·Adverse regulatory developments, government investigations or litigation; 23 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 developments with respect to our ability to comply with the terms of the Non-Prosecution Agreement; ·Our ability to enter into managed care provider arrangements on acceptable terms, including our ability tomitigate the impact of national managed care contracts that expire and are not replaced; ·Cuts to Medicare and Medicaid payment rates or changes in reimbursement practices; ·Competition; ·Increases in wages and our ability to hire and retain qualified personnel, especially healthcare professionals; ·The impact of our significant indebtedness; the availability and terms of capital to fund the operation andexpansion of our business; and our ability to comply with our debt covenants and, over time, reduce leverage; ·Our ability to continue to expand and realize earnings contributions from our Ambulatory Care and Conifersegments; ·Our ability to achieve operating and financial targets, attain expected levels of patient volumes, and identifyand execute on measures designed to save or control costs or streamline operations; ·Our success in divesting sub-scale businesses, such as our health plans, and completing other corporatedevelopment transactions; ·Increases in the amount and risk of collectability of uninsured accounts and deductibles and copays for insuredaccounts; ·Changes in service mix, revenue mix and surgical volumes, including potential declines in the populationcovered under managed care agreements; ·The timing and impact of potential changes in federal tax policies, and the outcome of pending and any futuretax audits, disputes and litigation associated with our tax positions; and ·Other factors and risks referenced in this report and our other public filings. When considering forward-looking statements, a reader should keep in mind the risk factors and other cautionarystatements in this report. Should one or more of the risks and uncertainties described in this report occur, or shouldunderlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in anyforward-looking statement. We specifically disclaim any obligation to update any information contained in a forward-looking statement or any forward-looking statement in its entirety and, therefore, disclaim any resulting liability forpotentially related damages. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionarystatement. 24 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 1A. RISK FACTORS Our business is subject to a number of risks and uncertainties – many of which are beyond our control – that maycause our actual operating results or financial performance to be materially different from our expectations. If one or more ofthe events discussed in this report were to occur, actual outcomes could differ materially from those expressed in or impliedby any forward-looking statements we make in this report or our other filings with the SEC, and our business, financialcondition, 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 the timing or outcome of Congress’ plan to significantly modify or repeal the Affordable CareAct or what action, if any, legislators may take to replace the law, nor are we able to predict the ultimate effect that suchactions may have on our business, financial condition, results of operations or cash flows. The expansion of health insurance coverage under the Affordable Care Act has resulted in an increase in the numberof patients using our facilities with either private or public program coverage and a decrease in uninsured and charity careadmissions. Although a substantial portion of both our patient volumes and, as result, our revenues has historically beenderived from government healthcare programs, reductions to our reimbursement under the Medicare and Medicaid programsas a result of the ACA have been partially offset by increased revenues from providing care to previously uninsuredindividuals. In January 2017, some members of Congress began renewed efforts to modify, repeal or otherwise invalidate allor significant portions of the ACA. In addition, the President issued an executive order on January 20, 2017 declaring thatthe official policy of his administration will be to seek the prompt repeal of the ACA and directing the heads of all executivedepartments and agencies to minimize the economic and regulatory burdens of the ACA to the maximum extent permitted bylaw while the ACA remains in effect. The White House also sent a memorandum to federal agencies directing them to freezeany new or pending regulations. We cannot predict if or when modification or repeal of the ACA will take effect or what action, if any, Congressmight take with respect to replacing the law. We are also unable to predict the impact of legislative and regulatory changeson our future revenues and operations. However, if the ultimate impact is that significantly fewer individuals have private orpublic health coverage, we will experience decreased volumes, reduced revenues, an increase in uncompensated care and a higher level of bad debt expense, which would adversely affect our results of operations and cash flows. This negative effectwill be exacerbated if the ACA’s reductions in the growth of Medicare spending and reductions in Medicare DSH paymentsthat have already taken effect are not reversed if the law is repealed or if further reductions (including Medicaid DSHreductions previously scheduled to take effect under the ACA in FFY 2018) are made. If we are unable to enter into and maintain managed care contractual arrangements on acceptable terms, if weexperience material reductions in the contracted rates we receive from managed care payers or if we have difficultycollecting from managed care payers, our results of operations could be adversely affected. We currently have thousands of managed care contracts with various HMOs and PPOs. The amount of our managedcare net patient revenues during the year ended December 31, 2016 was $11.2 billion, which represented approximately 62%of our total net patient revenues before provision for doubtful accounts. Approximately 61% of our managed care net patientrevenues for the year ended December 31, 2016 was derived from our top ten managed care payers. In the year endedDecember 31, 2016, our commercial managed care net inpatient revenue per admission from our acute care hospitals wasapproximately 77% higher than our aggregate yield on a per admission basis from government payers, including managedMedicare and Medicaid insurance plans. In addition, at December 31, 2016, approximately 66% of our net accountsreceivable for our Hospital Operations and other segment were due from managed care payers. Our ability to negotiate favorable contracts with HMOs, insurers offering preferred provider arrangements and othermanaged care plans significantly affects the revenues and operating results of our hospitals. Furthermore, we may experiencea short- or long-term adverse effect on our net operating revenues if we cannot replace or otherwise mitigate the impact ofexpired contracts with national payers. A managed care contract we had with a national payer expired on September 30,2016; as a result, our hospitals and other healthcare facilities, as well as our employed physicians, became out-of-networkproviders with respect to that payer’s members. The contract represented approximately 2.9% of our net25 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsoperating revenues before provision for doubtful accounts for the period subsequent to the sale of our Georgia hospitals onMarch 31, 2016 to the contract expiration on September 30, 2016. In addition, private payers are increasingly attempting to control healthcare costs through direct contracting withhospitals to provide services on a discounted basis, increased utilization reviews and greater enrollment in managed careprograms, such as HMOs and PPOs. The trend toward consolidation among private managed care payers tends to increasetheir bargaining power over prices and fee structures. Our future success will depend, in part, on our ability to renew existingmanaged care contracts and enter into new managed care contracts on competitive terms. Other healthcare companies,including some with greater financial resources, greater geographic coverage or a wider range of services, may compete withus for these opportunities. For example, some of our competitors may negotiate exclusivity provisions with managed careplans or otherwise restrict the ability of managed care companies to contract with us. Any material reductions in thecontracted rates we receive for our services or any significant difficulties in collecting receivables from managed care payerscould have a material adverse effect on our financial condition, results of operations or cash flows. Any material adverseeffects resulting from future reductions in payments from private payers could be exacerbated if we are not able to manageour operating costs effectively. Further changes in the Medicare and Medicaid programs or other government healthcare programs, includingreductions in scale and scope, could have an adverse effect on our business. For the year ended December 31, 2016, approximately 21% of our net patient revenues before provision for doubtfulaccounts were related to the Medicare program, and approximately 8% of our net patient revenues before provision fordoubtful accounts were related to various state Medicaid programs, in each case excluding Medicare and Medicaid managedcare programs. The Medicare and Medicaid programs are subject to: statutory and regulatory changes, administrative rulings,interpretations and determinations concerning patient eligibility requirements, funding levels and the method of calculatingpayments or reimbursements, among other things; requirements for utilization review; and federal and state fundingrestrictions, all of which could materially increase or decrease payments from these government programs in the future, aswell as affect the cost of providing services to our patients and the timing of payments to our facilities, which could in turnadversely affect our overall business, financial condition, results of operations or cash flows. Any material adverse effectsresulting from future reductions in payments from government programs could be exacerbated if we are not able to manageour operating costs effectively. Several states in which we operate face budgetary challenges that have resulted, and likely will continue to result, inreduced 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 consideradopting future legislation designed to reduce or not increase their Medicaid expenditures. In addition, some states delayissuing Medicaid payments to providers to manage state expenditures. As an alternative means of funding providerpayments, many of the states in which we operate have adopted provider fee programs or have received federal governmentwaivers allowing them to test new approaches and demonstration projects to improve care. Continuing pressure on statebudgets and other factors could result in future reductions to Medicaid payments, payment delays or additional taxes onhospitals. In general, we are unable to predict the effect of future government healthcare funding policy changes on ouroperations. If the rates paid by governmental payers are reduced, if the scope of services covered by governmental payers islimited, or if we or one or more of our subsidiaries’ hospitals are excluded from participation in the Medicare or Medicaidprogram or any other government healthcare program, there could be a material adverse effect on our business, financialcondition, results of operations or cash flows. The industry trend toward value-based purchasing and alternative payment models may negatively impact ourrevenues. Value-based purchasing and alternative payment model initiatives of both governmental and private payers tyingfinancial incentives to quality and efficiency of care will increasingly affect the results of operations of our hospitals andother healthcare facilities, and may negatively impact our revenues if we are unable to meet expected quality standards.Medicare now requires providers to report certain quality measures in order to receive full reimbursement increases forinpatient and outpatient procedures that were previously awarded automatically. In addition,26 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentshospitals that meet or exceed certain quality performance standards will receive increased reimbursement payments, andhospitals that have “excess readmissions” for specified conditions will receive reduced reimbursement. Furthermore,Medicare no longer pays hospitals additional amounts for the treatment of certain hospital-acquired conditions (“HACs”),unless the conditions were present at admission. Beginning in FFY 2015, hospitals that rank in the worst 25% of all hospitalsnationally for HACs in the previous year receive reduced Medicare reimbursements. Moreover, the ACA prohibits the use offederal funds under the Medicaid program to reimburse providers for treating certain provider‑preventable conditions. The ACA also created the CMS Innovation Center to test innovative payment and service delivery models that havethe potential to reduce Medicare, Medicaid or Children’s Health Insurance Program expenditures while preserving orenhancing the quality of care for beneficiaries. In 2015, the Secretary of HHS announced a goal of tying 30% of traditionalMedicare payments to quality or value through alternative payment models or bundled payment arrangements by the end of2016, and tying 50% of payments to these models by the end of 2018. Participation in some of these models is voluntary;however, participation in certain bundled payment arrangements is mandatory for providers located in randomly selectedgeographic locations. Generally, the mandatory bundled payment models hold hospitals financially accountable for thequality and costs for an entire episode of care for a specific diagnosis or procedure from the date of the hospital admission orinpatient procedure through 90 days post-discharge, including services not provided by the hospital, such as physician,inpatient rehabilitation, skilled nursing and home health services. Under the mandatory models, hospitals are eligible toreceive incentive payments or will be subject to payment reductions within certain corridors based on their performanceagainst quality and spending criteria. In 2015, CMS finalized a five-year bundled payment model, called the ComprehensiveCare for Joint Replacement (“CJR”) model, which includes hip and knee replacements, as well as other major leg procedures.In 2016, CMS finalized additional mandatory bundled payment models, which are scheduled to begin on July 1, 2017, forAcute Myocardial Infarction (“AMI”), Coronary Artery Bypass Graft (“CABG”) and Surgical Hip/Femur Fracture Treatment(“SHFFT”). Twenty of our hospitals currently participate in the CJR model and, effective July 1, 2017, certain of ourhospitals are expected to be required to participate in the AMI, CABG and SHFFT models. We cannot predict what effectsignificant modification or repeal of the ACA as described above will have on the established payment models or theSecretary of HHS’ authority to develop new payment models, nor can we predict what impact, if any, these demonstrationprograms will have on our inpatient volumes, net revenues or cash flows. There is also a trend among private payers toward value-based purchasing and alternative payment models forhealthcare services. Many large commercial payers expect hospitals to report quality data, and several of these payers willnot reimburse hospitals for certain preventable adverse events. We expect value-based purchasing programs, includingprograms 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 the industry trend toward value-based purchasing and alternative paymentmodels will affect our results of operations, but it could negatively impact our revenues, particularly if we are unable to meetthe quality and cost standards established by both governmental and private payers. Our hospitals, outpatient centers and other healthcare businesses operate in competitive environments, andcompetition in our markets can adversely affect patient volumes. The healthcare business is highly competitive, and competition among hospitals and other healthcare providers forpatients has intensified in recent years. Generally, other hospitals and outpatient centers in the local communities we serveprovide 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) may have larger or more specializedmedical staffs to admit and refer patients, among other things. Furthermore, healthcare consumers are now able to accesshospital performance data on quality measures and patient satisfaction, as well as standard charges for services, to comparecompeting providers; if any of our hospitals achieve poor results (or results that are lower than our competitors) on qualitymeasures or patient satisfaction surveys, or if our standard charges are higher than our competitors, we may attract fewerpatients. Additional quality measures and future trends toward clinical transparency may have an unanticipated impact onour competitive position and patient volumes. In the future, we expect to encounter increased competition from system-affiliated hospitals and healthcarecompanies, as well as health insurers and private equity companies seeking to acquire providers, in specific geographic27 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsmarkets. We also face competition from specialty hospitals (some of which are physician-owned) and unaffiliatedfreestanding outpatient centers for market share in high margin services and for quality physicians and personnel. In recentyears, the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent care centers anddiagnostic imaging centers in the geographic areas in which we operate has increased significantly. Furthermore, some of thehospitals that compete with our hospitals are owned by government agencies or not-for-profit organizations supported byendowments and charitable contributions and can finance capital expenditures and operations on a tax-exempt basis. If ourcompetitors are better able to attract patients, recruit physicians, expand services or obtain favorable managed care contractsat their facilities than we are, we may experience an overall decline in patient volumes. Our business and financial results could be harmed if we are alleged to have violated existing regulations or if wefail to comply with new or changed regulations. Our hospitals, outpatient centers and related healthcare businesses are subject to extensive federal, state and localregulation relating to, among other things, licensure, contractual arrangements, conduct of operations, privacy of patientinformation, ownership of facilities, physician relationships, addition of facilities and services, and reimbursement rates forservices. The laws, rules and regulations governing the healthcare industry are extremely complex and, in certain areas, theindustry has little or no regulatory or judicial interpretation for guidance. Moreover, under the ACA, the government and itscontractors may suspend Medicare and Medicaid payments to providers of services “pending an investigation of a credibleallegation of fraud.” The potential consequences for violating such laws, rules or regulations include reimbursement ofgovernment program payments, the assessment of civil monetary penalties, including treble damages, fines, which could besignificant, exclusion from participation in federal healthcare programs, or criminal sanctions against current or formeremployees, any of which could have a material adverse effect on our business, financial condition or cash flows. Even apublic announcement that we are being investigated for possible violations of law could have a material adverse effect on thevalue of our common stock and our business reputation could suffer. Furthermore, healthcare, as one of the largest industries in the United States, continues to attract much legislativeinterest and public attention. We are unable to predict the future course of federal, state and local healthcare regulation orlegislation, including Medicare and Medicaid statutes and regulations. Further changes in the regulatory frameworknegatively affecting healthcare providers could have a material adverse effect on our business, financial condition, results ofoperations or cash flows. We are also required to comply with various federal and state labor laws, rules and regulations governing a varietyof workplace wage and hour issues. From time to time, we have been and expect to continue to be subject to regulatoryproceedings and private litigation concerning our application of such laws, rules and regulations. If we fail to comply with our Non-Prosecution Agreement, we could be subject to criminal prosecution, substantialpenalties and exclusion from participation in federal healthcare programs, any of which could adversely impact ourbusiness, financial condition, results of operations or cash flows. In September 2016, one of our subsidiaries, Tenet HealthSystem Medical, Inc., entered into a Non-ProsecutionAgreement with the DOJ’s Criminal Division, Fraud Section, and the U.S. Attorney’s Office for the Northern District ofGeorgia. The NPA requires, among other things, that we and THSMI (i) fully cooperate with the Offices in any mattersrelating to the conduct described in the NPA and other conduct under investigation by the Offices at any time during theterm of the NPA, (ii) retain an independent compliance monitor to assess, oversee and monitor our compliance with theobligations under the NPA, (iii) promptly report any evidence or allegations of actual or potential violations of the Anti-kickback Statute, (iv) maintain our compliance and ethics program throughout our operations, including those of oursubsidiaries, affiliates, agents and joint ventures (to the extent that we manage or control or THSMI manages or controls suchjoint ventures), and (v) notify the DOJ and undertake certain other obligations specified in the NPA relative to, among otherthings, any sale, merger or transfer of all or substantially all of our and THSMI’s respective business operations or thebusiness operations of our or its subsidiaries or affiliates, including an obligation to include in any contract for sale, merger,transfer or other change in corporate form a provision binding the purchaser to retain the commitment of us or THSMI, or anysuccessor-in-interest thereto, to comply with the NPA obligations except as may otherwise be agreed by the parties to theNPA in connection with a particular transaction. The powers, duties and responsibilities of the independent compliancemonitor are broadly defined.28 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe NPA is scheduled to expire on February 1, 2020 (three years from the date on which the Monitor was retained),but it may be extended or terminated early as described herein and in the NPA. If, during the term of the NPA, THSMIcommits any felony under federal law, or if the Company commits any felony related to the Anti-kickback Statute, or ifTHSMI or the Company fails to cooperate or otherwise fails to fulfill the obligations set forth in the NPA, then THSMI, theCompany and our affiliates could be subject to prosecution, exclusion from participation in federal health care programs, andother substantial costs and penalties. The Offices retain sole discretion over determining whether there has been a breach ofthe NPA and whether to pursue prosecution. Any liability or consequences associated with a failure to comply with the NPAcould have a material adverse effect on our business, financial condition, results of operations or cash flows. We could be subject to substantial uninsured liabilities or increased insurance costs as a result of significant legalactions. We are subject to medical malpractice lawsuits, antitrust and other class action lawsuits and other legal actions inthe ordinary course of business. Some of these actions may involve large demands, as well as substantial defense costs. Evenin states that have imposed caps on damages, litigants are seeking recoveries under new theories of liability that might not besubject 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 healthcare industry has seensignificant increases in the cost of such insurance due to increased litigation. We cannot predict the outcome of current orfuture legal actions against us or the effect that judgments or settlements in such matters may have on us or on our insurancecosts. Additionally, all professional and general liability insurance we purchase is subject to policy limitations. If theaggregate limit of any of our professional and general liability policies is exhausted, in whole or in part, it could deplete orreduce the limits available to pay any other material claims applicable to that policy period. Any losses not covered by or inexcess of the amounts maintained under insurance policies will be funded from our working capital. Furthermore, one ormore of our insurance carriers could become insolvent and unable to fulfill its or their obligations to defend, pay or reimburseus when those obligations become due. In that case or if payments of claims exceed our estimates or are not covered by ourinsurance, it could have a material adverse effect on our business, financial condition, results of operations or cash flows. It is essential to our ongoing business that we attract an appropriate number of quality physicians in thespecialties required to support our services and that we maintain good relations with those physicians. The success of our business depends in significant part on the number, quality, specialties, and admitting andscheduling practices of the licensed physicians who have been admitted to the medical staffs of our hospitals and whoaffiliate with us and use our facilities as an extension of their practices. Physicians are often not employees of the hospitals orsurgery centers at which they practice. Members of the medical staffs of our hospitals also often serve on the medical staffs offacilities we do not operate, and they are free to terminate their association with our hospitals or admit their patients tocompeting facilities at any time. In addition, although physicians who own interests in our facilities are generally subject toagreements restricting them from owning an interest in competitive facilities, we may not learn of, or be unsuccessful inpreventing, our physician partners from acquiring interests in competitive facilities. We expect to encounter increased competition from health insurers and private equity companies seeking to acquireproviders in the markets where we operate physician practices and, where permitted by law, employ physicians. In some ofour markets, physician recruitment and retention are affected by a shortage of physicians in certain specialties and thedifficulties that physicians can experience in obtaining affordable malpractice insurance or finding insurers willing toprovide such insurance. Furthermore, our ability to recruit and employ physicians is closely regulated. For example, thetypes, amount and duration of compensation and assistance we can provide to recruited physicians are limited by the Starklaw, the Anti-kickback Statute, state anti-kickback statutes and related regulations. All arrangements with physicians mustalso be fair market value and commercially reasonable. If we are unable to attract and retain sufficient numbers of qualityphysicians by providing adequate support personnel, technologically advanced equipment, and facilities that meet the needsof those physicians and their patients, physicians may be discouraged from referring patients to our facilities, admissions andoutpatient visits may decrease and our operating performance may decline. 29 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOur USPI joint venture and our hospital-based joint ventures depend on existing relationships with key healthcaresystem partners. If we are not able to maintain historical relationships with these healthcare systems, or enter into newrelationships, we may be unable to implement our business strategies successfully. Our USPI joint venture and our hospital-based joint ventures depend in part on the efforts, reputations and successof healthcare system partners and the strength of our relationships with those healthcare systems. Our joint ventures could beadversely affected by any damage to those healthcare systems’ reputations or to our relationships with them. In addition,damage to our business reputation could negatively impact the willingness of healthcare systems to enter into relationshipswith us or our USPI joint venture. Moreover, in many cases, our joint venture agreements are structured to comply withcurrent revenue rulings published by the Internal Revenue Service (“IRS”), as well as case law, relevant to joint venturesbetween for-profit and not-for-profit healthcare entities. Material changes in these authorities could adversely affect ourrelationships with healthcare system partners. If we are unable to maintain existing arrangements on favorable terms or enterinto relationships with additional healthcare system partners, we may be unable to implement our business strategies for ourjoint ventures successfully. Our labor costs could be adversely affected by competition for staffing, the shortage of experienced nurses andlabor union activity. The operations of our facilities are dependent on the efforts, abilities and experience of our management andmedical support personnel, including nurses, therapists, pharmacists and lab technicians, as well as our employed physicians.We compete with other healthcare providers in recruiting and retaining employees, and, like others in the healthcareindustry, we continue to experience a shortage of critical-care nurses in certain disciplines and geographic areas. As a result,from time to time, we may be required to enhance wages and benefits to recruit and retain experienced employees, makegreater investments in education and training for newly licensed medical support personnel, or hire more expensivetemporary or contract employees. Furthermore, state-mandated nurse-staffing ratios in California affect not only our laborcosts, but, if we are unable to hire the necessary number of experienced nurses to meet the required ratios, they may alsocause us to limit patient admissions with a corresponding adverse effect on our net operating revenues. In general, our failureto recruit and retain qualified management, experienced nurses and other medical support personnel, or to control labor costs,could have a material adverse effect on our business, financial condition, results of operations or cash flows. Increased labor union activity is another factor that could adversely affect our labor costs. At December 31, 2016,approximately 23% of the employees in our Hospital Operations and other segment were represented by labor unions. Therewere no unionized employees in our Ambulatory Care segment, and less than 1% of Conifer’s employees belong to a union.Unionized employees – primarily registered nurses and service and maintenance workers – are located at 34 of our hospitals,the majority of which are in California, Florida and Michigan. We currently have six expired contracts coveringapproximately 8% of our unionized employees and are negotiating renewals under extension agreements. We are alsonegotiating first contracts at three hospitals and one physician practice covering approximately 5% of our unionizedemployees where employees recently selected 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 apossibility that strikes could occur during the negotiation process, which could increase our labor costs and have an adverseeffect on our patient admissions and net operating revenues. Organizing activities by labor unions could increase our level ofunion representation in future periods; to the extent a greater portion of our employee base unionizes, it is possible our laborcosts 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 and number of employees we require at Conifer is intense. We may face difficulty identifying andhiring qualified personnel at compensation levels consistent with our existing compensation and salary structure. Inaddition, we invest significant time and expense in training Conifer’s employees, which increases their value to competitorswho may seek to recruit them. If we fail to retain our Conifer employees, we could incur significant expenses in hiring,integrating and training their replacements, and the quality of Conifer’s services and its ability to serve its customers coulddiminish, resulting in a material adverse effect on that segment of our business. 30 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOur business and financial results could be harmed by a national or localized outbreak of a highly contagious orepidemic disease. If an outbreak of an infectious disease, such as the Zika virus or the Ebola virus, were to occur nationally or in one ofthe regions our hospitals serve, our business and financial results could be adversely effected. The treatment of a highlycontagious disease at one of our facilities may result in a temporary shutdown or diversion of patients. In addition, unaffectedindividuals may decide to defer elective procedures or otherwise avoid medical treatment, resulting in reduced patientvolumes and operating revenues. Furthermore, we cannot predict the costs associated with the potential treatment of aninfectious disease outbreak by our hospitals or preparation for such treatment. Conifer operates in a highly competitive industry, and its current or future competitors may be able to competemore effectively than Conifer does, which could have a material adverse effect on Conifer’s margins, growth rate andmarket share. We intend to continue to market and expand Conifer’s revenue cycle management, patient communications andengagement services, and management services businesses. However, there can be no assurance that Conifer will besuccessful in generating new client relationships, including with respect to hospitals we or Conifer’s other customers sell, asthe respective buyers may not continue to use Conifer’s services or, if they do, they may not do so under the same contractualterms. The market for Conifer’s solutions is highly competitive, and we expect competition may intensify in the future.Conifer faces competition from existing participants and new entrants to the revenue cycle management market (includingsoftware vendors and other technology-supported revenue cycle management outsourcing companies, traditional consultantsand information technology outsourcing firms), as well as from the staffs of hospitals and other healthcare providers whohandle these processes internally. In addition, electronic medical record software vendors may expand into services offeringsthat compete with Conifer. To be successful, Conifer must respond more quickly and effectively than its competitors to newor changing opportunities, technologies, standards, regulations and customer requirements. Moreover, existing or newcompetitors may introduce technologies or services that render Conifer’s technologies or services obsolete or lessmarketable. Even if Conifer’s technologies and services are more effective than the offerings of its competitors, current orpotential customers might prefer competitive technologies or services to Conifer’s technologies and services. Furthermore,increased competition has resulted and may continue to result in pricing pressures, which could negatively impact Conifer’smargins, growth rate or market share. The failure to comply with consumer protection laws could subject Conifer and its subsidiaries to fines and otherliabilities, as well as harm Conifer’s business and reputation. Conifer and its subsidiaries are subject to numerous federal, state and local consumer protection laws governingsuch topics as privacy, finance, debt collection and credit reporting. Regulations governing debt collection are subject tochanging interpretations that may be inconsistent among different jurisdictions. In addition, a regulatory determination madeby, or a settlement or consent decree entered into with, one regulatory agency, such as the Consumer Financial ProtectionBureau, may not be binding upon, or preclude, investigations or regulatory actions by state or local agencies. Conifer’sfailure to comply with consumer financial, debt collection and credit reporting requirements could result in, among otherthings, the issuance of cease and desist orders (which can include orders for restitution or rescission of contracts, as well asother kinds of affirmative relief), the imposition of fines or refunds, and other civil and criminal penalties, some of whichcould be significant in the case of knowing or reckless violations. In addition, Conifer’s failure to comply with the statutesand regulations applicable to it could result in reduced demand for its services, invalidate all or portions of some of Conifer’sservices agreements with its customers, give customers the right to terminate Conifer’s services agreements with them or giverise to contractual liabilities, among other things, any of which could have an adverse effect on Conifer’s business.Furthermore, if Conifer or its subsidiaries become subject to fines or other penalties, it could harm Conifer’s reputation,thereby making it more difficult for Conifer to retain existing customers or attract new customers. Our business could be negatively affected by security threats, catastrophic events and other disruptions affectingour information technology and related systems. As a provider of healthcare services, information technology is a critical component of the day-to-day operation ofour business. We rely on our information technology to process, transmit and store sensitive and confidential data, including31 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsprotected health information, personally identifiable information, and our proprietary and confidential business performancedata. We utilize electronic health records and other health information technology, along with additional technologysystems, in connection with our operations, including for, among other things, billing and supply chain and labormanagement. Our systems, in turn, interface with and rely on third-party systems. Although we monitor and routinely test oursecurity systems and processes and have a diversified data network that provides redundancies as well as other measuresdesigned to protect the security and availability of the data we process, transmit and store, our information technology andinfrastructure have been, and will likely continue to be, subject to computer viruses, attacks by hackers, or breaches due toemployee error or malfeasance. While we are not aware of having experienced a material breach of cybersecurity, thepreventive actions we take to reduce the risk of such incidents and protect our information technology may not be sufficientin the future. As cybersecurity threats continue to evolve, we may not be able to anticipate certain attack methods in order toimplement effective protective measures, and we may be required to expend significant additional resources to continue tomodify and strengthen our security measures, investigate and remediate any vulnerabilities in our information systems andinfrastructure, or invest in new technology designed to mitigate security risks. Third parties to whom we outsource certain ofour functions, or with whom our systems interface, are also subject to the risks outlined above and may not have or useappropriate controls to protect confidential information. A breach or attack affecting one of our third-party service providersor partners could harm our business even if we do not control the service that is attacked. Further, successful cyber-attacks atother healthcare services companies, whether or not we are impacted, could lead to a general loss of customer confidence inour industry that could negatively affect us, including harming the market perception of the effectiveness of our securitymeasures or of the healthcare industry in general, which could result in reduced use of our services. Though we haveinsurance against some cyber-risks and attacks, it may not be sufficient to offset the impact of a material loss event. Furthermore, our networks and technology systems are subject to disruption due to events such as a majorearthquake, fire, hurricane, telecommunications failure, terrorist attack or other catastrophic event. Any such breach or systeminterruption could result in the unauthorized disclosure, misuse or loss of confidential, sensitive or proprietary information,could negatively impact our ability to conduct normal business operations (including the collection of revenues), and couldresult in potential liability under privacy, security, consumer protection or other applicable laws, regulatory penalties,negative publicity and damage to our reputation, any of which could have a material adverse effect on our business, financialposition, results of operations or cash flows. We cannot provide any assurances that our corporate development activities will achieve their business goals orthe cost and service synergies we expect. We have completed, or have announced plans to complete, a number of acquisitions, divestitures, joint ventures andstrategic alliances in recent years as part of our business strategy, and we expect to enter into similar transactions in thefuture. We cannot provide any assurances that these transactions will achieve their business goals or the cost and servicesynergies we expect. In particular, our USPI joint venture represents an increased strategic focus on ambulatory and short-staysurgical facilities, as well as related imaging services businesses, and we cannot provide any assurances that this strategy willbe successful. Furthermore, with respect to acquisitions, we may not be able to identify suitable candidates, consummatetransactions on terms that are favorable to us, or achieve expected returns, synergies or other benefits in a timely manner or atall. With respect to proposed divestitures of assets or businesses, we may encounter difficulties in finding acquirers oralternative exit strategies on terms that are favorable to us, which could delay the receipt of anticipated proceeds necessaryfor us to complete our planned strategic objectives. In addition, our divestiture activities have required, and may in the futurerequire, us to retain significant pre-closing liabilities, recognize impairment charges or agree to contractual restrictions thatlimit our ability to reenter the applicable market, which may be material. Companies or operations acquired or joint ventures created may not be profitable or may not achieve theprofitability that justifies the investments made. Furthermore, the nature of a joint venture requires us to consult with andshare certain decision-making powers with unaffiliated third parties, some of which may be not-for-profit healthcare systems.If our joint venture partners do not fulfill their obligations, the affected joint venture may not be able to operate according toits business or strategic plans. In that case, our results could be adversely affected or we may be required to increase our levelof financial commitment to the joint venture. Moreover, differences in economic or business interests or goals among jointventure participants could result in delayed decisions, failures to agree on major issues and even litigation. If thesedifferences cause the joint ventures to deviate from their business or strategic plans, or if our joint venture partners takeactions contrary to our policies, objectives or the best interests of the joint venture, our results could be32 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsadversely affected. In addition, our relationships with not-for-profit healthcare systems and the joint venture agreements thatgovern these relationships are intended to be structured to comply with current IRS revenue rulings, as well as case lawrelevant to joint ventures between for-profit and not-for-profit healthcare entities. Material changes in these authorities couldadversely affect our relationships with not-for-profit healthcare systems and related joint venture arrangements. Our corporate development activities may present financial and operational risks, including diversion ofmanagement attention from existing core businesses and the integration or separation of personnel and financial and othersystems. Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence ofadditional debt, contingent liabilities and amortization expenses related to certain intangible assets, and increased operatingexpenses, any of which could adversely affect our results of operations and financial condition. Our existing joint ventures may limit our flexibility with respect to such jointly owned investments and could,thereby, have a material adverse effect on our business, results of operations and financial condition, as well as our abilityto sell the underlying assets or ownership interests in the joint ventures. We have invested in a number of joint ventures with other entities when circumstances warranted the use of thesestructures, and we may form additional joint ventures in the future. Our participation in joint ventures is subject to the risksthat: ·We could experience an impasse on certain decisions because we do not have sole decision-making authority,which could require us to expend additional resources on resolving such impasses or potential disputes. ·We may not be able to maintain good relationships with our joint venture partners (including healthcaresystems), which could limit our future growth potential and could have an adverse effect our business strategies. ·Our joint venture partners could have investment or operational goals that are not consistent with ourcorporate-wide objectives, including the timing, terms and strategies for investments or future growthopportunities. ·Our joint venture partners might become bankrupt, fail to fund their share of required capital contributions orfail to fulfill their other obligations as joint venture partners, which may require us to infuse our own capitalinto any such venture on behalf of the related joint venture partner or partners despite other competing uses forsuch capital. ·Many of our existing joint ventures require that one of our wholly owned affiliates provide a working capitalline of credit to the joint venture, which could require us to allocate substantial financial resources to thejoint venture potentially impacting our ability to fund our other short-term obligations. ·Some of our existing joint ventures require mandatory capital expenditures for the benefit of the applicablejoint venture, which could limit our ability to expend funds on other corporate opportunities. ·Our joint venture partners may have exit rights that would require us to purchase their interests upon theoccurrence of certain events, which could impact our financial condition by requiring us to incur additionalindebtedness in order to complete such transactions or, alternatively, in some cases we may have the option toissue shares of our common stock to our joint venture partners to satisfy such obligations, which would dilutethe ownership of our existing stockholders. ·Our joint venture partners may have competing interests in our markets that could create conflict of interestissues. ·Any sale or other disposition of our interest in a joint venture or underlying assets of the joint venture mayrequire consents from our joint venture partners, which we may not be able to obtain.33 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents·Certain corporate-wide or strategic transactions may also trigger other contractual rights held by a joint venturepartner (including termination or liquidation rights) depending on how the transaction is structured, whichcould impact our ability to complete such transactions. The put/call arrangements set forth in the Put/Call Agreement (as defined below) will require us to utilize our cashflow or incur additional indebtedness to satisfy the payment obligations in respect of such arrangements. In June 2015, we entered into a Contribution and Purchase Agreement (the “Contribution and Purchase Agreement”)with USPI Group Holdings, Inc. (“USPI Holdings”), Ulysses JV Holding I L.P. (“Ulysses Holding I”), Ulysses JV Holding IIL.P. (“Ulysses Holding II” and, together with Ulysses Holding I, the “USPI LPs”), and the newly formed USPI HoldingCompany, Inc., our USPI joint venture. USPI Holdings is the parent company of United Surgical Partners International, Inc.(“USPI”). Pursuant to the terms of the Contribution and Purchase Agreement, at the closing, the USPI LPs collectively soldand contributed 100% of the equity interests of USPI Holdings to the USPI joint venture in exchange for certain shares ofcommon stock of the USPI joint venture (the “USPI Contribution”), and we sold and contributed certain of our equityinterests and other assets that comprised a portion of our ambulatory surgery center and imaging center business to the USPIjoint venture (the “Tenet Contribution” and, together with the USPI Contribution, the “Contributions”).We also purchasedcertain shares of the USPI joint venture (the “Purchase” and, together with the Contributions, the “Contribution and PurchaseTransactions”) from the USPI LPs such that, after giving effect to the Contribution and Purchase Transactions, we owned50.1% and the USPI LPs, in the aggregate, owned 49.9% of the fully diluted equity interests of the USPI joint venture. In connection with the Contribution and Purchase Agreement, we, the USPI LPs and the USPI joint venture enteredinto a stockholders agreement pursuant to which we and the USPI LPs agreed to certain rights and obligations with respect tothe governance of the USPI joint venture. In addition, we entered into a put/call agreement (the “Put/Call Agreement”) thatcontains put and call options with respect to the equity interests in the USPI joint venture held by the USPI LPs. Each yearstarting in 2016, the USPI LPs must put to us at least 12.5%, and may put up to 25%, of the USPI joint venture shares held bythem immediately after the closing of the Contribution and Purchase Agreement. In each year that the USPI LPs are to delivera put and do not put the full 25% of USPI joint venture shares allowable, we may call the difference between the number ofUSPI joint venture shares the USPI LPs put and the maximum number of USPI joint venture shares the USPI LPs could haveput that year. In addition, the Put/Call Agreement contains certain other call options pursuant to which we will have theability to acquire all of the ownership interests held by the USPI LPs between 2018 and 2020 (at which point we would ownapproximately 95% of the USPI joint venture shares). In the event of a put by the USPI LPs, we will have the ability to choosewhether to settle the purchase price in cash or shares of our common stock and, in the event of a call by us, the USPI LPs willhave the ability to choose whether to settle the purchase price in cash or shares of our common stock. We have also entered into a separate put/call agreement (the “Baylor Put/Call Agreement”) with Baylor thatcontains put and call options with respect to the equity interests in the USPI joint venture held by Baylor. Each year startingin 2021, Baylor may put up to 33.3% of their total shares in the USPI joint venture held as of January 1, 2017. In each yearthat Baylor does not put the full 33.3% of the USPI joint venture’s shares allowable, we may call the difference between thenumber of shares Baylor put and the maximum number of shares they could have put that year. In addition, the BaylorPut/Call Agreement contains a call option pursuant to which we have the ability to acquire all of Baylor’s ownership interestby 2024. We have the ability to choose whether to settle the purchase price for the Baylor put/call in cash or shares of ourcommon stock. The put and call arrangements described above, to the extent settled in cash, may require us to dedicate a substantialportion of our cash flow to satisfy our payment obligations in respect of such arrangements, which may reduce the amount offunds available for our operations, capital expenditures and corporate development activities. Similarly, we may be requiredto incur additional indebtedness to satisfy our payment obligations in respect of such arrangements, which could haveimportant consequences to our business and operations, as described more fully below under “—Our level of indebtednesscould, among other things, adversely affect our ability to raise additional capital to fund our operations, limit our ability toreact to changes in the economy or our industry, and prevent us from meeting our obligations under the agreements relatingto our indebtedness.” 34 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsEconomic factors have affected, and may continue to impact, our business, financial condition and results ofoperations. We believe broad economic factors – including high unemployment rates in some of the markets our facilities serveand instability in consumer spending – have affected our volumes and our ability to collect outstanding receivables. TheUnited States economy remains unpredictable. If industry trends (including reductions in commercial managed careenrollment and patient decisions to postpone or cancel elective and non-emergency healthcare procedures) or generaleconomic 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 businessoperations worldwide has been limited in recent years. Our ability to access the capital markets on acceptable terms may beseverely restricted at a time when we would like, or need, to access those markets, which could have a negative impact on ourgrowth plans, our flexibility to react to changing economic and business conditions, and our ability to refinance existingdebt. An economic downturn or other economic conditions could also adversely affect the counterparties to our agreements,including the lenders under our credit facilities, 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 negatively impactour results of operations. As a result of factors that have negatively affected our industry generally and our business specifically, we havebeen required to record various charges in our results of operations. Our impairment tests presume stable, improving or, insome cases, declining operating results in our hospitals, which are based on programs and initiatives being implemented thatare designed to achieve the hospitals’ most recent projections. If these projections are not met, or negative trends occur thatimpact 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 alsoresult in future impairments of our goodwill. Any such charges could negatively impact our results of operations. Our level of indebtedness could, among other things, adversely affect our ability to raise additional capital to fundour operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting ourobligations under the agreements relating to our indebtedness. At December 31, 2016, we had approximately $15.1 billion of total long-term debt, as well as approximately$110 million in standby letters of credit outstanding in the aggregate, under our senior secured revolving credit facility (asamended, “Credit Agreement”) and our letter of credit facility agreement (as amended, “LC Facility”). Our Credit Agreementis collateralized by patient accounts receivable of substantially all of our domestic wholly owned acute care and specialtyhospitals, and our LC Facility is guaranteed and secured by a first priority pledge of the capital stock and other ownershipinterests of certain of our hospital subsidiaries on an equal ranking basis with our existing senior secured notes. From time totime, we expect to engage in additional capital market, bank credit and other financing activities, depending on our needsand financing alternatives available at that time. The interest expense associated with our indebtedness offsets a substantial portion of our operating income. During2016, our interest expense was $979 million and represented approximately 80% of our $1.22 billion of operating income.As a result, relatively small percentage changes in our operating income can result in a relatively large percentage change inour net income and earnings per share, both positively and negatively. In addition: ·Our substantial indebtedness may limit our ability to adjust to changing market conditions and place us at acompetitive disadvantage compared to our competitors that have less debt. ·We may be more vulnerable in the event of a deterioration in our business, in the healthcare industry or in theeconomy generally, or if federal or state governments substantially limit or reduce reimbursement under theMedicare or Medicaid programs. 35 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 debt service obligations reduce the amount of funds available for our operations, capital expenditures andcorporate development activities, and may make it more difficult for us to satisfy our financial obligations. ·Our substantial indebtedness could limit our ability to obtain additional financing to fund future capitalexpenditures, working capital, acquisitions or other needs. ·Some of our borrowings accrue interest at variable rates, exposing us to the risk of increased interest rates. ·Our significant indebtedness may result in the market value of our stock being more volatile, potentiallyresulting in larger investment gains or losses for our shareholders, than the market value of the common stock ofother companies that have a relatively smaller amount of indebtedness. Furthermore, our Credit Agreement, LC Facility and the indentures governing our outstanding notes contain, andany future debt obligations may contain, covenants that, among other things, restrict our ability to pay dividends, incuradditional debt and sell assets. See —“Restrictive covenants in the agreements governing our indebtedness may adverselyaffect us.” We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to takeother actions to satisfy our obligations under our indebtedness, which may not be successful. Our ability to make scheduled payments on or to refinance our indebtedness depends on our financial and operatingperformance, which is subject to prevailing economic and competitive conditions and to financial, business and other factorsbeyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient topermit us to pay the principal, premium, if any, and interest on our indebtedness. In addition, our ability to meet our debt service obligations is dependent upon the operating results of oursubsidiaries and their ability to pay dividends or make other payments or advances to us. We hold most of our assets at, andconduct substantially all of our operations through, direct and indirect subsidiaries. Moreover, we are dependent ondividends or other intercompany transfers of funds from our subsidiaries to meet our debt service and other obligations,including payment on our outstanding debt. The ability of our subsidiaries to pay dividends or make other payments oradvances to us will depend on their operating results and will be subject to applicable laws and restrictions contained inagreements governing the debt of such subsidiaries. Our less than wholly owned subsidiaries may also be subject torestrictions on their ability to distribute cash to us in their financing or other agreements and, as a result, we may not be ableto access their cash flows to service their respective debt obligations. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced toreduce or delay capital expenditures, including those required for operating our existing hospitals, for integrating ourhistorical acquisitions or for future corporate development activities. We also may be forced to sell assets or operations, seekadditional capital, or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any ofthese actions, that these actions would be successful and permit us to meet our scheduled debt service obligations, or thatthese actions would be permitted under the terms of our existing or future debt agreements, including our Credit Agreement,LC Facility and the indentures governing our outstanding notes. Restrictive covenants in the agreements governing our indebtedness may adversely affect us. Our Credit Agreement, LC Facility and the indentures governing our outstanding notes contain various covenantsthat, among other things, limit our ability and the ability of our subsidiaries to: ·incur, assume or guarantee additional indebtedness; ·incur liens; ·make certain investments;36 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents·provide subsidiary guarantees; ·consummate asset sales; ·redeem debt that is subordinated in right of payment to outstanding indebtedness; ·enter into sale and lease-back transactions; ·enter into transactions with affiliates; and ·consolidate, merge or sell all or substantially all of our assets. These restrictions are subject to a number of important exceptions and qualifications. In addition, so long as any obligation or commitment is outstanding under our Credit Agreement and LC Facility,the terms of such facilities require us to maintain a financial ratio relating to our ability to satisfy certain fixed expenses,including interest payments. Our ability to meet these restrictive covenants and financial ratio may be affected by eventsbeyond our control, and we cannot assure you that we will meet those tests. These restrictions could limit our ability toobtain future financing, make acquisitions or needed capital expenditures, withstand economic downturns in our business orthe economy in general, conduct operations or otherwise take advantage of business opportunities that may arise. Inaddition, a breach of any of these covenants could cause an event of default, which, if not cured or waived, could require usto repay the indebtedness immediately. Under these conditions, we are not certain whether we would have, or be able toobtain, sufficient funds to make accelerated payments. Despite current indebtedness levels, we may be able to incur substantially more debt. This could furtherexacerbate the risks described above. We have the ability to incur additional indebtedness in the future, subject to the restrictions contained in ourCredit Agreement, LC Facility and the indentures governing our outstanding notes. We may decide to incur additionalsecured or unsecured debt in the future to finance our operations and any judgments or settlements or for other businesspurposes. Our Credit Agreement provides for revolving loans in an aggregate principal amount of up to $1 billion, with a$300 million subfacility for standby letters of credit. Based on our eligible receivables, approximately $998 million wasavailable for borrowing under the Credit Agreement at December 31, 2016. Our LC Facility provides for the issuance ofstandby and documentary letters of credit in an aggregate principal amount of up to $180 million (subject to increase to upto $200 million). At December 31, 2016, we had no cash borrowings outstanding under the Credit Agreement, and we hadapproximately $110 million of standby letters of credit outstanding in the aggregate under the Credit Facility and theLC Facility. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify. The utilization of our tax losses could be substantially limited if we experience an ownership change as defined inthe Internal Revenue Code. At December 31, 2016, we had federal net operating loss (“NOL”) carryforwards of approximately $1.7 billionpretax available to offset future taxable income. These NOL carryforwards will expire in the years 2025 to 2034. Section 382of the Internal Revenue Code imposes an annual limitation on the amount of a company’s taxable income that may be offsetby the NOL carryforwards if it experiences an “ownership change” as defined in Section 382 of the Code. An ownershipchange occurs when a company’s “five-percent shareholders” (as defined in Section 382 of the Code) collectively increasetheir ownership in the company by more than 50 percentage points (by value) over a rolling three-year period. (This isdifferent from a change in beneficial ownership under applicable securities laws.) These ownership changes includepurchases 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 expectto be able to realize our total NOL carryforwards prior to their expiration, if an ownership change occurs, our ability to usethe NOL carryforwards to offset future taxable income will be subject to an37 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsannual limitation and will depend on the amount of taxable income we generate in future periods. There is no assurance thatwe will be able to fully utilize the NOL carryforwards. Furthermore, we could be required to record a valuation allowancerelated to the amount of the NOL carryforwards that may not be realized, which could adversely impact our results ofoperations. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES The disclosure required under this Item is included in Item 1, Business, of Part I of this report. ITEM 3. LEGAL PROCEEDINGS Because we provide healthcare services in a highly regulated industry, we have been and expect to continue to beparty to various lawsuits, claims and regulatory investigations from time to time. For information regarding material pendinglegal proceedings in which we are involved, see Note 14 to our Consolidated Financial Statements, which is incorporated byreference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 38 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 ANDISSUER PURCHASES OF EQUITY SECURITIES Common Stock. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “THC.”The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock on theNYSE: High LowYear Ended December 31, 2016 First Quarter $30.07 $21.39Second Quarter 34.08 25.71Third Quarter 31.84 20.93Fourth Quarter 24.13 14.06 Year Ended December 31, 2015 First Quarter $52.69 $41.47Second Quarter 59.21 46.33Third Quarter 60.93 35.76Fourth Quarter 39.75 26.60 On February 17, 2017, the last reported sales price of our common stock on the NYSE composite tape was $19.37per share. As of that date, there were 4,254 holders of record of our common stock. Our transfer agent and registrar isComputershare. Shareholders with questions regarding their stock certificates, including inquiries related to exchanging orreplacing 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 offiscal 1994. We currently intend to retain future earnings, if any, for the operation and development of our business and,accordingly, do not currently intend to pay any cash dividends on our common stock. Our board of directors will evaluateour future earnings, results of operations, financial condition and capital requirements in determining whether to pay anycash dividends in the future. Our senior secured revolving credit agreement and our letter of credit facility agreement containprovisions that limit the payment of cash dividends 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 andRelated Stockholder Matters, of Part III of this report for information regarding securities authorized for issuance under ourequity compensation plans. Stock Performance Graph. The following graph shows the cumulative, five-year total return for our common stockcompared to (i) the following indices (each of which was included in the stock performance graph presented in our AnnualReport on Form 10-K for the year ended December 31, 2015) and a (ii) new index that we adopted in 2016. The previouslydisclosed indices are: ·Standard & Poor’s 500 Stock Index (a broad equity market index in which we are not included);·Standard & Poor’s Health Care Composite Index (a published industry index in which we are not included); and·A group made up of us and our hospital company peers (namely, Community Health Systems, Inc. (CYH), TenetHealthcare Corporation (THC) and Universal Health Services, Inc. (UHS)), which we refer to as the “Old PeerGroup”. In 2016, we modified the Old Peer Group to add HCA Holdings, Inc. (HCA) and LifePoint Health, Inc. (LPNT), each of which,like the other companies included in the Old Peer Group, is a publicly traded company conducting as its primary business themanagement of acute care hospitals. We added HCA, which became a public reporting company again in39 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents2011, to the previously disclosed peer group because a full five years of performance data for its common stock becameavailable at December 31, 2016. We added LPNT to the peer group because we believe many investors consider LPNT to beone of our peers when evaluating our performance. We refer to the modified peer group as the “New Peer Group” and, inaccordance with SEC requirements, include it with the Old Peer Group on the chart below. Performance data assumes that $100.00 was invested on December 31, 2011 in our common stock and each of theindices. The data assumes the reinvestment of all cash dividends and the cash value of other distributions. The stock priceperformance shown in the graph is not necessarily indicative of future stock price performance. The performance graph shallnot be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filingsunder the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 12/11 12/12 12/13 12/14 12/15 12/16 Tenet Healthcare Corporation $100.00 $158.24 $205.26 $246.93 $147.66 $72.32 S&P 500 $100.00 $116.00 $153.58 $174.60 $177.01 $198.18 S&P Health Care $100.00 $117.89 $166.76 $209.02 $223.42 $217.41 Old Peer Group $100.00 $147.21 $213.62 $283.42 $225.22 $159.72 New Peer Group $100.00 $155.24 $235.16 $339.64 $298.31 $279.16 40 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 whollyowned and majority-owned subsidiaries for the years ended December 31, 2012 through 2016. Effective June 16, 2015, wecompleted the transaction that combined our freestanding ambulatory surgery and imaging center assets with the short-staysurgical facility assets of United Surgical Partners International, Inc. (“USPI”) into our new USPI joint venture. The tablebelow includes USPI results in the 2015 column for the post-acquisition period only. We acquired Vanguard Health Systems,Inc. (“Vanguard”) on October 1, 2013. The 2013 columns in the tables below include results of operations for Vanguard andits consolidated subsidiaries for the three months ended December 31, 2013 only. All amounts related to shares, share pricesand earnings per share for periods ending prior to October 11, 2012 have been restated to give retrospective presentation forthe one-for-four reverse stock split we announced on October 1, 2012. The tables should be read in conjunction with Item 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations, and our Consolidated FinancialStatements and notes thereto included in this report. Years Ended December 31, 2016 2015 2014 2013 2012 (In Millions, Except Per-Share Amounts) Net operating revenues: Net operating revenues before provision for doubtfulaccounts $21,070 $20,111 $17,908 $12,059 $9,896 Less: Provision for doubtful accounts 1,449 1,477 1,305 972 785 Net operating revenues 19,621 18,634 16,603 11,087 9,111 Equity in earnings of unconsolidated affiliates 131 99 12 15 8 Operating expenses: Salaries, wages and benefits 9,356 9,011 8,023 5,371 4,257 Supplies 3,124 2,963 2,630 1,784 1,552 Other operating expenses, net 4,891 4,555 4,114 2,701 2,147 Electronic health record incentives (32) (72) (104) (96) (40) Depreciation and amortization 850 797 849 545 430 Impairment and restructuring charges, andacquisition-related costs 202 318 153 103 19 Litigation and investigation costs, net of insurancerecoveries 293 291 25 31 5 Gains on sales, consolidation and deconsolidation offacilities (151) (186) — — — Operating income 1,219 1,056 925 663 749 Interest expense (979) (912) (754) (474) (412) Loss from early extinguishment of debt — (1) (24) (348) (4) Investment earnings 8 1 — 1 1 Income (loss) from continuing operations, beforeincome taxes 248 144 147 (158) 334 Income tax benefit (expense) (67) (68) (49) 65 (125) Income (loss) from continuing operations, beforediscontinued operations 181 76 98 (93) 209 Less: Preferred stock dividends — — — — 11 Less: Net income attributable to noncontrollinginterests from continuing operations 368 218 64 30 13 Net income (loss) attributable to Tenet HealthcareCorporation common shareholders from continuingoperations $(187) $(142) $34 $(123) $185 Basic earnings (loss) per share attributable to TenetHealthcare Corporation common shareholders fromcontinuing operations $(1.88) $(1.43) $0.35 $(1.21) $1.77 Diluted earnings (loss) per share attributable to TenetHealthcare Corporation common shareholders fromcontinuing operations $(1.88) $(1.43) $0.34 $(1.21) $1.70 41 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe operating results data presented above is not necessarily indicative of our future results of operations. Reasonsfor this include, but are not limited to: overall revenue and cost trends, particularly the timing and magnitude of pricechanges; fluctuations in contractual allowances and cost report settlements and valuation allowances; managed care contractnegotiations, settlements or terminations and payer consolidations; changes in Medicare and Medicaid regulations;Medicaid and other supplemental funding levels set by the states in which we operate; the timing of approval by the Centersfor Medicare and Medicaid Services (“CMS”) of Medicaid provider fee revenue programs; trends in patient accountsreceivable collectability and associated provisions for doubtful accounts; fluctuations in interest rates; levels of malpracticeinsurance expense and settlement trends; the timing of when we meet the criteria to recognize electronic health recordincentives; impairment of long-lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries relatedto natural disasters and other weather-related occurrences; litigation and investigation costs; acquisitions and dispositions offacilities and other assets; gains (losses) on sales, consolidation and deconsolidation of facilities; income tax rates anddeferred tax asset valuation allowance activity; changes in estimates of accruals for annual incentive compensation; thetiming and amounts of stock option and restricted stock unit grants to employees and directors; gains or losses from earlyextinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect patient volumes and,thereby, the results of operations at our hospitals and related healthcare facilities include, but are not limited to: the businessenvironment, economic conditions and demographics of local communities in which we operate; the number of uninsuredand underinsured individuals in local communities treated at our hospitals; seasonal cycles of illness; climate and weatherconditions; physician recruitment, retention and attrition; advances in technology and treatments that reduce length of stay;local healthcare competitors; managed care contract negotiations or terminations; the number of patients with high-deductible health insurance plans; any unfavorable publicity about us, or our joint venture partners, that impacts ourrelationships with physicians and patients; changes in healthcare regulations and the participation of individual states infederal programs; and the timing of elective procedures. BALANCE SHEET DATA December 31, 2016 2015 2014 2013 2012 (In Millions) Working capital (current assetsminus current liabilities) $1,223 $863 $393 $599 $918 Total assets 24,701 23,682 17,951 16,450 9,044 Long-term debt, net of current portion 15,064 14,383 11,505 10,696 5,158 Redeemable noncontrolling interests in equityof consolidated subsidiaries 2,393 2,266 401 340 16 Noncontrolling interests 665 267 134 123 75 Total equity 1,082 958 785 878 1,218 CASH FLOW DATA Years Ended December 31, 2016 2015 2014 2013 2012 (In Millions) Net cash provided by operating activities $558 $1,026 $687 $589 $593 Net cash used in investing activities (430) (1,317) (1,322) (2,164) (662) Net cash provided by financing activities 232 454 715 1,324 320 42 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results ofOperations (“MD&A”), is to provide a narrative explanation of our financial statements that enables investors to betterunderstand our business, to enhance our overall financial disclosures, to provide the context within which our financialinformation may be analyzed, and to provide information about the quality of, and potential variability of, our financialcondition, results of operations and cash flows. Our Hospital Operations and other segment is comprised of our acute carehospitals, ancillary outpatient facilities, urgent care centers, microhospitals, physician practices and health plans (certain ofwhich are classified as held for sale as described in Note 4 to our Consolidated Financial Statements). Our Ambulatory Caresegment is comprised of the operations of our USPI Holding Company, Inc. (“USPI joint venture”), in which we own amajority interest, and European Surgical Partners Limited (“Aspen”) facilities. At December 31, 2016, our USPI joint venturehad interests in 239 ambulatory surgery centers, 34 urgent care centers, 21 imaging centers and 20 short-stay surgicalhospitals in 27 states, and Aspen operated nine private hospitals and clinics in the United Kingdom. Our Conifer segmentprovides healthcare business process services in the areas of hospital and physician revenue cycle management and value-based care solutions to healthcare systems, as well as individual hospitals, physician practices, self-insured organizations,health plans and other entities, through our Conifer Holdings, Inc. (“Conifer”) subsidiary. MD&A, which should be read inconjunction 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 continuingoperations, with dollar amounts expressed in millions (except per share, per admission, per adjusted admission, per patientday, per adjusted patient day, per visit and per case amounts). Continuing operations information includes the results of(i) our same 67 hospitals and six health plans operated throughout the years ended December 31, 2016 and 2015, (ii) ourUSPI joint venture, in which we acquired a majority interest on June 16, 2015, (iii) Aspen, which we also acquired onJune 16, 2015, (iv) Hi-Desert Medical Center, which we began operating on July 15, 2015, (v) our Carondelet Heath Networkjoint venture, in which we acquired a majority interest on August 31, 2015, (vi) Saint Louis University Hospital (“SLUH”),which we divested on August 31, 2015, (vii) our joint venture with Baptist Health System, Inc., which we formed on October2, 2015, (viii) DMC Surgery Hospital, which we closed in October 2015, (ix) our two North Carolina hospitals, which wedivested effective January 1, 2016, (x) our four North Texas hospitals in which we divested a controlling interest effectiveJanuary 1, 2016, but continue to operate, and (xi) our five Georgia hospitals, which we divested effective April 1, 2016, ineach case only for the period from acquisition, or commencement of operations of the facility, as the case may be, toDecember 31, 2016, 2015 and 2014, as applicable. Continuing operations information excludes the results of our hospitalsand other businesses that have been classified as discontinued operations for accounting purposes. MANAGEMENT OVERVIEW RECENT DEVELOPMENTS Welsh Carson Put Notice—In January 2017, subsidiaries of Welsh, Carson, Anderson & Stowe delivered a putnotice for the minimum number of shares (representing a 6.25% ownership interest in our USPI joint venture) that they arerequired to put to us in 2017 according to our Put/Call Agreement, as described and defined in Note 15 to our ConsolidatedFinancial Statements. The parties are in discussions regarding the calculation of the estimated purchase43 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsprice relating to the exercise of the 2017 put option as contemplated by the Put/Call agreement. The estimated purchase priceis based on an agreed-upon estimate of 2017 financial results and is subject to true-up following the finalization of actual2017 financial results. However, we anticipate that the initial estimated payment will be between $159 million and $170million. In addition, we are currently evaluating the additional call options available to us pursuant to the Put/CallAgreement. TRENDS AND STRATEGIES The healthcare industry, in general, and the acute care hospital business, in particular, are experiencingsignificant regulatory uncertainty based, in large part, on legislative efforts to significantly modify or repeal and potentiallyreplace the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Actof 2010 (“Affordable Care Act” or “ACA”). It is difficult to predict the full impact of these actions on our future revenues andoperations. However, we believe that our ultimate success in increasing our profitability depends in part on our success inexecuting the strategies discussed below. In general, these strategies are intended to address the following trends shaping thedemand for healthcare services: (i) consumers, employers and insurers are actively seeking lower-cost solutions and bettervalue as they focus more on healthcare spending; (ii) patient volumes are shifting from inpatient to outpatient settings due totechnological advancements and demand for care that is more convenient, affordable and accessible; (iii) the industry ismigrating to value-based payment models with government and private payers shifting risk to providers; and(iv) consolidation continues across the entire healthcare sector through both traditional acquisition and divestiture activities,as well as joint ventures. Driving Growth in Our Facilities—Over the past several years, and with the aforementioned trends in mind, we havetaken a number of steps to better position our hospitals, ambulatory care centers and other outpatient businesses to competemore effectively in the ever evolving healthcare environment. We have set competitive prices for our services, made capitaland other investments in our facilities and technology, increased our efforts to recruit and retain quality physicians, nursesand other healthcare personnel, and negotiated competitive contracts with managed care and other private payers. Inaddition, we have expanded our network of outpatient centers, and we have increased the participation of our hospitals inaccountable care organizations (“ACOs”), which are networks of providers and suppliers that work together to invest ininfrastructure and to redesign delivery processes in an effort to achieve high quality and efficient delivery of services. Wehave also entered into joint ventures with other healthcare providers in several of our markets to maximize effectiveness,reduce costs and build clinically integrated networks that provide quality services across the care continuum. We believe we are well-positioned to generate returns on recent hospital projects, including our new 106-bedteaching hospital in El Paso, which opened on January 17, 2017. We are also continuing our strategy of selling assets in non-core markets, such as our former hospitals and related operations in Georgia and North Carolina, as well as sub-scalebusinesses, such as our health plans. We will continue to further refine our portfolio of hospitals and related healthcarebusinesses when we believe such refinements will help us achieve one or more of the following goals: improve profitability;allocate capital more effectively in areas where we have a stronger market presence; deploy proceeds on higher-returninvestments across our business; enhance cash generation; and lower our ratio of debt-to-Adjusted EBITDA. Expansion of Our Ambulatory Care Segment—We remain focused on opportunities to expand our Ambulatory Caresegment through organic growth, building new outpatient centers, corporate development activities and strategicpartnerships. We believe surgery centers and surgical hospitals like those in our USPI joint venture offer many advantages topatients and physicians, including greater affordability, predictability, flexibility and convenience. Moreover, due in part toadvancements in medical technology, and due to the lower cost structure and greater efficiencies that are attainable in aspecialized outpatient site, we believe the volume and complexity of surgical cases performed in an outpatient setting willcontinue to steadily increase. In addition, we have continued to grow our imaging and urgent care businesses through ourUSPI joint venture’s acquisitions. These acquisitions reflect our broader strategies to (1) offer more services to patients,(2) broaden the capabilities we offer to healthcare systems and physicians, and (3) expand into faster-growing, less capitalintensive, higher-margin businesses. Historically, our outpatient services have generated significantly higher margins for usthan inpatient services. We intend to increase our ownership in our USPI joint venture each year using internally generatedcash with the expectation that we will own approximately 95% of the total outstanding USPI joint venture shares between2018 and 2020. 44 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDriving Conifer’s Growth—We intend to continue to market and expand Conifer’s revenue cycle management,patient communications and engagement services, and value-based care services businesses. Conifer provides services tomore than 800 Tenet and non-Tenet hospital and other clients nationwide. Conifer’s service offerings have also expanded tosupport value-based performance through clinical integration, financial risk management and population healthmanagement, which are integral parts of the healthcare industry’s movement toward ACOs and similar risk-based or capitatedcontract models. In addition to hospitals and independent physician associations, clients for these services include healthplans, self-insured organizations, government agencies and other entities. Improving Operating Leverage—We are focused on improving profitability by growing patient volumes andeffective cost management. We believe our patient volumes have been constrained by increased competition, utilizationpressure by managed care organizations, new delivery models that are designed to lower the utilization of acute care hospitalservices, the effects of higher patient co-pays and deductibles, depressed economic conditions in certain of our markets anddemographic trends. However, we also believe that targeted capital spending on critical growth opportunities for ourhospitals, emphasis on higher-demand clinical service lines (including outpatient services), focus on expanding ouroutpatient business and the implementation of new payer contracting strategies should help us grow our patient volumes. Inaddition, we believe our capital structure will withstand a changing interest rate environment. Approximately 94% of ourlong-term debt has a fixed rate of interest, and the maturity dates of our notes are staggered from 2018 through 2031.Moreover, we intend to lower our ratio of debt-to-Adjusted EBITDA, primarily through Adjusted EBITDA growth, whichshould lower our refinancing risk and increase the potential for us to use lower-rate secured debt to refinance portions of ourhigher-rate unsecured debt. Our ability to execute on our strategies and manage the aforementioned trends is subject to a number of risks anduncertainties that may cause actual results to be materially different from expectations. For information about risks anduncertainties that could affect our results of operations, see the Forward-Looking Statements and Risk Factors sections in PartI of this report. RESULTS OF OPERATIONS—OVERVIEW We believe our results of operations for our most recent fiscal quarter best reflect recent trends we are experiencingwith respect to volumes, revenues and expenses; therefore, we have provided below information about these metrics for thethree months ended December 31, 2016 and 2015 on a continuing operations basis. Selected Operating Statistics for All Continuing Operations Hospitals— The following table shows certain selectedoperating statistics for our continuing operations, which includes the results of (i) our same 67 hospitals and six health plansoperated throughout three months ended December 31, 2016 and 2015, (ii) our USPI joint venture, in which we acquired amajority interest on June 16, 2015, (iii) Aspen, which we also acquired on June 16, 2015, (iv) Hi‑Desert Medical Center,which we began operating on July 15, 2015, (v) our Carondelet Heath Network joint venture, in which we acquired amajority interest on August 31, 2015, (vi) SLUH, which we divested on August 31, 2015, (vii) our joint venture with BaptistHealth System, Inc., which we formed on October 2, 2015, (viii) DMC Surgery Hospital, which we closed in October 2015,(ix) our two North Carolina hospitals, which we divested effective January 1, 2016, (x) our four North Texas hospitals inwhich we divested a controlling interest effective January 1, 2016, but continue to operate, and (xi) our five Georgiahospitals, which we divested effective April 1, 2016, in each case only for the period from acquisition, or commencement ofoperations of the facility, as the case may be, to December 31, 2016 and 2015, as applicable. We believe this information isuseful to investors because it reflects our current portfolio of operations and the recent trends we are experiencing withrespect to volumes, revenues and expenses.45 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Continuing Operations Three Months Ended December 31, Increase Selected Operating Statistics 2016 2015 (Decrease) Hospital Operations and other Number of hospitals (at end of period) 75 86 (11) Total admissions 192,104 211,991 (9.4)% Adjusted patient admissions 338,929 371,994 (8.9)% Paying admissions (excludes charity and uninsured) 181,617 200,462 (9.4)% Charity and uninsured admissions 10,487 11,529 (9.0)% Emergency department visits 701,100 778,148 (9.9)% Total surgeries 126,749 138,264 (8.3)% Patient days — total 888,185 983,856 (9.7)% Adjusted patient days 1,543,490 1,710,620 (9.8)% Average length of stay (days) 4.62 4.64 (0.4)% Average licensed beds 20,326 22,549 (9.9)% Utilization of licensed beds 47.5% 47.4% 0.1% Total visits 1,950,549 2,198,005 (11.3)% Paying visits (excludes charity and uninsured) 1,834,844 2,024,725 (9.4)% Charity and uninsured visits 115,705 173,280 (33.2)% Ambulatory Care Total consolidated facilities (at end of period) 215 192 23 Total cases 445,107 289,033 54.0% (1)The change is the difference between the 2016 and 2015 amounts shown.(2)Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities inour Hospital Operations and other segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues andoutpatient revenues and dividing the results by gross inpatient revenues.(3)Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. Total admissions decreased by 19,887, or 9.4%, in the three months ended December 31, 2016 compared to the threemonths ended December 31, 2015. Total surgeries decreased by 8.3% in the three months ended December 31, 2016compared to the same period in 2015. Our emergency department visits decreased 9.9% in the three months endedDecember 31, 2016 compared to the same period in the prior year. Our volumes from continuing operations were negativelyimpacted by the decrease in our number of hospitals; however, we believe the volume decreases were partially offset by thegrowth we generated through improved physician alignment and service line expansion, insurance coverage for a greaternumber of individuals, and a strengthening economy. Our Ambulatory Care total cases increased 54.0% due to our USPI jointventure’s acquisition of 35 urgent care centers (one of which has since been closed) effective December 31, 2015, as well asthe impact associated with stepping up our USPI joint venture’s ownership interests in previously held equity investments,which we began consolidating after we acquired controlling interests. Continuing Operations Three Months Ended December 31, IncreaseRevenues 2016 2015 (Decrease)Net operating revenues before provision for doubtful accounts $5,214 $5,417 (3.7)% Hospital Operations and other Revenues from charity and the uninsured $287 $267 7.5%Net inpatient revenues $2,606 $2,736 (4.8)%Net outpatient revenues $1,457 $1,616 (9.8)% Ambulatory Care revenues $478 $397 20.4% Conifer revenues $402 $384 4.7% (1)Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-payrevenues of $127 million and $96 million for the three months ended December 31, 2016 and 2015, respectively. Net outpatient revenuesinclude self-pay revenues of $160 million and $171 million for the three months ended December 31, 2016 and 2015, respectively. 46 (1) (2)(2)(3)(1)(1) (1)(1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNet operating revenues before provision for doubtful accounts decreased by $203 million, or 3.7%, in the threemonths ended December 31, 2016 compared to the same period in 2015, primarily due to lower inpatient and outpatientvolumes as a result of the decrease in our number of hospitals. For our Hospital Operations and other segment, the impact oflower volumes on net operating revenues was partially mitigated by improved managed care pricing. Continuing Operations Three Months Ended December 31, IncreaseProvision for Doubtful Accounts 2016 2015 (Decrease)Provision for doubtful accounts $354 $391 (9.5)%Provision for doubtful accounts as a percentage of net operatingrevenues before provision for doubtful accounts 6.8% 7.2% (0.4)% (1)The change is the difference between the 2016 and 2015 amounts shown. Provision for doubtful accounts as a percentage of net operating revenues before provision for doubtful accountswas 6.8% and 7.2% for the three months ended December 31, 2016 and 2015, respectively. This improvement was primarilydue to the growth in our Ambulatory Care segment, where bad debt expense is a much smaller percentage of revenues relativeto our hospitals. Our accounts receivable days outstanding (“AR Days”) from continuing operations were 54.8 days atDecember 31, 2016 and 49.5 days at December 31, 2015, within our target of less than 55 days. Continuing Operations Three Months Ended December 31, IncreaseSelected Operating Expenses 2016 2015 (Decrease)Hospital Operations and other Salaries, wages and benefits $1,925 $2,075 (7.2)% Supplies 674 738 (8.7)% Other operating expenses 1,034 1,067 (3.1)% Total $3,633 $3,880 (6.4)% Ambulatory Care Salaries, wages and benefits $157 $130 20.8% Supplies 99 79 25.3% Other operating expenses 83 78 6.4% Total $339 $287 18.1% Conifer Salaries, wages and benefits $242 $238 1.7% Other operating expenses 88 85 3.5% Total $330 $323 2.2% Total Salaries, wages and benefits $2,324 $2,443 (4.9)% Supplies 773 817 (5.4)% Other operating expenses 1,205 1,230 (2.0)% Total $4,302 $4,490 (4.2)% Rent/lease expense Hospital Operations and other $62 $67 (7.5)%Ambulatory Care 19 15 26.7%Conifer 4 4 —% Total $85 $86 (1.2)%(1)Included in other operating expenses. 47 (1)(1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Continuing Operations Three Months Ended December 31, IncreaseSelected Operating Expenses per Adjusted Patient Admission 2016 2015 (Decrease)Hospital Operations and other Salaries, wages and benefits per adjusted patient admission $5,680 $5,577 1.8% Supplies per adjusted patient admission 1,989 1,984 0.3% Other operating expenses per adjusted patient admission 3,074 2,890 6.4% Total per adjusted patient admission $10,743 $10,451 2.8% (1)Adjusted patient admissions represents actual patient admissions adjusted to include outpatient services provided by facilities in our HospitalOperations and other segment by multiplying actual patient admissions by the sum of gross inpatient revenues and outpatient revenues anddividing the results by gross inpatient revenues. Salaries, wages and benefits per adjusted patient admission increased 1.8% in the three months endedDecember 31, 2016 compared to the same period in 2015. This change is primarily due to annual merit increases for certainof our employees and the effect of lower volumes on operating leverage due to the sale of certain of our hospitals since the2015 period, partially offset by decreased accruals for annual incentive compensation, in the three months endedDecember 31, 2016 compared to the three months ended December 31, 2015. Supplies expense per adjusted patient admission increased 0.3% in the three months ended December 31, 2016compared to the three months ended December 31, 2015. The change in supplies expense was primarily attributable togrowth in our higher acuity supply-intensive surgical services, partially offset by the impact of the group-purchasingstrategies and supplies-management services we utilize to reduce costs. Other operating expenses per adjusted patient admission increased by 6.4% in the three months endedDecember 31, 2016 compared to the three months ended December 31, 2015. This increase is due to higher contractedservices and medical fees, the effect of lower volumes on operating leverage due to the sale of certain of our hospitals sincethe 2015 period, and increased costs associated with our health plans due to an increase in covered lives, which costs werepartially offset by increased health plan revenues. Malpractice expense for our Hospital Operations and other segment was$33 million lower in the 2016 period compared to the 2015 period. The 2016 period included a favorable adjustment ofapproximately $19 million due to an 83 basis point increase in the interest rate used to estimate the discounted present valueof projected future malpractice liabilities compared to a favorable adjustment of approximately $7 million as a result of a 34basis point increase in the interest rate in the 2015 period. LIQUIDITY AND CAPITAL RESOURCES OVERVIEW Cash and cash equivalents were $716 million at December 31, 2016 compared to $649 million atSeptember 30, 2016. Significant cash flow items in the three months ended December 31, 2016 included: ·Net cash provided by operating activities before interest, taxes and restructuring charges, acquisition-relatedcosts, and litigation costs and settlements of $613 million; ·Payments for restructuring charges, acquisition-related costs and litigation costs and settlements of$559 million, which payments include approximately $517 million related to our Clinica de la Mama matter,which is described in Note 14 to our Consolidated Financial Statements; ·Capital expenditures of $261 million; ·Purchases of businesses or joint venture interests of $21 million; ·Interest payments of $336 million; ·$750 million proceeds from the issuance of our 7/2% senior secured notes due 2022; and48 (1)(1)(1)1Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents·$67 million of distributions paid to our noncontrolling interests. Net cash provided by operating activities was $558 million in the year ended December 31, 2016 compared to $1.026 billionin the year ended December 31, 2015. Key positive and negative factors contributing to the change between the 2016 and2015 periods include the following: ·Increased income from continuing operations before income taxes of $137 million, excluding investmentearnings (losses), gain (loss) from early extinguishment of debt, interest expense, gains on sales, consolidationand deconsolidation of facilities, litigation and investigation costs, impairment and restructuring charges, andacquisition-related costs, and depreciation and amortization in the year ended December 31, 2016 compared tothe year ended December 31, 2015; ·An increase of $491 million in payments on reserves for restructuring charges, acquisition-related costs, andlitigation costs and settlements; ·Approximately $84 million of additional net cash proceeds in the 2016 period related to supplementalMedicaid programs in California and Texas; ·Higher aggregate annual 401(k) matching contributions and annual incentive compensation payments of$18 million and $9 million, respectively, in the year ended December 31, 2016 compared to the year endedDecember 31, 2015; ·Higher interest payments of $73 million. ·A $15 million decrease in cash used in discontinued operations; and ·The timing of other working capital items. SOURCES OF REVENUE We earn revenues for patient services from a variety of sources, primarily managed care payers and the federalMedicare program, as well as state Medicaid programs, indemnity-based health insurance companies and self-pay patients(that is, patients who do not have health insurance and are not covered by some other form of third-party arrangement). The table below shows the sources of net patient revenues before provision for doubtful accounts for our HospitalOperations and other segment, expressed as percentages of net patient revenues before provision for doubtful accounts fromall sources: Years Ended December 31, Net Patient Revenues from: 2016 2015 2014Medicare 20.5% 20.4% 22.0% Medicaid 8.2% 8.7% 9.6% Managed care 61.5% 60.6% 58.4%Indemnity, self-pay and other 9.8% 10.3% 10.0% Our payer mix on an admissions basis for our Hospital Operations and other segment, expressed as a percentage oftotal admissions from all sources, is shown below: Years Ended December 31, Admissions from: 2016 2015 2014Medicare 26.1% 26.7% 27.5% Medicaid 7.0% 8.0% 10.3% Managed care 59.2% 57.5% 54.5% Indemnity, self-pay and other 7.7% 7.8% 7.7% 49 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsGOVERNMENT PROGRAMS The Centers for Medicare and Medicaid Services (“CMS”), an agency of the U.S. Department of Health and HumanServices (“HHS”), is the single largest payer of healthcare services in the United States. Approximately 55 millionindividuals rely on healthcare benefits through Medicare, and approximately 74 million individuals are enrolled inMedicaid and the Children’s Health Insurance Program (“CHIP”). These three programs are authorized by federal law anddirected by CMS. Medicare is a federally funded health insurance program primarily for individuals 65 years of age andolder, certain younger people with disabilities, and people with end-stage renal disease, and is provided without regard toincome or assets. Medicaid is administered by the states and is jointly funded by the federal government and stategovernments. Medicaid is the nation’s main public health insurance program for people with low incomes and is the largestsource of health coverage in the United States. The CHIP, which is also administered by the states and jointly funded,provides health coverage to children in families with incomes too high to qualify for Medicaid, but too low to afford privatecoverage. The Affordable Care Act Several provisions of the ACA, including premium assistance and cost sharing subsidies for insurance productspurchased through the health insurance exchanges, and the expansion of Medicaid in the 31 states (including six in whichwe operate acute hospitals) and the District of Columbia that have taken action to do so, are financed through: ·negative adjustments to the annual market basket updates for Medicare hospital inpatient, outpatient,prospective payment systems, which began in 2010, as well as additional negative “productivity adjustments”to the annual market basket updates which began in 2011; and ·reductions to Medicare and Medicaid disproportionate share hospital (“DSH”) payments, which began forMedicare payments in federal fiscal year (“FFY”) 2014 and will begin for Medicaid payments in FFY 2018. We cannot predict if or when modification or repeal of the ACA will take effect or what action, if any, Congressmight take with respect to replacing the law. We are also unable to predict the impact of legislative and regulatory changeson our future revenues and operations. However, if the ultimate impact is that significantly fewer individuals have private orpublic health coverage, we will experience decreased volumes, reduced revenues, an increase in uncompensated care and ahigher level of bad debt expense, which would adversely affect our results of operations and cash flows. This negative effectwill be exacerbated if the ACA’s reductions in the growth of Medicare spending and reductions in Medicare DSH paymentsthat have already taken effect are not reversed if the law is repealed or if further reductions (including Medicaid DSHreductions previously scheduled to take effect under the ACA in FFY 2018) are made. Medicare Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original MedicarePlan (which includes “Part A” and “Part B”), is a fee-for-service payment system. The other option, called MedicareAdvantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”), preferredprovider organizations (“PPOs”), private fee-for-service Medicare special needs plans and Medicare medical savings accountplans. The major components of our net patient revenues from continuing operations of our Hospital Operations and othersegment for services provided to patients enrolled in the Original Medicare Plan for the years endedDecember 31, 2016, 2015 and 2014 are set forth in the following table: 50 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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, Revenue Descriptions 2016 2015 2014 Medicare severity-adjusted diagnosis-related group — operating $1,705 $1,744 $1,677 Medicare severity-adjusted diagnosis-related group — capital 157 161 154 Outliers 77 61 69 Outpatient 927 953 896 Disproportionate share 293 337 370 Direct Graduate and Indirect Medical Education 249 256 250 Other 63 5 98 Adjustments for prior-year cost reports and related valuation allowances 55 62 30 Total Medicare net patient revenues $3,526 $3,579 $3,544 (1)Includes Indirect Medical Education revenues earned by our children’s hospitals under the Children’s Hospitals Graduate Medical EducationPayment Program 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, otherrevenue 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 OriginalMedicare Plan is provided below. Recent regulatory and legislative updates to the terms of these payment systems and theirestimated effect on our revenues can be found under “Regulatory and Legislative Changes” below. Acute Care Hospital Inpatient Prospective Payment System Medicare Severity-Adjusted Diagnosis-Related Group Payments—Sections 1886(d) and 1886(g) of the SocialSecurity Act (the “Act”) set forth a system of payments for the operating and capital costs of inpatient acute care hospitaladmissions based on a prospective payment system (“PPS”). Under the inpatient prospective payment systems (“IPPS”),Medicare payments for hospital inpatient operating services are made at predetermined rates for each hospital discharge.Discharges are classified according to a system of Medicare severity-adjusted diagnosis-related groups (“MS-DRGs”), whichcategorize patients with similar clinical characteristics that are expected to require similar amounts of hospital resources.CMS assigns to each MS-DRG a relative weight that represents the average resources required to treat cases in that particularMS-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 averagestandardized amount that is divided into a labor-related share and a nonlabor-related share. Both the labor-related share ofoperating base payments and the base payment amount for capital costs are adjusted for geographic variations in labor andcapital costs, respectively. Using diagnosis and procedure information submitted by the hospital, CMS assigns to eachdischarge an MS-DRG, and the base payments are multiplied by the relative weight of the MS-DRG assigned. The MS‑DRGoperating and capital base rates, relative weights and geographic adjustment factors are updated annually, with considerationgiven to: the increased cost of goods and services purchased by hospitals; the relative costs associated with each MS-DRG;and changes in labor data by geographic area. Although these payments are adjusted for area labor and capital costdifferentials, 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 treatingMedicare patients whose medical conditions are costlier to treat than those of the average patient in the same MS-DRG. Toqualify for a cost outlier payment, a hospital’s billed charges, adjusted to cost, must exceed the payment rate for the MS-DRGby a fixed threshold established annually by CMS. A Medicare administrative contractor (“MAC”) calculates the cost of aclaim 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 hospitalreceives 80% of the difference as an outlier payment. Under the Act, CMS must project aggregate annual outlier payments to all PPS hospitals to be not less than 5% ormore than 6% of total MS-DRG payments (“Outlier Percentage”). The Outlier Percentage is determined by dividing totaloutlier payments by the sum of MS-DRG and outlier payments. CMS annually adjusts the fixed threshold to bring projectedoutlier payments within the mandated limit. 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 dollar amount hospitals receive for those cases that qualifyfor outlier payments. 51 (1)(2)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDisproportionate Share Hospital Payments—In addition to making payments for services provided directly tobeneficiaries, Medicare makes additional payments to hospitals that treat a disproportionately high share of low-incomepatients. Prior to October 1, 2013, DSH payments were determined annually based on certain statistical information definedby CMS and calculated as a percentage add-on to the MS-DRG payments. The ACA revised the Medicare DSH adjustmenteffective for discharges occurring on or after October 1, 2014. Under the revised methodology, hospitals receive 25% of theamount 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 anadditional payment for uncompensated care (the “UC DSH Amount”). The UC DSH Amount is a hospital’s share of a pool offunds that equal 75% of what otherwise would have been paid as Medicare DSH, adjusted for changes in the percentage ofindividuals that are uninsured. Generally, the factors used to calculate and distribute the UC DSH pool are set forth in theACA and are not subject to administrative or judicial review. The annual estimate of the size of the UC DSH pool is made bythe CMS Office of the Actuary and is based on the projections of total DSH payments that would have been made under thepre-ACA formula. Although the statute requires that each hospital’s cost of uncompensated care as a percentage of the totaluncompensated care cost of all DSH hospitals be used to allocate the pool, CMS determined that the available cost data fromcost reports was unreliable and is using low income days (i.e., Medicaid days) to distribute the pool. For FFY 2017, CMS isusing low income days to allocate the UC DSH pool. In the FFY 2017 IPPS Final Rule, CMS stated that: (1) it expecteduncompensated care cost data would be available for distribution of the UC DSH pool no later than FFY 2021, and (2) itwould explore whether there is an appropriate proxy for uncompensated care cost that could be used to allocate the UC DSHpool until the agency determines that the data from the cost reports can be used for that purpose. We cannot predict whataction, if any, CMS will take, the timing of such action, or what impact such action will have on our net revenues and cashflows.During 2016, 66 of our acute care hospitals in continuing operations qualified for Medicare DSH payments. One ofthe variables used in the pre-ACA DSH formula is the number of Medicare inpatient days attributable to patients receivingSupplemental Security Income (“SSI”) who are also eligible for Medicare Part A benefits divided by total Medicare inpatientdays (the “SSI Ratio”). In an earlier rulemaking, CMS established a policy of including not only days attributable to OriginalMedicare Plan patients, but also Medicare Advantage patients in the SSI ratio. The statutes and regulations that governMedicare DSH payments have been the subject of various administrative appeals and lawsuits, and our hospitals have beenparticipating in such appeals, including challenges to the inclusion of the Medicare Advantage days used in the DSHcalculation as set forth in the Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005 Rates(“FFY 2005 Final Rule”). We are not able to predict what action the Secretary might take with respect to the DSH calculationin this regard; however, a favorable outcome of our DSH appeals could have a material impact on our future revenues andcash flows.Direct Graduate and Indirect Medical Education Payments—The Medicare program provides additionalreimbursement to approved teaching hospitals for additional expenses incurred by such institutions. This additionalreimbursement, which is subject to certain limits, including intern and resident full-time equivalent (“FTE”) limits, is made inthe form of Direct Graduate Medical Education (“DGME”) and Indirect Medical Education (“IME”) payments. During 2016,26 of our hospitals in continuing operations were affiliated with academic institutions and were eligible to receive suchpayments. Hospital Outpatient Prospective Payment System Under the outpatient prospective payment system, hospital outpatient services, except for certain services that arereimbursed on a separate fee schedule, are classified into groups called ambulatory payment classifications (“APCs”).Services in each APC are similar clinically and in terms of the resources they require, and a payment rate is established foreach APC. Depending on the services provided, hospitals may be paid for more than one APC for an encounter. CMSannually updates the APCs and the rates paid for each APC. Inpatient Psychiatric Facility Prospective Payment System The inpatient psychiatric facility prospective payment system (“IPF-PPS”) applies to psychiatric hospitals andpsychiatric units located within acute care hospitals that have been designated as exempt from the hospital inpatient52 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsprospective payment system. The IPF-PPS is based on prospectively determined per-diem rates and includes an outlier policythat authorizes additional payments for extraordinarily costly cases. During 2016, 27 of our general hospitals operated IPFunits. Inpatient Rehabilitation Prospective Payment System Rehabilitation hospitals and rehabilitation units in acute care hospitals meeting certain criteria established by CMSare eligible to be paid as an inpatient rehabilitation facility (“IRF”) under the IRF prospective payment system (“IRF-PPS”).Payments under the IRF-PPS are made on a per-discharge basis. The IRF-PPS uses federal prospective payment rates acrossdistinct case-mix groups established by a patient classification system. During 2016, we operated one freestanding IRF, and21 of our general hospitals operated IRF units. Physician Services Payment System Medicare pays for physician and other professional services based on a list of services and their payment rates calledthe Medicare Physician Fee Schedule (“MPFS”). In determining payment rates for each service on the fee schedule, CMSconsiders the amount of work required to provide a service, expenses related to maintaining a practice, and liabilityinsurance costs. The values given to these three types of resources are adjusted by variations in the input prices in differentmarkets, and then a total is multiplied by a standard dollar amount, called the fee schedule’s conversion factor, to arrive atthe payment amount. Medicare’s payment rates may be adjusted based on provider characteristics, additional geographicdesignations and other factors. Beginning in CY 2017, the payments for physician services will be based on the provisionsprescribed by The Medicare Access and Children’s Health Insurance Program Act (“MACRA”) that was signed into law onApril 16, 2015 as described below. Cost Reports The final determination of certain Medicare payments to our hospitals, such as DSH, DGME, IME and bad debtexpense, are retrospectively determined based on our hospitals’ cost reports. The final determination of these payments oftentakes many years to resolve because of audits by the program representatives, providers’ rights of appeal, and the applicationof numerous technical reimbursement provisions. For filed cost reports, we adjust the accrual for estimated cost report settlements based on those cost reports andsubsequent activity, and record a valuation allowance against those cost reports based on historical settlement trends. Theaccrual for estimated cost report settlements for periods for which a cost report is yet to be filed is recorded based on estimatesof what we expect to report on the filed cost reports and a corresponding valuation allowance is recorded as previouslydescribed. Cost reports must generally be filed within five months after the end of the annual cost report reporting period.After the cost report is filed, the accrual and corresponding valuation allowance may need to be adjusted. Medicare Claims Reviews HHS estimates that approximately 11% of all Medicare Fee-For-Service (“FFS”) claim payments in FFY 2016 wereimproper. CMS has identified the FFS program as a program at risk for significant erroneous payments. One of CMS’ statedkey goals is to pay claims properly the first time. This means paying the right amount, to legitimate providers, for covered,reasonable and necessary services provided to eligible beneficiaries. According to CMS, paying correctly the first time savesresources required to recover improper payments and ensures the proper expenditure of Medicare Trust Fund dollars. CMShas established several initiatives to prevent or identify improper payments before a claim is paid, and to identify and recoverimproper payments after paying a claim. The overall goal is to reduce improper payments by identifying and addressingcoverage and coding billing errors for all provider types. Under the authority of the Act, CMS employs a variety ofcontractors (e.g., Medicare Administrative Contractors and Recovery Audit Contractors) to process and review claimsaccording to Medicare rules and regulations. Claims selected for prepayment review are not subject to the normal Medicare FFS payment timeframe. Furthermore,prepayment and post payment claims denials are subject to administrative and judicial review, and we intend to pursue thereversal of adverse determinations where appropriate. We have established robust protocols to53 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsrespond to claims reviews and payment denials. In addition to overpayments that are not reversed on appeal, we will incuradditional costs to respond to requests for records and pursue the reversal of payment denials. The degree to which ourMedicare FFS claims are subjected to prepayment reviews, the extent to which payments are denied, and our success inoverturning denials could have a material adverse effect on our cash flows and results of operations. Medicaid Medicaid programs and the corresponding reimbursement methodologies are administered by the states and varyfrom state to state and from year to year. Estimated revenues under various state Medicaid programs, including state-fundedmanaged care Medicaid programs, constituted approximately 17.2%, 18.3% and 18.1% of total net patient revenues beforeprovision for doubtful accounts for the years ended December 31, 2016, 2015 and 2014, respectively. We also receive DSHand other supplemental revenues under various state Medicaid programs. For the years ended December 31, 2016, 2015and 2014, our total Medicaid supplemental revenues attributable to DSH and other supplemental revenues wereapproximately $906 million, $888 million and $817 million, respectively. The $906 million of total Medicaid supplementalrevenues attributable to DSH and other supplemental revenues for the year ended December 31, 2016 was comprised of $232million related to the California Provider Fee program, $228 million related the Michigan Provider Fee program, $176million related to Medicaid DSH programs in multiple states, $142 million related to the Texas 1115 waiver program, and$128 million from a number of other state and local based programs. Several states in which we operate face budgetary challenges that have resulted, and likely will continue to result, inreduced 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 consideradopting future legislation designed to reduce or not increase their Medicaid expenditures. In addition, some states delayissuing Medicaid payments to providers to manage state expenditures. As an alternative means of funding providerpayments, many of the states in which we operate have adopted provider fee programs or received waivers under Section1115 of the Social Security Act. Under a Medicaid waiver, the federal government waives certain Medicaid requirements,thereby giving states flexibility in the operation of their Medicaid program to allow states to test new approaches anddemonstration projects to improve care. Generally the Section 1115 waivers are for a period of five years with an option toextend the waiver for three additional years. Continuing pressure on state budgets and other factors could result in futurereductions to Medicaid payments, payment delays or additional taxes on hospitals. The California Department of Health Care Services (DHCS) implemented its first Hospital Quality Assurance Fee(“HQAF”) program in 2010. The HQAF program provides funding for supplemental payments to California hospitals thatserve Medi-Cal and uninsured patients. The fourth and most recent phase of the program (“HQAF IV”) covering the periodJanuary 2014 through December 2016 was authorized by legislation enacted in October 2013 and approved by CMS in thethree months ended December 31, 2014. Under this program, our hospitals recognized revenues, net of provider fees andother expenses, of approximately $232 million, $188 million and $165 million in calendar years 2016, 2015 and 2014,respectively. In November 2016, California voters approved a state constitutional amendment measure that extendsindefinitely the statute that imposes fees on hospitals to obtain federal matching funds. However, the current program expiredon December 31, 2016 and CMS has not approved a new program. Consistent with the first four phases of the HQAFprogram, net revenue associated with HQAF V will not be recognized until CMS issues the required approvals. Because theHQAF supplemental payments are partially funded by the federal government, each phase of the program must be approvedby CMS, and the approval process can be lengthy. With the expiration of the HQAF IV program on December 31, 2016, weanticipate that: (1) during the three months ending March 31, 2017 the state will submit to CMS a request for approval of a30-month program covering the period January 2017 through June 2019 (“HQAF V”); and (2) CMS approval of the HQAF Vmay occur as early as late 2017, although we cannot provide any assurances in regard to either. Because HQAF fundinglevels are based in part on Medi-Cal utilization, changes in coverage of individuals under the Medi-Cal program could affectthe net revenues and cash flows of our hospitals under HQAF V and subsequent phases of the HQAF program. Accordingly,we are unable to predict the amount of net revenues our hospitals may receive from or the timing of CMS’ approval of theHQAF V program. Certain of our Texas hospitals participate in the Texas 1115 waiver program. The current waiver term expires onDecember 31, 2017, is funded by intergovernmental transfer payments from local government entities, and includes twofunding pools – Uncompensated Care and Delivery System Reform Payment. In 2016, we recognized $142 million54 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsof revenues from the Texas 1115 waiver program. Separately, during the same period, we incurred $79 million of expensesrelated to funding indigent care services by certain of our Texas hospitals. On September 30, 2016, the State of Texassubmitted a request to CMS to extend the 1115 waiver program for a period of five years. We cannot provide any assurancesas to the extension of the 1115 waiver program, or the ultimate amount of revenues that our hospitals may receive from thisprogram in 2017 or future periods. Because we cannot predict what actions the federal government or the states may take under existing legislation andfuture legislation to address budget gaps, deficits, Medicaid expansion, provider fee programs or Medicaid Section 1115waivers, we are unable to assess the effect that any such legislation might have on our business, but the impact on our futurefinancial position, results of operations or cash flows could be material. Medicaid-related patient revenues from continuing operations recognized by our Hospital Operations and othersegment from Medicaid-related programs in the states in which our hospitals are located, as well as from Medicaid programsin neighboring states, for the years ended December 31, 2016, 2015 and 2014 are set forth in the table below: Years Ended December 31, 2016 2015 2014 Managed Managed Managed Hospital Location Medicaid Medicaid Medicaid Medicaid Medicaid Medicaid California $401 $417 $343 $401 $311 $257 Michigan 349 314 366 306 337 270 Texas 235 231 264 237 280 223 Florida 95 166 97 162 158 103 Alabama 80 — 37 — 12 — Pennsylvania 80 199 66 206 73 194 Illinois 37 69 88 50 80 32 Massachusetts 37 52 37 50 39 46 South Carolina 16 34 16 33 18 34 Georgia 11 8 69 39 73 36 Tennessee 5 34 6 32 7 29 Missouri 2 — 50 14 67 9 Arizona — 199 (16) 195 1 113 North Carolina (2) — 28 6 26 5 $1,346 $1,723 $1,451 $1,731 $1,482 $1,351 Regulatory and Legislative Changes The Medicare and Medicaid programs are subject to statutory and regulatory changes, administrative and judicialrulings, interpretations and determinations, requirements for utilization review, and federal and state funding restrictions, allof which could materially increase or decrease payments from these government programs in the future, as well as affect thecost of providing services to our patients and the timing of payments to our facilities. We are unable to predict the effect offuture government healthcare funding policy changes on our operations. If the rates paid by governmental payers arereduced, 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 the Medicare or Medicaid program or any other government healthcare program,there could be a material adverse effect on our business, financial condition, results of operations or cash flows. Recentregulatory and legislative updates to the Medicare and Medicaid payment systems are provided below. Final Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems Under Medicare law, CMS is required to annually update certain rules governing the inpatient prospective paymentsystems (“IPPS”). The updates generally become effective October 1, the beginning of the federal fiscal year (“FFY”). OnAugust 2, 2016, CMS issued Changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals andFiscal Year 2017 Rates. On September 30, 2016, CMS issued a notice that corrects technical and typographical errors in theAugust 2, 2016 rule. The August 2, 2016 final rule and the September 30, 2016 correction55 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsnotice are hereinafter referred to as the “Final IPPS Rule”. The Final IPPS Rule includes the following payment and policychanges: ·A market basket increase of 2.7% for Medicare severity-adjusted diagnosis-related group (“MS-DRG”)operating payments for hospitals reporting specified quality measure data and that are meaningful users ofelectronic health record (“EHR”) technology (hospitals that do not report specified quality measure data and/orare not meaningful users of EHR technology will receive a reduced market basket increase); CMS is alsomaking certain adjustments to the 2.7% market basket increase that result in a net operating payment update tothe operating standardized amount of 0.95% (before budget neutrality adjustments), including: ·Market basket index and multifactor productivity reductions required by the ACA of 0.75% and 0.3%,respectively; ·A documentation and coding recoupment reduction of 1.5% as required by the American Taxpayer ReliefAct of 2012; ·Prospective reversal of the 0.2% reduction related to the two-midnight rule that was first imposed in FFY2014; and ·A one-time increase of 0.6% to reverse the 0.2% two-midnight rule reductions imposed in FFYs 2014through 2016. ·Updates to the factors and methodology used to determine the amount and distribution of Medicareuncompensated care disproportionate share (“UC-DSH”) payments; ·A 1.84% net increase in the capital federal MS-DRG rate; and ·An increase in the cost outlier threshold from $22,544 to $23,573. CMS projects that the combined impact of the payment and policy changes in the Final IPPS Rule will yield anaverage 0.9% increase in operating MS-DRG payments for hospitals in large urban areas (populations over one million) inFFY 2017. The final payment and policy changes affecting operating MS-DRG payments and other rules, including thoseaffecting Medicare UC-DSH payments, result in an estimated 0.5% increase in our annual IPPS payments, which yields anestimated increase of approximately $11 million in our annual Medicare IPPS payments. Because of the uncertaintyregarding factors that may influence our future IPPS payments by individual hospital, including legislative action, admissionvolumes, length of stay and case mix, we cannot provide any assurances regarding our estimate of the impact of the paymentand policy changes. Final Payment and Policy Changes to the Medicare Outpatient Prospective Payment and Ambulatory SurgicalCenter Payment Systems On November 1, 2016, CMS released the final policy changes, quality provisions and payment rates for theMedicare Hospital Outpatient Prospective Payment System (“OPPS”) and Ambulatory Surgical Center (“ASC”) PaymentSystem for calendar year 2017 (“Final OPPS/ASC Rule”). The Final OPPS/ASC rule includes the following changes: ·An net increase in the OPPS rates of 1.65% based on an estimated market basket increase of 2.7% reduced bymarket basket index and multifactor productivity reductions required by the ACA of 0.75% and 0.3%,respectively; ·Policies to implement Section 603 of the Bipartisan Budget Act of 2015, which requires that certain items andservices furnished by certain off-campus hospital departments shall not be considered covered outpatientdepartment services for purposes of OPPS payments and shall instead be paid “under the applicable paymentsystem” which, beginning January 1, 2017, is approximately 50% of the OPPS rate;56 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 removal of five spine procedure codes and two laryngoplasty codes from the CMS list of procedures thatcan be performed only on an inpatient basis (the “Inpatient Only List”); ·A 1.9% update to the ASC payment rates; and ·Reducing the Electronic Health Record reporting period for 2016 and 2017 from 12 months to a consecutive90-day period. CMS projects that the combined impact of the payment and policy changes in the Final OPPS/ASC Rule will yieldan average 1.7% increase in OPPS payments for all facilities and an average 1.7% increase in OPPS payments for hospitals inlarge urban areas (populations over one million). Based on CMS’ estimates, the projected annual impact of the payment andpolicy changes in the Final OPPS/ASC Rule on our hospitals is an increase to Medicare outpatient revenues ofapproximately $15 million. Because of the uncertainty associated with various factors that may influence our future OPPSpayments, including legislative action, volumes and case mix, we cannot provide any assurances regarding our estimate ofthe impact of the changes. The Medicare Access and CHIP Reauthorization Act of 2015 The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) replaces the Medicare SustainableGrowth Rate methodology with a new system for establishing the annual updates to payment rates for physician services inMedicare that, beginning in 2019, rewards the delivery of high-quality patient care through one of two avenues: ·The Merit-Based Incentive Payment System (“MIPS”) – MIPS-participating providers will be eligible for apayment adjustment of plus or minus 4% in the first payment adjustment year (2019 based on 2017performance) with the payment adjustment increasing each year until it reaches plus or minus 9% in 2022 andbeyond; or ·The Advanced Alternative Payment Model (“APM”) – Providers that choose to participate in an AdvancedAPM (defined as certain CMS Innovation Center models and Shared Savings Program tracks that requireparticipants to use certified EHR technology, base payments for services on quality measures comparable tothose in MIPS, and require participants to bear more than nominal financial risk for losses) will be exempt fromMIPS and from 2019-2024 will be eligible for a 5% upward adjustment to their Medicare payments. The new system helps to link fee-for-service payments to quality and value, with payment incentives and penalties. Additionally, the MACRA reduces the restoration of the 3.2% coding and document adjustment to hospitalinpatient rates that was expected to be effective in FFY 2018. Under the legislation, the reduced amount is 3.0% and will beapplied at the rate of 0.5% over six years beginning in FFY 2018. This provision was subsequently modified by the 21Century Cures Act of 2016 as described below. On October 14, 2016, CMS issued a final rule implementing MACRA. In the final rule, CMS made several changesto the proposed rule including: ·Reducing the MIPS reporting burden in the first performance year (2017). Per the final rule, providers maybegin reporting under MIPS at any time between January 1, 2017 and October 2, 2017 and can avoid a paymentpenalty in 2019 by reporting as little as one quality measure or one improvement activity. CMS also reducedthe thresholds by which a provider in a small practice must participate. ·Changes to the APMs (including the Comprehensive Care and Joint Replacement (“CJR”) model) that will beeligible as Advanced APMs for bonus payment purposes. 57 stSource: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsLess than 1% of the net operating revenue generated by our Hospital Operations and other segment during the yearended December 31, 2016 was related to the Medicare fee-for-service Physician Fee Schedule. We are unable to estimate thepotential impact of MACRA; however, the maximum incentive and penalty adjustments could result in an increase ordecrease in our annual net revenues of approximately $15 million. Additionally, we cannot predict the effect of MACRA onour future operations, revenues and cash flows. Payment and Policy Changes to the Medicare Physician Fee Schedule On November 2, 2016, CMS issued a final rule updating the MPFS for calendar year 2017 (“MPFS Final Rule”).This final rule updates payment policies, payment rates, and other provisions for services furnished under the MPFS on orafter January 1, 2017. In addition to policies affecting the calculation of payment rates, the final rule identifies potentiallymisvalued codes, adds procedures to the telehealth list, and finalizes a number of new policies, including several that are aresult of recently enacted legislation. As a result of the final rule, the MPFS conversion factor for 2017 will increase by0.24%. CMS estimates that the impact of the payment and policy changes in the final rule will result in no change inaggregate payments across all specialties. Bipartisan Budget Act of 2015 On November 2, 2015, the President signed the Bipartisan Budget Act of 2015 (“BBA 2015”). The legislation raisesthe debt ceiling through March 2017 and establishes a federal budget through FFY 2017. The BBA 2015 includes thefollowing payment policies affecting Medicare beneficiaries, hospitals and other providers: ·Medicare Part B premium relief for the 30% of beneficiaries facing massive increases beginning in 2016; ·An extension through FFY 2025 of a 2% reduction (referred to as the “sequestration adjustment”) to allMedicare payments, mandated by the Budget Control Act of 2011, that was originally scheduled to expire in2021 and subsequently extended through 2024; and ·Creation of a site-neutral payment policy for services provided in off-campus outpatient departments ofhospitals. This provision: ·Creates a permanent exemption from site-neutral payment adjustments for off-campus hospital-basedemergency departments; ·Grandfathers off-campus hospital outpatient departments that billed for services under the OPPS as of thedate of enactment; and ·Provides that, beginning January 1, 2017, off-campus hospital outpatient departments that are notgrandfathered or exempt will be paid under the MPFS or ASC fee schedule (this measure was amended bythe 21 Century Cures Act as described below). The American Recovery and Reinvestment Act of 2009 ARRA was enacted to stimulate the U.S. economy. One provision of ARRA provides financial incentives tohospitals and physicians to become “meaningful users” of electronic health records. The Medicare incentive payments toindividual hospitals are made over a four-year, front-weighted transition period. The Medicaid incentive payments, which arefunded by the federal government and administered by the states, are subject to separate payment policies. During the year ended December 31, 2016, we recognized approximately $32 million of EHR incentives related tothe Medicare and Medicaid EHR incentive programs as a result of certain of our hospitals, employed physicians andAmbulatory Care segment facilities demonstrating meaningful use of certified EHR technology and meeting the criteria forrevenue recognition. The final Medicare EHR hospital incentive payments are determined when the cost report that begins inthe federal fiscal year during which the hospital achieved meaningful use is settled. Medicare and Medicaid incentivepayment amounts to which a provider is entitled are subject to post-payment audits.58 stSource: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsWe anticipate recognizing approximately $9 million of Medicare and Medicaid EHR incentive payments in 2017.In addition to the expenditures we incur to qualify for these incentive payments, our operating expenses have increased andwe anticipate will increase in the future as a result of these information system investments. Eligible hospitals must continueto demonstrate meaningful use of EHR technology every year to avoid payment reductions in subsequent years. Thesereductions, 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 fail to become meaningful users (or fail to continue to demonstratemeaningful use) of EHRs and fail to submit quality data, the penalties would result in reductions to our annual Medicaretraditional inpatient net revenues of up to approximately $34 million in 2017 and subsequent years. The complexity of the changes required to our hospitals’ systems and the time required to complete the changes willlikely result in some or all of our facilities and physicians not being fully compliant in time to be eligible for the maximumHIT funding permitted under ARRA. Because of the uncertainties regarding the implementation of HIT, including CMS’future EHR implementation regulations, our ability to achieve compliance and the associated costs, we cannot provide anyassurances regarding the aforementioned estimates of incentives or penalties in future periods. 21 Century Cures Act On December 13, 2016, the President signed the 21st Century Cures Act (“Cures Act”) legislation intended toaccelerate the “discovery, development and delivery” of medical therapies by encouraging biomedical research investmentand facilitating innovation review and approval processes, and several other health-related measures, including changesaffecting Medicare payments to hospitals and other providers, including: ·Relief for certain off-campus hospital-based sites that were under development from the provisions of section603 of the Bipartisan Budget Act of 2015; ·Requiring CMS to develop Healthcare Common Procedure Coding System (“HCPCS”) codes (used to codeoutpatient services) associated with 10 surgical MS-DRGs that commonly have a one-day length of stay totranslate outpatient surgical codes into inpatient surgical MS-DRGs as one of the steps to help develop aunified hospital payment system; and ·Reducing the coding and documentation adjustment to inpatient hospital payment rates under the MACRAfrom an increase of 0.5 percentage points to an increase of 0.4588 percentage points in 2018. CMS Innovation Models The CMS Innovation Center develops new payment and service delivery models in accordance with therequirements of Section 1115A of the Social Security Act. Additionally, Congress has defined – both through the AffordableCare Act and previous legislation – a number of specific demonstrations to be conducted by CMS. The CMS InnovationCenter has a growing portfolio testing various payment and service delivery models that aim to achieve better care forpatients, better health for communities and lower costs through improvement for our health care system. Generally, themodels include ACOs and Episodic Bundled Payment Model (“EPM”) initiatives. Participation in these programs is eithervoluntary or mandatory. For example, participation in the Shared Savings ACO is voluntary; whereas participation in certainbundled payment models is mandatory. On December 20, 2016, CMS finalized new Innovation Center models that continue the progress toward shiftingMedicare payments from rewarding quantity to rewarding quality by creating strong incentives for healthcare providers todeliver better care to patients at a lower cost. These models are intended to avoid complications, prevent hospitalreadmissions, and speed recovery. In December 2016, CMS released a final rule, the Advancing Care Coordination ThroughEpisode Payment Models (“EPMs”) rule. This rule: 59 stSource: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents·makes changes to the current CJR demonstration to conform to the other EPMs; ·implements testing of three EPMs that address care of:oacute myocardial infarction (“AMI”),ocoronary artery bypass graft (“CABG”), andosurgical hip/femur fracture treatment (“SHFFT”). ·establishes the Cardiac Rehabilitation Incentive Payment Model (“CR”), designed to complement the AMI andCABG EPMs. Participants for all four models (AMI, CABG, SHFFT, and CR) are IPPS acute care hospitals in selected geographicareas and participation is mandatory. Similar to the CJR, under the three new EPMs, inpatient and 90-day post-dischargepayments will be retrospectively bundled, and quality-adjusted comparison of actual to target expenditures for each EPMhospital will result in reconciliation payments (from CMS to participants) or repayments (from participants to CMS). The firstperformance year for the new EPMs is scheduled to begin on July 1, 2017, and the demonstrations expire on December 31,2021. Currently, 20 of our acute care hospitals participate in the CJR and are expected to be required to participate in theSHFFT EPM, 12 of our acute care hospitals are expected to be required to participate in the AMI and CABG demonstrations,and 16 of our hospitals are expected to participate in the CR program. We cannot predict what impact, if any, thesedemonstration programs will have on our inpatient volumes, net revenues or cash flows. Medicaid Managed Care Final Rule – Pass Through Payments In a final rule issued in 2016, CMS stated that managed care regulations prohibit states from making payments toproviders for services available under a contract between the state and the managed care plan, and the agency interprets thoseregulations to also prohibit states from making supplemental payments to providers (referred to as “pass-through” payments)through a managed care plan. In that rule, CMS: (1) stated its belief that pass-through payments are not actuarially soundbecause they do not tie provider payments to the provision of services and limited the managed care plans’ ability toeffectively manage care delivery, and (2) that it would allow states, managed care plans and providers 10 years to phase outpass-through payments. On January 17, 2017, CMS issued a Final Medicaid Managed Care rule that clarified and establishedadditional policies regarding Medicaid managed care pass-through payments that will affect how Medicaid managed caresupplemental payments are distributed to providers. Specifically, ·States may not create new pass-through payment programs; ·Pass-through payments that will be permitted through the phase down period will be limited to the rates thatstates had submitted to CMS as of July 5, 2016; and ·Although the change in CMS’ policy results in a reduction of the pass-through payments over a 10-year period,states may instead implement new “Permissible Directed Payments” in Medicaid managed care programs, whichcould include uniform dollar or percentage increases in rates, minimum or maximum fee schedules. In the January 17, 2017 final rule, CMS estimates that at least 16 states have implemented pass-through paymentsfor hospitals, although the individual states are not identified. Some states in which we operate hospitals have establishedsupplemental payment programs which include payments that may possibly meet CMS’ definition of pass-through payments,and would, therefore, be subject to the provisions of the Medicaid Managed Care final rule. Although CMS’ policy requiresthe gradual phase out of pass-through payments, the agency concluded that, because states have other mechanisms to buildin amounts currently provided through pass-through payments in approvable ways, the fiscal impact in aggregate spendingwould not be significant. However, transitioning from pass-through payments to other payment structures could result in aredistribution of payments among providers. We are unable to predict what actions the states affected by the rule will takewith respect to CMS’ policy, including the development of permissible60 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsalternative managed care payment structures to offset the phase out of pass-through payments over the transition period, orwhat impact those actions might have on our operations, revenues or cash flows. PRIVATE INSURANCE Managed Care We currently have thousands of managed care contracts with various HMOs and PPOs. HMOs generally maintain afull-service healthcare delivery network comprised of physician, hospital, pharmacy and ancillary service providers thatHMO members must access through an assigned “primary care” physician. The member’s care is then managed by his or herprimary care physician and other network providers in accordance with the HMO’s quality assurance and utilization reviewguidelines so that appropriate healthcare 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 healthcare providers fornon-emergency care. PPOs generally offer limited benefits to members who use non-contracted healthcare providers. PPO members whouse contracted healthcare providers receive a preferred benefit, typically in the form of lower co-pays, co-insurance ordeductibles. As employers and employees have demanded more choice, managed care plans have developed hybrid productsthat combine elements of both HMO and PPO plans, including high-deductible healthcare plans that may have limitedbenefits, but cost the employee less in premiums. The amount of our managed care net patient revenues during the years ended December 31, 2016, 2015 and 2014was $11.2 billion, $10.6 billion and $9.3 billion, respectively. Approximately 61% of our managed care net patient revenuesfor the year ended December 31, 2016 was derived from our top ten managed care payers. National payers generatedapproximately 44% of our total net managed care revenues. The remainder comes from regional or local payers. AtDecember 31, 2016 and 2015 approximately 66% and 63%, respectively, of our net accounts receivable for our HospitalOperations and other segment were due from managed care payers. A managed care contract we had with a national payer expired on September 30, 2016; as a result, our hospitals andother healthcare facilities, as well as our employed physicians, became out-of-network providers with respect to that payer’smembers. The contract represented approximately 2.9% of our net operating revenues before provision for doubtful accountsfor the period subsequent to the sale of our Georgia hospitals on March 31, 2016 to the contract expiration on September 30,2016. Although there can be no assurance that we will enter into negotiations or reach an agreement with the payer on a newcontract, we do not anticipate the expiration of the contract to have a long-term material adverse impact on our business,financial condition or results of operations. Revenues under managed care plans are based primarily on payment terms involving predetermined rates perdiagnosis, per-diem rates, discounted fee-for-service rates and other similar contractual arrangements. These revenues are alsosubject to review and possible audit by the payers, which can take several years before they are completely resolved. Thepayers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on apatient-by-patient basis in the ordinary course of business by the payers following their review and adjudication of eachparticular bill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data onan individual patient basis. At the end of each month, on an individual hospital basis, we estimate our expectedreimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likelyfor there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed careplans. Based on reserves at December 31, 2016, a 3% increase or decrease in the estimated contractual allowance wouldimpact the estimated reserves by approximately $15 million. Some of the factors that can contribute to changes in thecontractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs whenthreshold levels are triggered; (2) changes in reimbursement levels when stop-loss or outlier limits are reached; (3) changes inthe 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 afterprimary insurance payments; and (6) reclassification of patients among insurance plans with different coverage levels.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 tothe estimated reimbursement for every patient bill, we61 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsbelieve our estimation and review process enables us to identify instances on a timely basis where such estimates need to berevised. We do not believe there were any adjustments to estimates of patient bills that were material to our operatingincome. In addition, on a corporate-wide basis, we do not record any general provision for adjustments to estimatedcontractual allowances for managed care plans. We expect managed care governmental admissions to continue to increase as a percentage of total managed careadmissions over the near term. However, the managed Medicare and Medicaid insurance plans typically generate loweryields than commercial managed care plans, which have been experiencing an improved pricing trend. Although we havebenefitted from solid year-over-year aggregate managed care pricing improvements for several years, we have seen theseimprovements moderate recently, and we believe the moderation could continue in future years. In the year endedDecember 31, 2016, our commercial managed care net inpatient revenue per admission from our acute care hospitals wasapproximately 77% higher than our aggregate yield on a per admission basis from government payers, including managedMedicare and Medicaid insurance plans. Indemnity An indemnity-based agreement generally requires the insurer to reimburse an insured patient for healthcare expensesafter those expenses have been incurred by the patient, subject to policy conditions and exclusions. Unlike an HMO member,a patient with indemnity insurance is free to control his or her utilization of healthcare and selection of healthcare 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 of private insurance and, therefore, are responsible for their own medical bills. A significant number ofour self-pay patients are admitted through our hospitals’ emergency departments and often require high-acuity treatment that ismore costly to provide and, therefore, results in higher billings, which are the least collectible of all accounts. Self-pay accounts pose significant collectability problems. At December 31, 2016 and 2015, approximately 4% and5%, respectively, of our net accounts receivable for our Hospital Operations and other segment were due from self-paypatients. Further, a significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-paysand deductibles owed to us by patients with insurance. We provide revenue cycle management services through our Conifersubsidiary, which is subject to various statutes and regulations regarding consumer protection in areas including finance,debt collection and credit reporting activities. For additional information, see Item 1, Business — Regulations AffectingConifer’s Operations, of Part I of this report. Conifer has performed systematic analyses to focus our attention on the drivers of bad debt expense for eachhospital. While emergency department use is the primary contributor to our provision for doubtful accounts in the aggregate,this is not the case at all hospitals. As a result, we have increased our focus on targeted initiatives that concentrate on non-emergency department patients as well. These initiatives are intended to promote process efficiencies in collecting self-payaccounts, as well as co-pay and deductible amounts owed to us by patients with insurance, that we deem highly collectible.We leverage a statistical-based collections model that aligns our operational capacity to maximize our collectionsperformance. We are dedicated to modifying and refining our processes as needed, enhancing our technology and improvingstaff training throughout the revenue cycle process in an effort to increase collections and reduce accounts receivable. Over the longer term, several other initiatives we have previously announced should also help address thischallenge. For example, our Compact with Uninsured Patients (“Compact”) is designed to offer managed care-stylediscounts to certain uninsured patients, which enables us to offer lower rates to those patients who historically had beencharged standard gross charges. A significant portion of those charges had previously been written down in our provision fordoubtful accounts. Under the Compact, the discount offered to uninsured patients is recognized as a contractual allowance,which reduces net operating revenues at the time the self-pay accounts are recorded. The uninsured patient accounts, net ofcontractual allowances recorded, are further reduced to their net realizable value through provision for doubtful accountsbased on historical collection trends for self-pay accounts and other factors that affect the estimation process. 62 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsWe also provide charity care to patients who are financially unable to pay for the healthcare services they receive.Most patients who qualify for charity care are charged a per-diem amount for services received, subject to a cap. Except forthe per-diem amounts, our policy is not to pursue collection of amounts determined to qualify as charity care; therefore, wedo not report these amounts in net operating revenues. Most states include an estimate of the cost of charity care in thedetermination of a hospital’s eligibility for Medicaid DSH payments. These payments are intended to mitigate our cost ofuncompensated care, as well as reduced Medicaid funding levels. Generally, our method of measuring the estimated costsuses adjusted self-pay/charity patient days multiplied by selected operating expenses (which include salaries, wages andbenefits, supplies and other operating expenses) per adjusted patient day. The adjusted self-pay/charity patient daysrepresents actual self-pay/charity patient days adjusted to include self-pay/charity outpatient services by multiplying actualself-pay/charity patient days by the sum of gross self-pay/charity inpatient revenues and gross self-pay/charity outpatientrevenues and dividing the results by gross self-pay/charity inpatient revenues. The following table shows our estimated costs(based on selected operating expenses) of caring for self-pay patients and charity care patients, as well as revenuesattributable to DSH and other supplemental revenues we recognized, in the years ended December 31, 2016, 2015 and 2014. Years Ended December 31, 2016 2015 2014Estimated costs for: Self-pay patients $644 $678 $620Charity care patients $146 $191 $180Medicaid DSH and other supplemental revenues $906 $888 $817 The expansion of health insurance coverage has resulted in an increase in the number of patients using our facilitieswho have either health insurance exchange or government healthcare insurance program coverage. However, we continue tohave to provide uninsured discounts and charity care due to the failure of states to expand Medicaid coverage and forpersons living in the country who are not permitted to enroll in a health insurance exchange or government healthcareinsurance program. RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2016 COMPARED TO THE YEAR ENDEDDECEMBER 31, 2015 The following two tables summarize our consolidated net operating revenues, operating expenses and operatingincome from continuing operations, both in dollar amounts and as percentages of net operating revenues, for the years endedDecember 31, 2016 and 2015: Years Ended December 31, Increase 2016 2015 (Decrease) Net operating revenues: General hospitals $16,488 $16,741 $(253) Other operations 4,582 3,370 1,212 Net operating revenues before provision for doubtful accounts 21,070 20,111 959 Less provision for doubtful accounts 1,449 1,477 (28) Net operating revenues 19,621 18,634 987 Equity in earnings of unconsolidated affiliates 131 99 32 Operating expenses: Salaries, wages and benefits 9,356 9,011 345 Supplies 3,124 2,963 161 Other operating expenses, net 4,891 4,555 336 Electronic health record incentives (32) (72) 40 Depreciation and amortization 850 797 53 Impairment and restructuring charges, and acquisition-related costs 202 318 (116) Litigation and investigation costs 293 291 2 Gains on sales, consolidation and deconsolidation of facilities (151) (186) 35 Operating income $1,219 $1,056 $163 63 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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, Increase 2016 2015 (Decrease) Net operating revenues 100.0% 100.0% —% Equity in earnings of unconsolidated affiliates 0.7% 0.5% 0.2% Operating expenses: Salaries, wages and benefits 47.7% 48.4% (0.7)% Supplies 15.9% 15.9% —% Other operating expenses, net 25.0% 24.4% 0.6% Electronic health record incentives (0.2)% (0.4)% 0.2% Depreciation and amortization 4.3% 4.3% —% Impairment and restructuring charges, and acquisition-related costs 1.1% 1.7% (0.6)% Litigation and investigation costs 1.5% 1.5% —% Gains on sales, consolidation and deconsolidation of facilities (0.8)% (1.0)% 0.2% Operating income 6.2% 5.7% 0.5% Net operating revenues of our general hospitals include inpatient and outpatient revenues for services provided byfacilities in our Hospital Operations and other segment, as well as nonpatient revenues (e.g., rental income, management feerevenue, and income from services such as cafeterias, gift shops and parking) and other miscellaneous revenue. Net operatingrevenues of other operations primarily consist of revenues from (1) physician practices, (2) a long-term acute care hospital, (3)our Ambulatory Care segment, (4) services provided by our Conifer subsidiary to third parties and (5) our health plans.Revenues from our general hospitals represented approximately 78% and 83% of our total net operating revenues beforeprovision for doubtful accounts for the years ended December 31, 2016 and 2015, respectively. Net operating revenues from our other operations were $4.582 billion and $3.370 billion in the years endedDecember 31, 2016 and 2015, respectively. The increase in net operating revenues from other operations during 2016primarily relates to revenue cycle services provided by our Conifer subsidiary, as well as revenues from our USPI jointventure and Aspen operations, our health plans and physician practices. Equity in earnings of unconsolidated affiliates were$131 million and $99 million for the years ended December 31, 2016 and 2015, respectively. The increase in equity inearnings of unconsolidated affiliates in the 2016 period compared to the 2015 period primarily related to our USPI jointventure. The following table shows selected operating expenses of our three reportable business segments. Information forour Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same67 hospitals and six health plans operated throughout the years ended December 31, 2016 and 2015. The results of thefollowing facilities are excluded from our same-hospital information: (i) Hi-Desert Medical Center, which we beganoperating on July 15, 2015, (ii) our Carondelet Heath Network joint venture, in which we acquired a majority interest onAugust 31, 2015, (iii) SLUH, which we divested on August 31, 2015, (iv) our joint venture with Baptist Health System, Inc.,which we formed on October 2, 2015, (v) DMC Surgery Hospital, which we closed in October 2015, (vi) our two NorthCarolina hospitals, which we divested effective January 1, 2016, (vii) our four North Texas hospitals in which we divested acontrolling interest effective January 1, 2016, but continue to operate, and (viii) our five Georgia hospitals, which wedivested effective April 1, 2016. 64 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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, Increase Selected Operating Expenses 2016 2015 (Decrease) Hospital Operations and other — Same-Hospital Salaries, wages and benefits $7,121 $6,965 2.2% Supplies 2,484 2,408 3.2% Other operating expenses 3,829 3,466 10.5% Total $13,434 $12,839 4.6% Ambulatory Care Salaries, wages and benefits $594 $301 97.3% Supplies 365 188 94.1% Other operating expenses 346 196 76.5% Total $1,305 $685 90.5% Conifer Salaries, wages and benefits $959 $852 12.6% Other operating expenses 335 296 13.2% Total $1,294 $1,148 12.7% Rent/lease expense Hospital Operations and other $201 $191 5.2% Ambulatory Care 74 41 80.5% Conifer 18 16 12.5% Total $293 $248 18.1% (1)Included in other operating expenses. RESULTS OF OPERATIONS BY SEGMENT Our operations are reported under three segments: ·Hospital Operations and other, which is comprised of our acute care hospitals, ancillary outpatientfacilities, urgent care centers, microhospitals, physician practices and health plans (certain of which areclassified as held for sale as described in Note 4 to our Consolidated Financial Statements); ·Ambulatory Care, which is comprised of our USPI joint venture’s ambulatory surgery centers, urgent carecenters, imaging centers and short-stay surgical hospitals, as well as Aspen’s hospitals and clinics; and ·Conifer, which provides healthcare business process services in the areas of hospital and physician revenuecycle management and value-based care solutions to healthcare systems and other entities. Hospital Operations and Other Segment The following tables show operating statistics of our continuing operations hospitals on a same-hospital basis,which includes the results of our same 67 hospitals and six health plans operated throughout the years endedDecember 31, 2016 and 2015. The results of the following facilities are excluded from our same-hospital information:(i) Hi‑Desert Medical Center, which we began operating on July 15, 2015, (ii) our Carondelet Heath Network joint venture, inwhich we acquired a majority interest on August 31, 2015, (iii) SLUH, which we divested on August 31, 2015, (iv) our jointventure with Baptist Health System, Inc., which we formed on October 2, 2015, (v) DMC Surgery Hospital, which we closedin October 2015, (vi) our two North Carolina hospitals, which we divested effective January 1, 2016, (vii) our four NorthTexas hospitals in which we divested a controlling interest effective January 1, 2016, but continue to operate, and (viii) ourfive Georgia hospitals, which we divested effective April 1, 2016.65 (1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 Continuing Operations Years Ended December 31, Increase Admissions, Patient Days and Surgeries 2016 2015 (Decrease) Number of hospitals (at end of period) 67 67 — Total admissions 715,502 717,218 (0.2)% Adjusted patient admissions 1,239,324 1,228,039 0.9% Paying admissions (excludes charity and uninsured) 677,361 680,837 (0.5)% Charity and uninsured admissions 38,141 36,381 4.8% Admissions through emergency department 451,785 452,593 (0.2)% Paying admissions as a percentage of total admissions 94.7% 94.9% (0.2)% Charity and uninsured admissions as a percentage of totaladmissions 5.3% 5.1% 0.2% Emergency department admissions as a percentage oftotal admissions 63.1% 63.1% —% Surgeries — inpatient 195,641 196,352 (0.4)% Surgeries — outpatient 256,301 254,932 0.5% Total surgeries 451,942 451,284 0.1% Patient days — total 3,269,558 3,286,026 (0.5)% Adjusted patient days 5,612,240 5,567,041 0.8% Average length of stay (days) 4.57 4.58 (0.2)% Licensed beds (at end of period) 18,118 18,130 (0.1)% Average licensed beds 18,127 18,217 (0.5)% Utilization of licensed beds 49.4% 49.4% —% (1)The change is the difference between 2016 and 2015 amounts shown.(2)Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities inour Hospital Operations and other segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues andoutpatient revenues and dividing the results by gross inpatient revenues.(3)Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. Same-Hospital Continuing Operations Years Ended December 31, Increase Outpatient Visits 2016 2015 (Decrease) Total visits 7,273,671 7,176,650 1.4% Paying visits (excludes charity and uninsured) 6,784,173 6,670,711 1.7% Charity and uninsured visits 489,498 505,939 (3.2)% Emergency department visits 2,560,308 2,520,481 1.6% Surgery visits 256,301 254,932 0.5% Paying visits as a percentage of total visits 93.3% 93.0% 0.3% Charity and uninsured visits as a percentage of total visits 6.7% 7.0% (0.3)% (1)The change is the difference between 2016 and 2015 amounts shown. Same-Hospital Continuing Operations Years Ended December 31, Increase Revenues 2016 2015 (Decrease) Net operating revenues $14,877 $14,148 5.2% Revenues from charity and the uninsured $950 $879 8.1% Net inpatient revenues $9,776 $9,334 4.7% Net outpatient revenues $5,347 $5,103 4.8% (1)Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-payrevenues of $396 million and $340 million for the years ended December 31, 2016 and 2015, respectively. Net outpatient revenues includeself-pay revenues of $554 million and $539 million for the years ended December 31, 2016 and 2015, respectively. 66 (1)(2)(1)(1)(1)(2)(3)(1)(1)(1)(1)(1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 Continuing Operations Years Ended December 31, Revenues on a Per Admission, Increase Per Patient Day and Per Visit Basis 2016 2015 (Decrease) Net inpatient revenue per admission $13,663 $13,014 5.0% Net inpatient revenue per patient day $2,990 $2,841 5.2% Net outpatient revenue per visit $735 $711 3.4% Net patient revenue per adjusted patient admission $12,203 $11,756 3.8% Net patient revenue per adjusted patient day $2,695 $2,593 3.9% (1)Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities inour Hospital Operations and other segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues andoutpatient revenues and dividing the results by gross inpatient revenues. Same-Hospital Continuing Operations Years Ended December 31, Increase Provision for Doubtful Accounts 2016 2015 (Decrease) Provision for doubtful accounts $1,306 $1,203 8.6% Provision for doubtful accounts as a percentage of netoperating revenues before provision for doubtful accounts 8.1% 7.8% 0.3% (1)The change is the difference between the 2016 and 2015 amounts shown. Same-Hospital Continuing Operations Years Ended December 31, IncreaseSelected Operating Expenses 2016 2015 (Decrease)Hospital Operations and other Salaries, wages and benefits as a percentage of net operatingrevenues 47.9% 49.2% (1.3)% Supplies as a percentage of net operating revenues 16.7% 17.0% (0.3)% Other operating expenses as a percentage of netoperating revenues 25.7% 24.5% 1.2% (1)The change is the difference between the 2016 and 2015 amounts shown. REVENUES Same-hospital net operating revenues increased $729 million, or 5.2%, during the year ended December 31, 2016compared to the year ended December 31, 2015. The increase in same-hospital net operating revenues in the 2016 period isprimarily due to volume growth in higher acuity inpatient services, higher outpatient volumes, improved terms of ourmanaged care contracts, incremental net revenues from the California provider fee program of $44 million and an increase inour other operations revenues. Same-hospital net inpatient revenues increased $442 million, or 4.7%, while same-hospitaladmissions decreased 0.2% in the 2016 period compared to the 2015 period. Same-hospital net inpatient revenue peradmission increased 5.0%, primarily due to the improved terms of our managed care contracts and volume growth in higheracuity service lines, in the year ended December 31, 2016. Same-hospital net outpatient revenues increased $244 million, or4.8%, and same-hospital outpatient visits increased 1.4% in the year ended December 31, 2016 compared to the year endedDecember 31, 2015. Growth in outpatient revenues and volumes was primarily driven by improved terms of our managedcare contracts and increased outpatient volume levels associated with our outpatient development program. Same-hospitalnet outpatient revenue per visit increased 3.4% primarily due to the improved terms of our managed care contracts. PROVISION FOR DOUBTFUL ACCOUNTS Same-hospital provision for doubtful accounts as a percentage of net operating revenues before provision fordoubtful accounts was 8.1% and 7.8% for the years ended December 31, 2016 and 2015, respectively. The increases in the2016 periods compared to the 2015 periods were driven by increases in uninsured revenues and volumes, and higher67 (1)(1)(1)(1)(1)(1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentspatient co–pays and deductibles. The table below shows the net accounts receivable and allowance for doubtful accounts bypayer at December 31, 2016 and December 31, 2015: December 31, 2016 December 31, 2015 Accounts Accounts Receivable Receivable Before Before Allowance Allowance Allowance Allowance for Doubtful for Doubtful for Doubtful for Doubtful Accounts Accounts Net Accounts Accounts Net Medicare $404 $— $404 $360 $— $360 Medicaid 46 — 46 70 — 70 Net cost report settlements payableand valuation allowances (14) — (14) (42) — (42) Managed care 1,965 175 1,790 1,715 126 1,589 Self-pay uninsured 488 442 46 509 436 73 Self-pay balance after insurance 211 155 56 208 142 66 Estimated future recoveries 141 — 141 144 — 144 Other payers 458 216 242 442 166 276 Total Hospital Operations and other 3,699 988 2,711 3,406 870 2,536 Ambulatory Care 227 43 184 182 17 165 Total discontinued operations 2 — 2 3 — 3 $3,928 $1,031 $2,897 $3,591 $887 $2,704 A significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-pays anddeductibles owed to us by patients with insurance. Collection of accounts receivable has been a key area of focus,particularly over the past several years. At December 31, 2016, our Hospital Operations and other segment collection rate onself-pay accounts was approximately 26.1%. Our self-pay collection rate includes payments made 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, 2016, a 10% decrease or increase in our self-paycollection rate, or approximately 3%, which we believe could be a reasonably likely change, would result in an unfavorableor favorable adjustment to provision for doubtful accounts of approximately $9 million. Payment pressure from managed care payers also affects our provision for doubtful accounts. We typicallyexperience ongoing managed care payment delays and disputes; however, we continue to work with these payers to obtainadequate and timely reimbursement for our services. Our estimated Hospital Operations and other segment collection ratefrom managed care payers was approximately 97.8% at December 31, 2016. We manage our provision for doubtful accounts using hospital-specific goals and benchmarks such as (1) total cashcollections, (2) point-of-service cash collections, (3) accounts receivable days outstanding (“AR Days”), and (4) accountsreceivable by aging category. The following tables present the approximate aging by payer of our net accounts receivablefrom the continuing operations of our Hospital Operations and other segment of $2.725 billion and $2.578 billion atDecember 31, 2016 and 2015, respectively, excluding cost report settlements payable and valuation allowances of$14 million and $42 million at December 31, 2016 and 2015, respectively: December 31, 2016 Indemnity, Managed Self-Pay Medicare Medicaid Care and Other Total0-60 days 92% 75% 61% 24% 60% 61-120 days 5% 15% 15% 14% 13% 121-180 days 2% 4% 8% 10% 6% Over 180 days 1% 6% 16% 52% 21% Total 100% 100% 100% 100% 100% 68 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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, 2015 Indemnity, Managed Self-Pay Medicare Medicaid Care and Other Total0-60 days 90% 65% 64% 27% 62% 61-120 days 6% 16% 16% 19% 15% 121-180 days 2% 6% 7% 11% 7% Over 180 days 2% 13% 13% 43% 16% Total 100% 100% 100% 100% 100% As of December 31, 2016, we had a cumulative total of patient account assignments to our Conifer subsidiary ofapproximately $2.9 billion related to our continuing operations. These accounts have already been written off and are notincluded in our receivables or in the allowance for doubtful accounts; however, an estimate of future recoveries from all theaccounts assigned to our Conifer subsidiary is determined based on our historical experience and recorded in accountsreceivable. Patient advocates from Conifer’s Medicaid Eligibility Program (“MEP”) screen patients in the hospital to determinewhether those patients meet eligibility requirements for financial assistance programs. They also expedite the process ofapplying for these government programs. Receivables from patients who are potentially eligible for Medicaid are classifiedas Medicaid pending, under the MEP, with appropriate contractual allowances recorded. Based on recent trends,approximately 95% of all accounts in the MEP are ultimately approved for benefits under a government program, such asMedicaid. The following table shows the approximate amount of accounts receivable in the MEP still awaitingdetermination of eligibility under a government program at December 31, 2016 and December 31, 2015 by aging categoryfor the hospitals currently in the program: December 31, December 31, 2016 2015 0-60 days $84 $86 61-120 days 13 14 121-180 days 4 7 Over 180 days 4 18 Total $105 $125 SALARIES, WAGES AND BENEFITS Same-hospital salaries, wages and benefits as a percentage of net operating revenues decreased by 130 basis pointsto 47.9% in the year ended December 31, 2016 compared to the same period in 2015. While same-hospital net operatingrevenues increased 5.2% in the year ended December 31, 2016 compared to the year ended December 31, 2015, same-hospital salaries, wages and benefits increased by only 2.2% in the year ended December 31, 2016 compared to the 2015period. The increase in same-hospital salaries, wages and benefits was primarily due to annual merit increases for certain ofour employees and increased employee health benefits costs, partially offset lower annual incentive compensation expense.Salaries, wages and benefits expense for the years ended December 31, 2016 and 2015 included stock-based compensationexpense of $58 million and $77 million, respectively. At December 31, 2016, approximately 23% of the employees in our Hospital Operations and other segment wererepresented by labor unions. There were no unionized employees in our Ambulatory Care segment, and less than 1% ofConifer’s employees belong to a union. Unionized employees – primarily registered nurses and service and maintenanceworkers – are located at 34 of our hospitals, the majority of which are in California, Florida and Michigan. We currently havesix expired contracts covering approximately 8% of our unionized employees and are negotiating renewals under extensionagreements. We are also negotiating first contracts at three hospitals and one physician practice covering approximately 5%of our unionized employees where employees recently selected union representation. At this time, we are unable to predictthe outcome of the negotiations, but increases in salaries, 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 laborcosts and have an adverse effect on our patient admissions and net operating revenues. Organizing activities by labor unionscould increase our level of union representation in future periods.69 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsSUPPLIES Same-hospital supplies expense as a percentage of net operating revenues decreased by 30 basis points to 16.7% inthe year ended December 31, 2016 compared to the same period in 2015. We strive to control supplies expense through product standardization, contract compliance, improved utilization,bulk purchases and operational improvements. The items of current cost reduction focus continue to be cardiac stents andpacemakers, orthopedics and implants, and high-cost pharmaceuticals. We also utilize group-purchasing strategies andsupplies-management services in an effort to reduce costs. OTHER OPERATING EXPENSES, NET Same-hospital other operating expenses as a percentage of net operating revenues increased by 120 basis points to25.7% in the year ended December 31, 2016 compared 24.5% to the same period in 2015. The increase in other operatingexpenses was primarily due to: ·increased costs associated with funding indigent care services by hospitals we operated throughout bothperiods of $16 million, which costs were substantially offset by additional net patient revenues; ·increased costs of $126 million associated with our health plans due to an increase in covered lives, which costswere partially offset by increased health plan revenues; and ·increased costs of contracted services of $160 million. Same-hospital malpractice expense in the 2016 period included a favorable adjustment of approximately $4 million due to a16 basis point increase in the interest rate used to estimate the discounted present value of projected future malpracticeliabilities compared to a favorable adjustment of approximately $3 million as a result of a 12 basis point increase in theinterest rate in the 2015 period. Ambulatory Care Segment On June 16, 2015, we completed the transaction that combined our freestanding ambulatory surgery and imagingcenter assets with the short-stay surgical facility assets of USPI into our new USPI joint venture, and we acquired Aspen,which operates nine private short-stay surgical hospitals and clinics in the United Kingdom, thereby forming our AmbulatoryCare separate reportable business segment. The results of our USPI joint venture and Aspen are included in the financial andstatistical information provided only for the period from acquisition to December 31, 2016. Our USPI joint venture operates its surgical facilities in partnership with local physicians and, in many of thesefacilities, a healthcare system partner. We hold an ownership interest in each facility, with each being operated through aseparate legal entity. The joint venture operates facilities on a day-to-day basis through management services contracts. Oursources of earnings from each facility consist of: ·management services revenues, computed as a percentage of each facility’s net revenues (often net of bad debtexpense); and ·our share of each facility’s net income (loss), which is computed by multiplying the facility’s net income (loss)times the percentage of each facility’s equity interests owned by our USPI joint venture. Our role as an owner and day-to-day manager provides us with significant influence over the operations of eachfacility. In many of the facilities our Ambulatory Care segment operates (108 of 323 facilities at December 31, 2016), thisinfluence does not represent control of the facility, so we account for our investment in the facility under the equity method.We control 215 of the facilities our Ambulatory Care segment operates, and we account for these investments as consolidatedsubsidiaries. 70 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOur net earnings from a facility are the same under either method, but the classification of those earnings differs. Forconsolidated subsidiaries, our financial statements reflect 100% of the revenues and expenses of the subsidiaries, after theelimination of intercompany amounts. The net profit attributable to owners other than us is classified within “net incomeattributable to noncontrolling interests.” For unconsolidated affiliates, our consolidated statements of operations reflect our earnings in two line items: ·equity in earnings of unconsolidated affiliates—our share of the net income of each facility, which is based onthe facility’s net income and the percentage of the facility’s outstanding equity interests owned by us; and ·management and administrative services revenues, which is included in our net operating revenues—incomewe earn in exchange for managing the day-to-day operations of each facility, usually quantified as a percentageof each facility’s net revenues less bad debt expense. Our Ambulatory Care operating income is driven by the performance of all facilities our USPI joint venture operatesand by the joint venture’s ownership interests in those facilities, but our individual revenue and expense line items containonly consolidated businesses, which represent 67% of those facilities. This translates to trends in consolidated operatingincome that often do not correspond with changes in consolidated revenues and expenses. Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015 The following table summarizes certain consolidated statements of operations items for the periods indicated: Years Ended December 31, Ambulatory Care Results of Operations 2016 2015 Net operating revenues $1,797 $959 Equity in earnings of unconsolidated affiliates $122 $83 Salaries, wages and benefits $594 $301 Supplies $365 $188 Other operating expenses, net $346 $196 Our Ambulatory Care net operating revenues increased by $838 million, or 87.4%, for the year endedDecember 31, 2016 compared to the year ended December 31, 2015. The growth in revenues was primarily due to ourmajority ownership interest in our USPI joint venture for the entire year ended December 2016 compared to only the periodfrom June 15, 2015 to December 31, 2015. Salaries, wages and benefits expense increased by $293 million, or 97.3%, for the year ended December 31, 2016compared to the year ended December 31, 2015. The increase was primarily due to our majority ownership interest in ourUSPI joint venture for the entire year ended December 2016 compared to only the period from June 15, 2015 to December 31,2015. Supplies expense increased by $177 million, or 94.1%, for the year ended December 31, 2016 compared to the yearended December 31, 2015. The increase was primarily due to our majority ownership interest in our USPI joint venture for theentire year ended December 2016 compared to only the period from June 15, 2015 to December 31, 2015. Other operating expenses increased by $150 million 76.5%, for the year ended December 31, 2016 compared to theyear ended December 31, 2015. The increases was primarily due to our majority ownership interest in our USPI joint venturefor the entire year ended December 2016 compared to only the period from June 15, 2015 to December 31, 2015. 71 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsFacility Growth The following table summarizes the changes in our same-facility revenue year-over-year on a pro forma systemwidebasis, which includes both consolidated and unconsolidated (equity method) facilities. While we do not record the revenuesof unconsolidated facilities, we believe this information is important in understanding the financial performance of ourAmbulatory Care segment because these revenues are the basis for calculating our management services revenues and,together with the expenses of our unconsolidated facilities, are the basis for our equity in earnings of unconsolidatedaffiliates. Ambulatory Care Facility Growth Year Ended December 31,2016Net revenues 9.6% Cases 5.2% Net revenue per case 4.2% Joint Ventures with Healthcare System Partners Our USPI joint venture’s business model is to jointly own its facilities with local physicians and not-for-profithealthcare systems. Accordingly, as of December 31, 2016, the majority of facilities in our Ambulatory Care segment areoperated in this model. Ambulatory Care Facilities with Healthcare System Partners Year Ended December 31,2016Facilities: With a healthcare system partner 177Without a healthcare system partner 146Total facilities operated 323Change from December 31, 2015 Acquisitions 5De novo 4Dispositions/Mergers (17)Total decrease in number of facilities operated (8) Conifer Segment Our Conifer subsidiary generated net operating revenues of approximately $1.6 billion and $1.4 billion during theyears ended December 31, 2016 and 2015, respectively, a portion of which was eliminated in consolidation as described inNote 20 to the Consolidated Financial Statements. The increase in the revenue from third-party customers, which is noteliminated in consolidation, is primarily due to new clients. Salaries, wages and benefits expense for Conifer increased $107 million, or 12.6%, in the year endedDecember 31, 2016 compared to the year ended December 31, 2015 due to an increase in employee headcount as a result ofthe growth in Conifer’s business primarily attributable to new clients. Conifer typically incurs start-up and other transitioncosts during the initial term of new client contracts. Other operating expenses for Conifer increased $39 million, or 13.2%, in the year ended December 31, 2016compared to the year ended December 31, 2015 due to the growth in Conifer’s business primarily attributable to new clients.Conifer typically incurs start-up and other transition costs during the initial term of new client contracts. Conifer continues to implement revenue cycle initiatives to improve our cash flow. These initiatives are focused onstandardizing and improving patient access processes, including pre-registration, registration, verification of eligibility andbenefits, liability identification and collection at point-of-service, and financial counseling. These initiatives are intended toreduce denials, improve service levels to patients and increase the quality of accounts that end up in accounts receivable.Although we continue to focus on improving our methodology for evaluating the collectability of our accounts receivable,we may incur future charges if there are unfavorable changes in the trends affecting the net realizable value of our accountsreceivable.72 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsConifer’s master service agreement with Tenet expires in December 2018. Prior to the expiration, we will undertakea new fair market value analysis with respect to the pricing of these services and use that analysis in our negotiation ofrenewal contracts. As a result, it is possible that the pricing under the renegotiated agreements may be different from thecurrent agreements. Any changes in the price or other terms of the contract could have a material impact on our Conifersegment’s results of operations. Conifer’s contract with Tenet represented approximately 41% of the net operating revenuesConifer recognized in the year ended December 31, 2016. Consolidated IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS During the year ended December 31, 2016, we recorded impairment and restructuring charges and acquisition-related costs of $202 million. This amount included impairment charges of approximately $54 million for the write-down ofbuildings, equipment and other long-lived assets, primarily capitalized software cost classified as other intangible assets, totheir estimated fair values at four of our hospitals. Material adverse trends in our most recent estimates of future undiscountedcash flows of the hospitals indicated the carrying value of the hospitals’ long-lived assets was not recoverable from theestimated future cash flows. We believe the most significant factors contributing to the adverse financial trends includereductions in volumes of insured patients, shifts in payer mix from commercial to governmental payers combined withreductions in reimbursement rates from governmental payers, and high levels of uninsured patients. As a result, we updatedthe estimate of the fair value of the hospitals’ long-lived assets and compared the fair value estimate to the carrying value ofthe hospitals’ long-lived assets. Because the fair value estimates were lower than the carrying value of the long-lived assets,an impairment charge was recorded for the difference in the amounts. Unless the anticipated future financial trends of thesehospitals improve to the extent that the estimated future undiscounted cash flows exceed the carrying value of the long-livedassets, these hospitals are at risk of future impairments, particularly if we spend significant amounts of capital at the hospitalswithout generating a corresponding increase in the hospitals’ fair value or if the fair value of the hospitals’ real estate orequipment declines. The aggregate carrying value of assets held and used of the hospitals for which impairment charges wererecorded was $163 million as of December 31, 2016 after recording the impairment charges. We also recorded $19 million ofimpairment charges related to investments and $14 million related to other intangible assets, primarily contract relatedintangibles and capitalized software costs not associated with the hospitals described above. Of the total impairment chargesrecognized for the year ended December 31, 2016, $76 million related to our Hospital Operations and other segment, $8million related to our Ambulatory Care segment, and $3 million related to our Conifer segment. We also recorded $35million of employee severance costs, $14 million of restructuring costs, $14 million of contract and lease termination fees,and $52 million in acquisition-related costs, which include $20 million of transaction costs and $32 million of acquisitionintegration costs. During the year ended December 31, 2015, we recorded impairment and restructuring charges and acquisition-related costs of $318 million, including $168 million of impairment charges. We recorded an impairment charge ofapproximately $147 million to write-down assets held for sale to their estimated fair value, less estimated costs to sell, as aresult of entering into a definitive agreement for the sale of SLUH during the three months ended June 30, 2015, as furtherdescribed in Note 5. We also recorded impairment charges of approximately $19 million for the write-down of buildings,equipment and other long-lived assets, primarily capitalized software cost classified as other intangible assets, to theirestimated fair values at two of our hospitals. The aggregate carrying value of assets held and used of the hospitals for whichimpairment charges were recorded was $45 million as of December 31, 2015 after recording the impairment charge. We alsorecorded $2 million of impairment charges related to investments. We also recorded $25 million of employee severancecosts, $6 million of restructuring costs, $19 million of contract and lease termination fees, and $100 million in acquisition-related costs, which include $55 million of transaction costs and $45 million of acquisition integration costs. Our impairment tests presume stable, improving or, in some cases, declining operating results in our hospitals, whichare based on programs and initiatives being implemented that are designed to achieve the hospital’s most recent projections.If these projections are not met, or if in the future negative trends occur that impact our future outlook, future impairments oflong-lived assets and goodwill may occur, and we may incur additional restructuring charges. 73 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsLITIGATION AND INVESTIGATION COSTS Litigation and investigation costs for the years ended December 31, 2016 and 2015 were $293 million and$291 million, respectively. Of these amounts, $278 million and $219 million for the years ended December 31, 2016 and2015, respectively, were attributable to accruals for the Clinica de la Mama matter, which is further described in Note 14 toour Consolidated Financial Statements. GAINS ON SALES, CONSOLIDATION AND DECONSOLIDATION OF FACILITIES During the year ended December 31, 2016, we recorded gains on sales, consolidation and deconsolidation offacilities of approximately $151 million, primarily comprised of a $113 million gain from the sale of our Atlanta-areafacilities and $33 million of gains related to the consolidation of certain businesses of our USPI joint venture due toownership changes. During the year ended December 31, 2015, we recorded gains on sales, consolidation and deconsolidation offacilities of approximately $186 million, comprised of a $151 million gain on deconsolidation due to our joint venture withBaylor Scott & White Health (“BSW”), a $3 million gain from the sale of our North Carolina facilities and $32 million ofgains related to the consolidation and deconsolidation of certain businesses of our USPI joint venture due to ownershipchanges. INTEREST EXPENSE Interest expense for the year ended December 31, 2016 was $979 million compared to $912 million for the yearended December 31, 2015, primarily due to increased borrowings related to our 2015 acquisitions. INCOME TAX EXPENSE During the year ended December 31, 2016, we recorded income tax expense of $67 million in continuing operationson pre-tax income of $248 million, compared to income tax expense of $68 million on pre-tax income of $144 millionduring the year ended December 31, 2015. The reconciliation between the amount of recorded income tax expense (benefit)and the amount calculated at the statutory federal tax rate is shown below. Years Ended December 31, 2016 2015Tax expense at statutory federal rate of 35% $87 $50State income taxes, net of federal income tax benefit 16 18Expired state net operating losses, net of federal income tax benefit 35 11Tax attributable to noncontrolling interests (106) (59)Nondeductible goodwill 29 22Nontaxable gains (11) (11)Nondeductible litigation costs 37 44Nondeductible acquisition costs 1 4Nondeductible health insurance provider fee 2 2Changes in valuation allowance (25) 4Change in tax contingency reserves, including interest (9) 7Amendment of prior-year tax returns — (17)Prior-year provision to return adjustments and other changes indeferred taxes 12 (12)Other items (1) 5 $67 $68 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS Net income attributable to noncontrolling interests was $368 million for the year ended December 31, 2016compared to $218 million for the year ended December 31, 2015. Net income attributable to noncontrolling interests for74 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsthe year ended December 31, 2016 was comprised of $31 million related to our Hospital Operations and other segment, $285million related to our Ambulatory Care segment and $52 million related to our Conifer segment. Of the portion related to ourAmbulatory Care segment, $65 million was related to the minority interest in our USPI joint venture. ADDITIONAL SUPPLEMENTAL NON-GAAP DISCLOSURES The financial information provided throughout this report, including our Consolidated Financial Statements and thenotes thereto, has been prepared in conformity with accounting principles generally accepted in the United States of America(“GAAP”). However, we use certain non-GAAP financial measures defined below in communications with investors, analysts,rating agencies, banks and others to assist such parties in understanding the impact of various items on our financialstatements, some of which are recurring or involve cash payments. We use this information in our analysis of the performanceof our business, excluding items we do not consider relevant to the performance of our continuing operations. In addition,from time to time we use these measures to define certain performance targets under our compensation programs. “Adjusted EBITDA” is a non-GAAP measure defined by the Company as net income available (loss attributable) toTenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2)net loss (income) attributable to noncontrolling interests, (3) income (loss) from discontinued operations, (4) income taxbenefit (expense), (5) investment earnings (losses), (6) gain (loss) from early extinguishment of debt, (7) interest expense, (8)litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation anddeconsolidation of facilities, (10) impairment and restructuring charges and acquisition-related costs, and (11) depreciationand amortization. Litigation and investigation costs do not include ordinary course of business malpractice and otherlitigation and related expense. The Company believes the foregoing non-GAAP measure is useful to investors and analysts because it presentsadditional information on the Company’s financial performance. Investors, analysts, Company management and theCompany’s Board of Directors utilize this non-GAAP measure, in addition to GAAP measures, to track the Company’sfinancial and operating performance and compare the Company’s performance to its peer companies, which utilize similarnon-GAAP measures in their presentations. The Human Resources Committee of the Company’s Board of Directors also usescertain of these measures to evaluate management’s performance for the purpose of determining incentive compensation.Additional information regarding the purpose and utility of specific non-GAAP measures used by the Company is set forthbelow. The Company believes that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts useboth historical and projected Adjusted EBITDA, in addition to other GAAP and non-GAAP measures, as factors indetermining the estimated fair value of shares of the Company’s common stock. Company management also regularlyreviews the Adjusted EBITDA performance for each operating segment. The Company does not use Adjusted EBITDA tomeasure liquidity, but instead to measure operating performance. This non-GAAP measure may not be comparable tosimilarly titled measures reported by other companies. Because this measure excludes many items that are included in ourfinancial statements, it does not provide a complete measure of our operating performance. Accordingly, investors areencouraged to use GAAP measures when evaluating the Company’s financial performance. 75 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe table below shows the reconciliation of Adjusted EBITDA to net income available (loss attributable) to TenetHealthcare Corporation common shareholders (the most comparable GAAP term) for the years ended December 31, 2016 and2015: Years Ended December 31, 2016 2015 Net loss attributable to Tenet Healthcare Corporation common shareholders $(192) $(140) Less: Net income attributable to noncontrolling interests (368) (218) Net income (loss) from discontinued operations, net of tax (5) 2 Net income from continuing operations 181 76 Income tax expense (67) (68) Investment earnings (losses) 8 1 Loss from early extinguishment of debt — (1) Interest expense (979) (912) Operating income 1,219 1,056 Litigation and investigation costs (293) (291) Gains on sales, consolidation and deconsolidation of facilities 151 186 Impairment and restructuring charges, and acquisition-related costs (202) (318) Depreciation and amortization (850) (797) Adjusted EBITDA $2,413 $2,276 Net operating revenues $19,621 $18,634 Net loss from continuing operations as a % of operating revenues (1.0)% (0.8)% Adjusted EBITDA as % of net operating revenues (Adjusted EBITDA margin) 12.3% 12.2% 76 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsRESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2015 COMPARED TO THE YEAR ENDEDDECEMBER 31, 2014 The following two tables summarize our net operating revenues, operating expenses and operating income fromcontinuing operations, both in dollar amounts and as percentages of net operating revenues, for the years endedDecember 31, 2015 and 2014: Years Ended December 31, Increase 2015 2014 (Decrease) Net operating revenues: General hospitals $16,741 $15,518 $1,223 Other operations 3,370 2,390 980 Net operating revenues before provision for doubtful accounts 20,111 17,908 2,203 Less provision for doubtful accounts 1,477 1,305 172 Net operating revenues 18,634 16,603 2,031 Equity in earnings of unconsolidated affiliates 99 12 87 Operating expenses: Salaries, wages and benefits 9,011 8,023 988 Supplies 2,963 2,630 333 Other operating expenses, net 4,555 4,114 441 Electronic health record incentives (72) (104) 32 Depreciation and amortization 797 849 (52) Impairment and restructuring charges, and acquisition-related costs 318 153 165 Litigation and investigation costs 291 25 266 Gains on sales, consolidation and deconsolidation of facilities (186) — (186) Operating income $1,056 $925 $131 Years Ended December 31, Increase 2015 2014 (Decrease) Net operating revenues 100.0% 100.0% —% Equity in earnings of unconsolidated affiliates 0.5% 0.1% 0.4% Operating expenses: Salaries, wages and benefits 48.4% 48.3% 0.1% Supplies 15.9% 15.8% 0.1% Other operating expenses, net 24.4% 24.8% (0.4)% Electronic health record incentives (0.4)% (0.6)% 0.2% Depreciation and amortization 4.3% 5.1% (0.8)% Impairment and restructuring charges, and acquisition-related costs 1.7% 0.9% 0.8% Litigation and investigation costs 1.5% 0.2% 1.3% Gains on sales, consolidation and deconsolidation of facilities (1.0)% —% (1.0)% Operating income 5.7% 5.6% 0.1% Net operating revenues of our general hospitals include inpatient and outpatient revenues for services provided byfacilities in our Hospital Operations and other segment, as well as nonpatient revenues (e.g., rental income, management feerevenue, and income from services such as cafeterias, gift shops and parking) and other miscellaneous revenue. Net operatingrevenues of other operations primarily consist of revenues from (1) physician practices, (2) a long-term acute care hospital, (3)our Ambulatory Care segment, (4) services provided by our Conifer subsidiary to third parties and (5) our health plans.Revenues from our general hospitals represented approximately 83% and 87% of our total net operating revenues beforeprovision for doubtful accounts for the years ended December 31, 2015 and 2014, respectively. 77 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNet operating revenues from our other operations were $3.370 billion and $2.390 billion in the years endedDecember 31, 2015 and 2014, respectively. The increase in net operating revenues from other operations during 2015primarily relates to revenue cycle services provided by our Conifer subsidiary, as well as revenues from our USPI jointventure and Aspen acquisition, our health plans and physician practices. Equity in earnings of unconsolidated affiliates were$99 million and $12 million for the years ended December 31, 2015 and 2014, respectively. The increase in equity inearnings of unconsolidated affiliates in the 2015 period compared to the 2014 period primarily relates to our USPI jointventure. The following table shows selected operating expenses of our three reportable business segments. Information forour Hospital Operations and other segment is presented on a same-hospital basis, which includes the results of our same75 hospitals and six health plans operated throughout the years ended December 31, 2015 and 2014. The results of TRMC,in which we acquired a majority interest on June 3, 2014, Resolute Health Hospital, which we opened on June 24, 2014,Emanuel Medical Center, which we acquired on August 1, 2014, Hi-Desert Medical Center, which we began operating onJuly 15, 2015, our Carondelet Heath Network joint venture, in which we acquired a majority interest on August 31, 2015,SLUH, which we sold on August 31, 2015, our joint venture with Baptist Health System, Inc., which we formed on October 2,2015, and DMC Surgery Hospital, which we closed in October 2015, are excluded. Certain previously reported informationhas been reclassified to conform to the current-year presentation, primarily related to the sale of SLUH and our contributionof freestanding ambulatory surgery and imaging center assets to the USPI joint venture. These outpatient facilities wereformerly part of our Hospital Operations and other segment, but are now reported as part of our new Ambulatory Caresegment. Same Hospital Continuing Operations Years Ended December 31, Increase Selected Operating Expenses 2015 2014 (Decrease) Hospital Operations and other — Same-Hospital Salaries, wages and benefits $7,438 $7,005 6.2% Supplies 2,590 2,459 5.3% Other operating expenses 3,779 3,569 5.9% Total $13,807 $13,033 5.9% Salaries, wages and benefits per adjusted patient admission $5,579 $5,433 2.7% Supplies per adjusted patient admission 1,943 1,889 2.9% Other operating expenses per adjusted patient admission 2,856 2,774 3.0% Total per adjusted patient admission $10,378 $10,096 2.8% Ambulatory Care Salaries, wages and benefits $301 $87 246.0% Supplies 188 61 208.2% Other operating expenses 196 74 164.9% Total $685 $222 208.6% Conifer Salaries, wages and benefits $852 $727 17.2% Other operating expenses 296 263 12.5% Total $1,148 $990 16.0% Rent/lease expense Hospital Operations and other $214 $191 12.0% Conifer 16 21 (23.8)% Ambulatory Care 41 22 86.4% Total $271 $234 15.8% (1)Adjusted patient admissions represents actual patient admissions adjusted to include outpatient services provided by facilities in our HospitalOperations and other segment by multiplying actual patient admissions by the sum of gross inpatient revenues and outpatient revenues anddividing the results by gross inpatient revenues.(2)Included in other operating expenses. 78 (1)(1)(1)(2)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsRESULTS OF OPERATIONS BY SEGMENT Our operations are reported under three segments: Hospital Operations and other, which is focused on operatingacute care hospitals, ancillary outpatient facilities, urgent care facilities, freestanding emergency departments, physicianpractices and health plans; Ambulatory Care, which is comprised of our freestanding ambulatory surgery and imagingcenters, short-stay surgical facilities and Aspen’s hospitals and clinics; and Conifer, which operates revenue cyclemanagement and patient communication and engagement services businesses. Hospital Operations and Other Segment The following tables show operating statistics of our continuing operations hospitals on a same-hospital basis,which includes the results of our same 75 hospitals and six health plans operated throughout the years ended December 31,2015 and 2014. The results of TRMC, in which we acquired a majority interest on June 3, 2014, Resolute Health Hospital,which we opened on June 24, 2014, Emanuel Medical Center, which we acquired on August 1, 2014, Hi-Desert MedicalCenter, which we began operating on July 15, 2015, our Carondelet Heath Network joint venture, in which we acquired amajority interest on August 31, 2015, SLUH, which we sold on August 31, 2015, our joint venture with Baptist HealthSystem, Inc., which we formed on October 2, 2015, and DMC Surgery Hospital, which we closed in October 2015, areexcluded. Certain previously reported information has been reclassified to conform to the current-year presentation, primarilyrelated to the sale of SLUH and our contribution of freestanding ambulatory surgery and imaging center assets to the USPIjoint venture. These outpatient facilities were formerly part of our Hospital Operations and other segment, but are nowreported as part of our new Ambulatory Care segment. Same-Hospital Continuing Operations Years Ended December 31, Increase Admissions, Patient Days and Surgeries 2015 2014 (Decrease) Total admissions 774,480 765,951 1.1% Adjusted patient admissions 1,333,227 1,301,936 2.4% Paying admissions (excludes charity and uninsured) 733,155 722,455 1.5% Charity and uninsured admissions 41,325 43,496 (5.0)% Admissions through emergency department 489,401 479,805 2.0% Paying admissions as a percentage of total admissions 94.7% 94.3% 0.4% Charity and uninsured admissions as a percentage of total admissions 5.3% 5.7% (0.4)% Emergency department admissions as a percentage of total admissions 63.2% 62.6% 0.6% Surgeries — inpatient 211,063 209,385 0.8% Surgeries — outpatient 276,890 273,248 1.3% Total surgeries 487,953 482,633 1.1% Patient days — total 3,573,155 3,566,694 0.2% Adjusted patient days 6,083,749 5,993,861 1.5% Average length of stay (days) 4.61 4.66 (1.1)% Number of hospitals (at end of period) 75 75 — Licensed beds (at end of period) 19,882 19,984 (0.5)% Average licensed beds 19,969 19,905 0.3% Utilization of licensed beds 49.0% 49.1% (0.1)% (1)Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities inour Hospital Operations and other segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues andoutpatient revenues and dividing the results by gross inpatient revenues.(2)The change is the difference between 2015 and 2014 amounts shown.(3)Utilization of licensed beds represents patient days divided by number of days in the period divided by average licensed beds. 79 (1)(2)(2)(2)(1)(2)(3)(2)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 Continuing Operations Years Ended December 31, Increase Outpatient Visits 2015 2014 (Decrease) Total visits 7,831,785 7,496,243 4.5% Paying visits (excludes charity and uninsured) 7,213,214 6,859,531 5.2% Charity and uninsured visits 618,571 636,712 (2.8)% Emergency department visits 2,816,943 2,738,233 2.9% Surgery visits 276,890 273,248 1.3% Paying visits as a percentage of total visits 92.1% 91.5% 0.6% Charity and uninsured visits as a percentage of total visits 7.9% 8.5% (0.6)% (1)The change is the difference between 2015 and 2014 amounts shown. Same-Hospital Continuing Operations Years Ended December 31, Increase Revenues 2015 2014 (Decrease) Net operating revenues $15,334 $14,553 5.4% Revenues from charity and the uninsured $992 $1,025 (3.2)% Net inpatient revenues $10,079 $9,615 4.8% Net outpatient revenues $5,630 $5,271 6.8% (1)Net inpatient revenues and net outpatient revenues are components of net operating revenues. Net inpatient revenues include self-payrevenues of $374 million and $381 million for the years ended December 31, 2015 and 2014, respectively. Net outpatient revenues includeself-pay revenues of $618 million and $644 million for the years ended December 31, 2015 and 2014, respectively. Same-Hospital Continuing Operations Years Ended December 31, Increase Revenues on a Per Admission, Per Patient Day and Per Visit Basis 2015 2014 (Decrease) Net inpatient revenue per admission $13,014 $12,553 3.7% Net inpatient revenue per patient day $2,821 $2,696 4.6% Net outpatient revenue per visit $719 $703 2.3% Net patient revenue per adjusted patient admission $11,783 $11,434 3.1% Net patient revenue per adjusted patient day $2,582 $2,484 3.9% (1)Adjusted patient admissions/days represents actual patient admissions/days adjusted to include outpatient services provided by facilities inour Hospital Operations and other segment by multiplying actual patient admissions/days by the sum of gross inpatient revenues andoutpatient revenues and dividing the results by gross inpatient revenues. Same-Hospital Continuing Operations Years Ended December 31, Increase Provision for Doubtful Accounts 2015 2014 (Decrease) Provision for doubtful accounts $1,375 $1,250 10.0% Provision for doubtful accounts as a percentage of net operating revenuesbefore provision for doubtful accounts 8.2% 8.0% 0.2% (1)The change is the difference between the 2015 and 2014 amounts shown. REVENUES Same-hospital net operating revenues increased $781 million, or 5.4%, during the year ended December 31, 2015compared to the year ended December 31, 2014. The increase in same-hospital net operating revenues in the 2015 period isprimarily due to higher inpatient and outpatient volumes, improved terms of our managed care contracts, incremental netrevenues from the California provider fee program of $15 million and an increase in our other operations revenues. For theyears ended December 31, 2015 and 2014, our net operating revenues attributable to80 (1)(1)(1)(1)(1)(1)(1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsMedicaid DSH and other supplemental revenues were approximately $840 million and $775 million, respectively. Same-hospital net inpatient revenues increased $464 million, or 4.8%, and same-hospital admissions increased 1.1% in the 2015period compared to the 2014 period. We believe our volumes were positively impacted by incremental market share wegenerated through improved physician alignment and service line expansion, insurance coverage for a greater number ofindividuals, and a strengthening economy. Same-hospital net inpatient revenue per admission increased 3.7%, primarily dueto the improved terms of our managed care contracts and volume growth in higher acuity service lines, in the year endedDecember 31, 2015. Same-hospital net outpatient revenues increased $359 million, or 6.8%, and same-hospital outpatientvisits increased 4.5% in the year ended December 31, 2015 compared to the year ended December 31, 2014. Growth inoutpatient revenues and volumes was primarily driven by improved terms of our managed care contracts and increasedoutpatient volume levels associated with our outpatient development program. Same-hospital net outpatient revenue pervisit increased 2.3% primarily due to the improved terms of our managed care contracts. PROVISION FOR DOUBTFUL ACCOUNTS Same-hospital provision for doubtful accounts as a percentage of net operating revenues before provision fordoubtful accounts was 8.2% and 8.0% for the years ended December 31, 2015 and 2014, respectively. The table below showsthe net accounts receivable and allowance for doubtful accounts by payer at December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Accounts Accounts Receivable Receivable Before Before Allowance Allowance Allowance Allowance for Doubtful for Doubtful for Doubtful for Doubtful Accounts Accounts Net Accounts Accounts Net Medicare $360 $— $360 $323 $— $323 Medicaid 70 — 70 153 — 153 Net cost report settlementspayable and valuationallowances (42) — (42) (51) — (51) Managed care 1,715 126 1,589 1,528 99 1,429 Self-pay uninsured 509 436 73 578 482 96 Self-pay balance after insurance 208 142 66 210 133 77 Estimated future recoveries fromaccounts assigned to our Conifersubsidiary 144 — 144 125 — 125 Other payers 442 166 276 337 125 212 Total Hospital Operationsand other 3,406 870 2,536 3,203 839 2,364 Ambulatory Care 182 17 165 49 12 37 Total discontinued operations 3 — 3 4 1 3 $3,591 $887 $2,704 $3,256 $852 $2,404 A significant portion of our provision for doubtful accounts relates to self-pay patients, as well as co-pays anddeductibles owed to us by patients with insurance. Collection of accounts receivable has been a key area of focus,particularly over the past several years. At December 31, 2015, our collection rate on self-pay accounts was approximately29.7%. Our self-pay collection rate includes payments made by patients, including co-pays and deductibles paid by patientswith insurance. Based on our accounts receivable from self-pay patients and co-pays and deductibles owed to us by patientswith insurance at December 31, 2015, a 10% decrease or increase in our self-pay collection rate, or approximately 3%, whichwe believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to provision fordoubtful accounts of approximately $10 million. Our estimated collection rate from managed care payers was approximately98.0% at December 31, 2015. 81 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe following tables present the approximate aging by payer of our net accounts receivable from HospitalOperations and other segment of $2.578 billion and $2.415 billion at December 31, 2015 and 2014, respectively, excludingcost report settlements payable and valuation allowances of $42 million and $51 million at December 31, 2015 and 2014,respectively: December 31, 2015 Indemnity, Managed Self-Pay Medicare Medicaid Care and Other Total0-60 days 90% 65% 64% 27% 62% 61-120 days 6% 16% 16% 19% 15% 121-180 days 2% 6% 7% 11% 7% Over 180 days 2% 13% 13% 43% 16% Total 100% 100% 100% 100% 100% December 31, 2014 Indemnity, Managed Self-Pay Medicare Medicaid Care and Other Total0-60 days 81% 44% 66% 29% 61% 61-120 days 9% 22% 16% 19% 16% 121-180 days 4% 12% 7% 11% 7% Over 180 days 6% 22% 11% 41% 16% Total 100% 100% 100% 100% 100% Our AR Days from continuing operations were 49.5 days at both December 31, 2015 and December 31, 2014, withinour target of less than 55 days. AR Days are calculated as our accounts receivable from continuing operations on the last datein the quarter divided by our net operating revenues from continuing operations for the quarter ended on that date divided bythe number of days in the quarter. As of December 31, 2015, we had a cumulative total of patient account assignments to our Conifer subsidiary ofapproximately $2.7 billion related to our continuing operations, but excluding our newly acquired hospitals. These accountshave already been written off and are not included in our receivables or in the allowance for doubtful accounts; however, anestimate of future recoveries from all the accounts assigned to our Conifer subsidiary is determined based on our historicalexperience and recorded in accounts receivable. The following table shows the approximate amount of accounts receivable in the MEP still awaiting determinationof eligibility under a government program at December 31, 2015 and December 31, 2014 by aging category: December 31, December 31, 2015 2014 0-60 days $86 $85 61-120 days 14 20 121-180 days 7 10 Over 180 days 18 16 Total $125 $131 SALARIES, WAGES AND BENEFITS Same-hospital salaries, wages and benefits per adjusted patient admission increased by 2.7% in the year endedDecember 31, 2015 compared to the same period in 2014. This change is primarily due to a greater number of employedphysicians, annual merit increases for certain of our employees, and increased employee health benefits and incentivecompensation costs. Salaries, wages and benefits expense for the year ended December 31, 2015 and 2014 included stock-based compensation expense of $77 million and $51 million, respectively. 82 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsSUPPLIES Supplies expense per adjusted patient admission for our Hospital Operations and other segment increased by 2.9%in the year ended December 31, 2015 compared to the same period in 2014. The increase in supplies expense per adjustedpatient admission was primarily attributable to higher costs for pharmaceuticals and cardiology supplies, as well as volumegrowth in our supply-intensive surgical services, partially offset by lower implant costs. OTHER OPERATING EXPENSES, NET Same-hospital other operating expenses per adjusted patient admission increased by 3.0% in the year endedDecember 31, 2015 compared to the same period in 2014. Other operating expenses on a per adjusted admission basis wereimpacted by: ·higher same-hospital malpractice expense of $46 million; ·increased information systems maintenance contract costs of $45 million; ·additional costs related to a greater number of employed and contracted physicians for hospitals we operatedthroughout both periods of $56 million; and ·increased costs associated with funding indigent care services by the Texas hospitals we operated throughoutboth periods of $9 million, which costs were substantially offset by additional net patient revenues. Same-hospital malpractice expense was higher in the year ended December 31, 2015 compared to the year endedDecember 31, 2014 due to incremental patient volumes and unfavorable adjustments to settle various cases to mitigate therisk of protracted litigation, partially offset by a favorable adjustment in the 2015 period of approximately $3 million due toa 12 basis point increase in the interest rate used to estimate the discounted present value of projected future malpracticeliabilities compared to an unfavorable adjustment of approximately $7 million as a result of a 48 basis point decrease in theinterest rate in the 2014 period. Ambulatory Care Segment On June 16, 2015, we completed the transaction that combined our freestanding ambulatory surgery and imagingcenter assets with the short-stay surgical facility assets of USPI into our new USPI joint venture, and we acquired Aspen,which operates nine private short-stay surgical hospitals and clinics in the United Kingdom, thereby forming our newAmbulatory Care separate reportable business segment. The results of our USPI joint venture and Aspen are included in thefinancial and statistical information provided only for the period from acquisition to December 31, 2015. Information that isreported on a same-facility basis relates to the freestanding ambulatory surgery and diagnostic imaging centers that weoperated throughout the year ended December 31, 2015 and 2014 and were contributed to the USPI joint venture. Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014 The following table summarizes certain consolidated statements of operations items for the periods indicated: Years Ended December 31,Ambulatory Care Results of Operations 2015 2014Net operating revenues $959 $320Equity in earnings of unconsolidated affiliates $83 $ —Salaries, wages and benefits $301 $87Supplies $188 $61Other operating expenses, net $196 $74 83 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOur Ambulatory Care net operating revenues increased by $639 million, or 199.7%, for the year ended December31, 2015 compared to the year ended December 31, 2014. The growth in revenues was driven by increases from acquisitionsof $603 million, and increases from our same-facility operations of $36 million, for the year ended December 31, 2015compared to the year ended December 31, 2014. Salaries, wages and benefits expense increased by $214 million, or 246.0%, for the year ended December 31, 2015compared to the year ended December 31, 2014. These increases were driven by increases in salaries, wages and benefitsexpense from acquisitions of $208 million, and increases in our same-facility salaries, wages and benefits expense of$6 million, for the year ended December 31, 2015 compared by the year ended December 31, 2014. Supplies expense increased by $127 million, or 208.2%, for the year ended December 31, 2015 compared to the yearended December 31, 2014. These increases were driven by increases in supplies expense from acquisitions of $117 million,and increases in our same-facility supplies expense of $10 million, for the year ended December 31, 2015 compared to theyear ended December 31, 2014. Other operating expenses increased by $122 million, or 164.9%, for the year ended December 31, 2015 compared tothe year ended December 31, 2014. These increases were driven by increases in other operating expenses from acquisitions of$113 million, and increases in our same‑facility supplies expense of $7 million, for the year ended December 31, 2015compared to the year ended December 31, 2014. Facility Growth The following table summarizes the changes in our same-facility revenue year-over-year on a systemwide basis,which includes both consolidated and unconsolidated (equity method) facilities. While we do not record the revenues of ourunconsolidated facilities, we believe this information is important in understanding the financial performance of ourAmbulatory Care segment because these revenues are the basis for calculating our management services revenues and,together with the expenses of our unconsolidated facilities, are the basis for our equity in earnings of unconsolidatedaffiliates. Year EndedAmbulatory Care Facility Growth December 31, 2015Net revenue 11.7% Cases 7.9% Net revenue per case 3.6% Joint Ventures with Healthcare System Partners During the three months ended June 30, 2015, we established our new Ambulatory Care segment as a result of ourjoint venture with USPI and our purchase of Aspen. USPI’s business model is to jointly own its facilities with localphysicians and not-for-profit healthcare systems. Accordingly, as of December 31, 2015, the majority of facilities in ourAmbulatory Care segment are operated in this model. Year EndedAmbulatory Care Facilities with Healthcare System Partners December 31, 2015Facilities: With a healthcare system partner 181Without a healthcare system partner 152Total facilities operated 333Change from December 31, 2014 Acquired through USPI joint venture and Aspen acquisition 227Other acquisitions 47Dispositions/Mergers (3)Total increase in number of facilities operated 271 84 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsConifer Segment Our Conifer subsidiary generated net operating revenues of $1.4 billion and $1.2 billion during the years endedDecember 31, 2015 and 2014, respectively, a portion of which was eliminated in consolidation as described in Note 20 to theConsolidated Financial Statements. The increase in the revenue from third-party customers, which is not eliminated inconsolidation, is primarily due to new clients, service growth and Conifer’s acquisition of SPi Healthcare in the fourth quarterof 2014. Salaries, wages and benefits expense for Conifer increased $125 million, or 17.2%, in the year ended December 31,2015 compared to the year ended December 31, 2014 due to an increase in employee headcount as a result of the growth inConifer’s business primarily attributable to Conifer’s acquisition of SPi Healthcare and expanded services to CHI. Other operating expenses for Conifer increased $33 million, or 12.5%, in the year ended December 31, 2015compared to the year ended December 31, 2014 due to the growth in Conifer’s business primarily attributable to Conifer’sacquisition of SPi Healthcare and expanded services to CHI. Consolidated IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS During the year ended December 31, 2015, we recorded impairment and restructuring charges and acquisition-related costs of $318 million, including $168 million of impairment charges. We recorded an impairment charge ofapproximately $147 million to write-down assets held for sale to their estimated fair value, less estimated costs to sell, as aresult of entering into a definitive agreement for the sale of SLUH during the three months ended June 30, 2015, as furtherdescribed in Note 4. We also recorded impairment charges of approximately $19 million for the write-down of buildings,equipment and other long-lived assets, primarily capitalized software cost classified as other intangible assets, to theirestimated fair values at two of our hospitals. Material adverse trends in our most recent estimates of future undiscounted cashflows of the hospitals indicated the carrying value of the hospitals’ long-lived assets was not recoverable from the estimatedfuture cash flows. We believe the most significant factors contributing to the adverse financial trends include reductions involumes of insured patients, shifts in payer mix from commercial to governmental payers combined with reductions inreimbursement rates from governmental payers, and high levels of uninsured patients. As a result, we updated the estimate ofthe fair value of the hospitals’ long-lived assets and compared the fair value estimate to the carrying value of the hospitals’long-lived assets. Because the fair value estimates were lower than the carrying value of the long-lived assets, an impairmentcharge was recorded for the difference in the amounts. Unless the anticipated future financial trends of these hospitalsimprove to the extent that the estimated future undiscounted cash flows exceed the carrying value of the long-lived assets,these hospitals are at risk of future impairments, particularly if we spend significant amounts of capital at the hospitalswithout generating a corresponding increase in the hospitals’ fair value or if the fair value of the hospitals’ real estate orequipment declines. The aggregate carrying value of assets held and used of the hospitals for which impairment charges wererecorded was $45 million as of December 31, 2015 after recording the impairment charge. We also recorded $2 millionrelated to investments. We also recorded $25 million of employee severance costs, $6 million of restructuring costs,$19 million of contract and lease termination fees, and $100 million in acquisition-related costs, which include $55 millionof transaction costs and $45 million of acquisition integration costs. During the year ended December 31, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $153 million. This amount included a $20 million impairment charge for the write-down of buildings andequipment of one of our previously impaired hospitals to their estimated fair values, primarily due to a decline in the fairvalue of real estate in the market in which the hospital operates and a decline in the estimated fair value of equipment.Material adverse trends in our most recent estimates of future undiscounted cash flows of the hospital, consistent with ourprevious estimates in prior years when impairment charges were recorded at this hospital, indicated the carrying value of thehospital’s long-lived assets was not recoverable from the estimated future cash flows. We believe the most significant factorscontributing to the adverse financial trends include reductions in volumes of insured patients, shifts in payer mix fromcommercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and highlevels of uninsured patients. As a result, we updated the estimate of the fair value of the hospital’s long-lived assets85 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsand compared the fair value estimate to the carrying value of the hospital’s long-lived assets. Because the fair value estimatewas lower than the carrying value of the hospital’s long-lived assets, an impairment charge was recorded for the difference inthe 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 significant amounts of capital at the hospital without generating a corresponding increase in thehospital’s fair value or if the fair value of the hospital’s real estate or equipment declines. The aggregate carrying value ofassets held and used of the hospital for which an impairment charge was recorded was $23 million as of December 31, 2014after recording the impairment charge. We also recorded $16 million of employee severance costs, $19 million of contractand lease termination fees, $3 million of restructuring costs, and $95 million in acquisition-related costs, which include$16 million of transaction costs and $79 million of acquisition integration charges. LITIGATION AND INVESTIGATION COSTS Litigation and investigation costs for the years ended December 31, 2015 and 2014 were $291 million and$25 million, respectively, primarily related to costs associated with various legal proceedings and governmental reviewsdescribed in Note 14 to our Consolidated Financial Statements. GAINS ON SALES, CONSOLIDATION AND DECONSOLIDATION OF FACILITIES During the year ended December 31, 2015, we recorded gains on sales, consolidation and deconsolidation offacilities of approximately $186 million, comprised of a $151 million gain on deconsolidation due to our joint venture withBSW, a $3 million gain from the sale of our North Carolina facilities and $32 million of gains related to the consolidationand deconsolidation of certain businesses of our USPI joint venture due to ownership changes. INTEREST EXPENSE Interest expense for the year ended December 31, 2015 was $912 million compared to $754 million for the yearended December 31, 2014, primarily due to increased borrowings relating to our recent acquisitions and our $254 millionpayment to acquire the remaining 49% noncontrolling interest of our Valley Baptist Health System in South Texas. LOSS FROM EARLY EXTINGUISHMENT OF DEBT During the year ended December 31, 2014, we recorded a loss from early extinguishment of debt of approximately$24 million, primarily related to the difference between the redemption price and the par value of the $474 million aggregateprincipal amount of our 9/4% senior unsecured notes due 2015 that we redeemed in the period, as well as the write-off ofassociated unamortized note discounts and issuance costs. During the year ended December 31, 2015, we recorded a loss ofapproximately $1 million. INCOME TAX EXPENSE During the year ended December 31, 2015, we recorded income tax expense of $68 million compared to $49 millionduring the year ended December 31, 2014. NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS Net income attributable to noncontrolling interests was $218 million for the year ended December 31, 2015compared to $64 million for the year ended December 31, 2014. Net income attributable to noncontrolling interests for theyear ended December 31, 2015 was comprised of $31 million related to our Hospital Operations and other segment, $138million related to our Ambulatory Care segment and $49 million related to our Conifer segment. Of the portion related to ourAmbulatory Care segment, $50 million was related to the Welsh, Carson, Anderson & Stowe minority interest in our USPIjoint venture. The portion related to our Conifer segment is due to CHI’s ownership interest in Conifer’s principal operatingsubsidiary, Conifer Health Solutions, LLC. 86 1Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsLIQUIDITY AND CAPITAL RESOURCES CASH REQUIREMENTS Our obligations to make future cash payments under contracts, such as debt and lease agreements, and undercontingent commitments, such as standby letters of credit and minimum revenue guarantees, are summarized in the tablebelow, all as of December 31, 2016: Years Ended December 31, Later Total 2017 2018 2019 2020 2021 Years (In Millions) Long-term debt $19,163 $902 $1,966 $2,419 $4,977 $2,418 $6,481 Capital lease obligations 1,005 216 101 73 49 35 531 Long-term non-cancelableoperating leases 1,216 215 182 156 125 102 436 Standby letters of credit 110 105 5 — — — — Guarantees 95 72 21 2 — — — Asset retirement obligations 236 — — — — — 236 Academic affiliation agreements 82 54 19 9 — — — Tax liabilities 25 — — — — — 25 Defined benefit plan obligations 690 62 21 22 22 22 541 Construction and capital improvements 5 5 — — — — — Information technology contract services 1,193 259 248 240 244 181 21 Purchase orders 354 354 — — — — — Total $24,174 $2,244 $2,563 $2,921 $5,417 $2,758 $8,271 (1)Includes interest through maturity date/lease termination.(2)Includes minimum revenue guarantees, primarily related to physicians under relocation agreements and physician groups that provideservices at our hospitals, and operating lease guarantees.(3)These agreements contain various rights and termination provisions.(4)Professional liability and workers’ compensation reserves, and our obligations under the Put/Call Agreement and the Baylor Put/CallAgreement, as defined in Note 15 to our Consolidated Financial Statements, have been excluded from the table. At December 31, 2016, thecurrent and long-term professional and general liability reserves included in our Consolidated Balance Sheet were approximately $181million and $613 million, respectively, and the current and long-term workers’ compensation reserves included in our Consolidated BalanceSheet were approximately $50 million and $204 million, respectively. Redeemable noncontrolling interests in our USPI joint venture thatare subject to the Put/Call Agreement and the Baylor Put/Call Agreement totaled approximately $1.25 billion at December 31, 2016. InJanuary 2017, subsidiaries of Welsh, Carson, Anderson & Stowe delivered a put notice for the minimum number of shares they are requiredto put to us in 2017 according to the Put/Call Agreement. The estimated amount we will pay to repurchase these shares is between $159million and $170 million. Standby letters of credit are required principally by our insurers and various states to collateralize our workers’compensation programs pursuant to statutory requirements and as security to collateralize the deductible and self-insuredretentions under certain of our professional and general liability insurance programs. The amount of collateral required isprimarily dependent upon the level of claims activity and our creditworthiness. The insurers require the collateral in case weare unable to meet our obligations to claimants within the deductible or self-insured retention layers. We consummated the following transactions affecting our long-term commitments in the year endedDecember 31, 2016: ·In December 2016, we sold $750 million aggregate amount of 7/2% senior secured second lien notes, which willmature on January 1, 2022. We will pay interest on the 7/2% senior secured second lien notes semi-annually inarrears on January 1 and July 1 of each year, commencing on July 1, 2017. The net proceeds of the notes wereused, after payment of fees and expenses, to repay indebtedness outstanding under our senior secured revolvingcredit facility and for general corporate purposes. 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 our outstanding debt or equity securities subject to prevailing market conditions, our liquidityrequirements, contractual restrictions and other factors. These actions are part of our strategy to manage our leverage andcapital structure over time, which is dependent on our total amount of debt, our cash and our operating87 (1)(1)(2)(3)(4)11Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsresults. At December 31, 2016, using the last 12 months of Adjusted EBITDA, our ratio of total long-term debt, net of cashand cash equivalent balances, to Adjusted EBITDA was 6.03x. We anticipate this ratio will fluctuate from quarter to quarterbased on earnings performance and other factors, including the use of our Credit Agreement as a source of liquidity andacquisitions that involve the assumption of long-term debt. We intend to manage this ratio by following our business plan,managing our cost structure, possible assets divestitures and through other changes in our capital structure, including, ifappropriate, the issuance of equity or convertible securities. Our ability to achieve our leverage and capital structureobjectives is subject to numerous risks and uncertainties, many of which are described in the Forward-Looking Statementsand Risk Factors sections of Part I of this report. Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amountsto comply with applicable statutes and regulations), equipment and information systems additions and replacements(including those required to achieve compliance with the HIT requirements under ARRA), introduction of new medicaltechnologies, design and construction of new buildings, and various other capital improvements, as well as commitments tomake capital expenditures in connection with the acquisition of businesses. Capital expenditures were $875 million,$842 million and $933 million in the years ended December 31, 2016, 2015 and 2014, respectively. We anticipate that ourcapital expenditures for continuing operations for the year ending December 31, 2017 will total approximately $700 millionto $750 million, including $179 million that was accrued as a liability at December 31, 2016. Our budgeted 2017 capitalexpenditures include approximately $3 million to improve disability access at certain of our facilities pursuant to the termsof a negotiated consent decree. During the year ended December 31, 2016, we completed the transaction that allowed us to consolidate fivemicrohospitals that were previously recorded as equity method investments. We also acquired majority interests in 28ambulatory surgery centers (all of which are owned by our USPI joint venture) and various physician practices. The fair valueof the consideration conveyed in the acquisitions (the “purchase price”) was $117 million. Interest payments, net of capitalized interest, were $932 million, $859 million and $726 million in the years endedDecember 31, 2016, 2015 and 2014, respectively. For the year ending December 31, 2017, we expect annual interest expenseto increase by $50 million to $55 million from 2016 due primarily to the issuance of the 7/2% senior secured second liennotes in December 2016. Income tax payments, net of tax refunds, were approximately $33 million in the year ended December 31, 2016compared to approximately $7 million in the year ended December 31, 2015. At December 31, 2016, our carryforwardsavailable to offset future taxable income consisted of (1) federal net operating loss (“NOL”) carryforwards of approximately$1.7 billion pretax expiring in 2025 to 2034, (2) approximately $30 million in alternative minimum tax credits with noexpiration, (3) general business credit carryforwards of approximately $24 million expiring in 2023 through 2036, and(4) state NOL carryforwards of $3.0 billion expiring in 2017 through 2036 for which the associated deferred tax benefit, netof valuation allowance and federal tax impact, is $19 million. Our ability to utilize NOL carryforwards to reduce futuretaxable 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 sharerepurchase programs (see Note 2), the offering of stock by us, the purchase or sale of our stock by 5% shareholders, as definedin the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by5% shareholders result in aggregate increases that exceed 50 percentage points during the three-year period, thenSection 382 imposes an annual limitation on the amount of our taxable income that may be offset by the NOL carryforwardsor tax credit carryforwards at the time of ownership change. Periodic examinations of our tax returns by the Internal Revenue Service (“IRS”) or other taxing authorities couldresult in the payment of additional taxes. The IRS has completed audits of our tax returns for all tax years ended on or beforeDecember 31, 2007, and of Vanguard’s tax returns for fiscal years ending on or before October 1, 2013. All disputed issueswith respect to these audits have been resolved, and all related tax assessments (including interest) have been paid. Our taxreturns for years ended after December 31, 2007 and Vanguard’s tax returns for fiscal years ended after October 1, 2013remain subject to examination by the IRS. USPI tax returns for years ended after December 31, 2011 remain subject to audit. 88 1Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsSOURCES AND USES OF CASH Our liquidity for the year ended December 31, 2016 was primarily derived from net cash provided by operatingactivities, cash on hand, issuance of long-term debt and borrowings under our revolving credit facility. We hadapproximately $716 million of cash and cash equivalents on hand at December 31, 2016 to fund our operations and capitalexpenditures, and our borrowing availability under our credit facility was $998 million based on our borrowing basecalculation as of December 31, 2016. Our primary source of operating cash is the collection of accounts receivable. As such, our operating cash flow isimpacted by levels of cash collections and levels of bad debt due to shifts in payer mix and other factors. Net cash provided by operating activities was $558 million in the year ended December 31, 2016 compared to $1.026 billionin the year ended December 31, 2015. Key positive and negative factors contributing to the change between the 2016 and2015 periods include the following: ·Increased income from continuing operations before income taxes of $137 million, excluding investmentearnings (losses), gain (loss) from early extinguishment of debt, interest expense, gains on sales, consolidationand deconsolidation of facilities, litigation and investigation costs, impairment and restructuring charges, andacquisition-related costs, and depreciation and amortization in the year ended December 31, 2016 compared tothe year ended December 31, 2015; ·An increase of $491 million in payments on reserves for restructuring charges, acquisition-related costs, andlitigation costs and settlements; ·Approximately $84 million of additional net cash proceeds in the 2016 period related to supplementalMedicaid programs in California and Texas; ·Higher aggregate annual 401(k) matching contributions and annual incentive compensation payments of$18 million and $9 million, respectively, in the year ended December 31, 2016 compared to the year endedDecember 31, 2015; ·Higher interest payments of $73 million. ·A $15 million decrease in cash used in discontinued operations; and ·The timing of other working capital items. We continue to seek further initiatives to increase the efficiency of our balance sheet by generating incremental cashincluding by means of the sale of underutilized or inefficient assets. Net cash used in investing activities was $430 million for the year ended December 31, 2016 compared to $1.317billion for the year ended December 31, 2015. The primary reason for the decrease was due to acquisitions of businesses andjoint venture interests of only $117 million in the 2016 period primarily related to freestanding outpatient facilitiescompared to $940 million in the 2015 period when we purchased Aspen and formed our USPI, Carondelet Health Network,and Baptist Health System, Inc. joint ventures. In the 2016 period, we generated $573 million of proceeds from the sale of ourGeorgia facilities compared to $549 million of proceeds in the 2015 period from: (i) the sale of SLUH; (ii) the sale of ourhospitals, physician practices and related assets in North Carolina; and (iii) our joint venture with BSW. Capital expenditureswere $875 million and $842 million in the years ended December 31, 2016 and 2015, respectively. Net cash used in financing activities to purchase noncontrolling interests was $186 million and $268 million for theyears ended December 31, 2016 and 2015, respectively. The 2016 amount included $127 million to increase our ownershipinterest in our USPI joint venture from 50.1% to approximately 56.3% under our Put/Call Agreement as89 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsdefined in Note 15 to our Consolidated Financial Statements. The 2015 amount included $254 million to acquire theremaining 49% noncontrolling interest of our Valley Baptist Health System in South Texas. In November 2015, 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 2016. Pursuant to the share repurchaseprogram, we paid approximately $40 million to repurchase a total of 1,242,806 shares during the period from thecommencement of the program through December 31, 2015. There were no purchases under the program during the yearended December 31, 2016. We record our investments that are available-for-sale at fair market value. As shown in Note 18 to the ConsolidatedFinancial 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 negatively affected by the current economic conditions such that they willmaterially 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, “Credit Agreement”), which provides, subject toborrowing availability, for revolving loans in an aggregate principal amount of up to $1 billion, with a $300 millionsubfacility for standby letters of credit. Obligations under the Credit Agreement, which has a scheduled maturity date ofDecember 4, 2020, are guaranteed by substantially all of our domestic wholly owned hospital subsidiaries and are secured bya first priority lien on the accounts receivable owned by us and the subsidiary guarantors. At December 31, 2016, we were incompliance with all covenants and conditions in our Credit Agreement. At December 31, 2016, we had no cash borrowingsoutstanding under the revolving credit facility, and we had approximately $2 million of standby letters of credit outstanding.Based on our eligible receivables, approximately $998 million was available for borrowing under the revolving creditfacility at December 31, 2016. We have a letter of credit facility (as amended, “LC Facility”) that provides for the issuance of standby anddocumentary letters of credit, from time to time, in an aggregate principal amount of up to $180 million (subject to increaseto up to $200 million). Obligations under the LC Facility are guaranteed by and secured by a first priority pledge of thecapital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal rankingbasis with our senior secured first lien notes. On September 15, 2016, we entered into an amendment to our existing letter ofcredit facility agreement in order to, among other things, (i) extend the scheduled maturity date of the LC Facility toMarch 7, 2021, and reduce certain margins and fees payable under the LC Facility. We are in compliance with all covenantsand conditions in our LC Facility. At December 31, 2016, we had approximately $108 million of standby letters of creditoutstanding under the LC Facility. In December 2016, we sold $750 million aggregate amount of 7/2% senior secured notes, which will mature onJanuary 1, 2022. We will pay interest on the 7/2% senior secured second lien notes semi-annually in arrears on January 1 andJuly 1 of each year, commencing on July 1, 2017. The net proceeds of the notes were used, after payment of fees andexpenses, to repay indebtedness outstanding under our senior secured revolving credit facility and for general corporatepurposes. In June 2015, we sold $900 million aggregate principal amount of floating rate senior secured notes, which willmature on June 15, 2020, and assumed $1.9 billion aggregate principal amount of 6/4% senior unsecured notes, which willmature on June 15, 2023, issued by THC Escrow Corporation II. We pay interest on the floating rate senior secured notesquarterly in arrears on March 15, June 15, September 15 and December 15 of each year, which payments commenced onSeptember 15, 2015. The 6/4% senior unsecured notes accrue interest at a rate per annum, reset quarterly, equal to LIBORplus 3/2%. We pay interest on the 6/4% senior unsecured notes semi-annually in arrears on June 15 and December 15 ofeach year, which payments commenced on December 15, 2015. The proceeds from the sale of these notes were used to repayborrowings outstanding under a $400 million secured term loan facility and our Credit Agreement, as well as to refinance thedebt of USPI and to pay the cash consideration in respect of our USPI joint venture and Aspen acquisition. In September 2014, we sold $500 million aggregate principal amount of 5/2% senior unsecured notes, which willmature on March 1, 2019. We pay interest on the notes semi-annually in arrears on March 1 and September 1 of each year,which payments commenced on March 1, 2015. The proceeds from the sale of the notes were used for general90 1133131Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentscorporate purposes, including the repayment of indebtedness and drawings under our Credit Agreement, related transactionfees and expenses, and acquisitions. In June and March 2014, we sold $500 million and $600 million aggregate principal amount, respectively, of5% senior unsecured notes, which will mature on March 1, 2019. We pay interest on the notes semi-annually in arrears onMarch 1 and September 1 of each year, which payments commenced on September 1, 2014. The net proceeds from the sale ofthe notes in June 2014 were used to redeem our 9/4% senior unsecured notes due 2015 in July 2014. The net proceeds fromthe sale of the notes in March 2014 were used for general corporate purposes, including the repayment of borrowings underour Credit Agreement. For additional information regarding our long-term debt and capital lease obligations, see Note 6 to theaccompanying Consolidated Financial Statements. LIQUIDITY From time to time, we expect to engage in additional capital markets, bank credit and other financing activitiesdepending on our needs and financing alternatives available at that time. We believe our existing debt agreements providesignificant flexibility for future secured or unsecured borrowings. Our cash on hand fluctuates day-to-day throughout the year based on the timing and levels of routine cash receiptsand disbursements, including our book overdrafts, and required cash disbursements, such as interest and income taxpayments. These fluctuations result in material intra-quarter net operating and investing uses of cash that has caused, and willcontinue to cause, us to use our Credit Agreement as a source of liquidity. We believe that existing cash and cash equivalentson hand, availability under our Credit Agreement, anticipated future cash provided by operating activities, and ourinvestments in marketable securities of our captive insurance companies classified as noncurrent investments on our balancesheet should be adequate to meet our current cash needs. These sources of liquidity, in combination with any potential futuredebt incurrence, should also be adequate to finance planned capital expenditures, payments on the current portion of ourlong-term debt, payments to joint venture partners, including those related to put and call arrangements, and other presentlyknown operating needs. Long-term liquidity for debt service and other purposes will be dependent on the amount of cash provided byoperating activities and, subject to favorable market and other conditions, the successful completion of future borrowingsand potential refinancing. However, our cash requirements could be materially affected by the use of cash in acquisitions ofbusinesses, repurchases of securities, the exercise of put rights or other exit options by our joint venture partners, andcontractual commitments to fund capital expenditures in, or intercompany borrowings to, businesses we own. In addition,liquidity could be adversely affected by a deterioration in our results of operations, including our ability to generate cashfrom operations, as well as by the various risks and uncertainties discussed in this and other sections of this report, includingany costs associated with legal proceedings and government investigations described in Note 14 to our ConsolidatedFinancial Statements. We do not rely on commercial paper or other short-term financing arrangements nor do we enter into repurchaseagreements or other short-term financing arrangements not otherwise reported in our period-end balance sheets. In addition,we do not have significant exposure to floating interest rates given that substantially all of our current long-termindebtedness has fixed rates of interest. We continue to aggressively identify and implement further actions to control costs and enhance our operatingperformance, including cash flow. Among the areas being addressed are capital allocation priorities, volume growth,including the acquisition of outpatient businesses, physician recruitment and alignment strategies, expansion of our Coniferservices businesses, managed care payer contracting, procurement efficiencies, cost standardization, bad debt expensereduction initiatives, non-core hospitals and portfolio optimization, and certain hospital and overhead costs not related topatient care. Although these initiatives may result in improved performance, our performance may remain somewhat belowour hospital management company peers because of geographic and other differences in hospital portfolios. 91 1Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOFF-BALANCE SHEET ARRANGEMENTS Our consolidated operating results for the years ended December 31, 2016, 2015 and 2014 include $2 million, $94million and $49 million, respectively, of net operating revenues and ($7) million, $15 million and ($1) million, respectively,of operating income (loss) generated from hospitals operated by us under operating lease arrangements (one hospital in theyear ended December 31, 2016, which was sold effective March 31, 2016 and two hospitals in the years ended December 31,2015 and 2014). In accordance with GAAP, the applicable buildings and the future lease obligations under thesearrangements are not recorded on our consolidated balance sheet. We have no other off-balance sheet arrangements that may have a current or future material effect on our financialcondition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, except for $128million of standby letters of credit outstanding and guarantees at December 31, 2016.RECENTLY ISSUED ACCOUNTING STANDARDS See Note 21 to our Consolidated Financial Statements included in this report for a discussion of recently issuedaccounting standards. CRITICAL ACCOUNTING ESTIMATES In preparing our Consolidated Financial Statements in conformity with GAAP, we must use estimates andassumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. Weregularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experienceand on assumptions that we believe to be reasonable, given the particular circumstances in which we operate. Actual resultsmay 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 more difficult for management to determine, and (3) may produce materially different outcomesunder 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; ·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 areperformed. Net operating revenues before provision for doubtful accounts primarily consist of net patient service revenuesthat are recorded based on established billing rates (i.e., gross charges), less estimated discounts for contractual and otherallowances, principally for patients covered by Medicare, Medicaid, and managed care and other health plans, as well ascertain uninsured patients under the Compact. Revenues under the traditional fee-for-service Medicare and Medicaid programs are based primarily on prospectivepayment systems. Retrospectively determined cost-based revenues under these programs, which were more92 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsprevalent in earlier periods, and certain other payments, such as DSH, DGME, IME and bad debt expense, which are based onour hospitals’ cost reports, are estimated using historical trends and current factors. Cost report settlements under theseprograms are subject to audit by Medicare and Medicaid auditors and administrative and judicial review, and it can takeseveral 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 could change by material amounts. We have a system and estimation process for recording Medicare net patient revenue and estimated cost reportsettlements. This results in us recording accruals to reflect the expected final settlements on our cost reports. For filed costreports, we record the accrual based on those cost reports and subsequent activity, and record a valuation allowance againstthose cost reports based on historical settlement trends. The accrual for periods for which a cost report is yet to be filed isrecorded 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 costreport reporting period. After the cost report is filed, the accrual and corresponding valuation allowance may need to beadjusted. Revenues under managed care plans are based primarily on payment terms involving predetermined rates perdiagnosis, per-diem rates, discounted fee-for-service rates and other similar contractual arrangements. These revenues are alsosubject to review and possible audit by the payers, which can take several years before they are completely resolved. Thepayers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on apatient-by-patient basis in the ordinary course of business by the payers following their review and adjudication of eachparticular bill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data onan individual patient basis. At the end of each month, on an individual hospital basis, we estimate our expectedreimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likelyfor there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed careplans. Based on reserves as of December 31, 2016, a 3% increase or decrease in the estimated contractual allowance wouldimpact the estimated reserves by approximately $15 million. Some of the factors that can contribute to changes in thecontractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs whenthreshold levels are triggered; (2) changes in reimbursement levels when stop-loss or outlier limits are reached; (3) changes inthe 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 afterprimary insurance payments; and (6) reclassification of patients among insurance plans with different coverage levels.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 tothe estimated reimbursement for every patient bill, we believe our estimation and review process enables us to identifyinstances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments toestimates of patient bills that were material to our revenues. In addition, on a corporate-wide basis, we do not record anygeneral provision for adjustments to estimated contractual allowances for managed care plans. Revenues related to self-pay patients may qualify for a discount under the Compact, whereby the gross chargesbased on established billing rates would 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 ofamounts earned under all the above arrangements. We know of no material claims, disputes or unsettled matters with anypayers that would affect our revenues for which we have not adequately provided for in our Consolidated FinancialStatements. Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co-pays anddeductibles due from patients with insurance, at the time of service while complying with all federal and state statutes andregulations, including, but not limited to, the Emergency Medical Treatment 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 withoutdelaying to obtain insurance information. In non-emergency circumstances or for elective procedures and services, it is ourpolicy to verify insurance prior to a patient being treated; however, there are various exceptions that can occur. Suchexceptions can include, for example, instances where (1) we are unable to obtain verification because93 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsthe patient’s insurance company was unable to be reached or contacted, (2) a determination is made that a patient may beeligible for benefits under various government programs, such as Medicaid or Victims of Crime, and it takes several days orweeks before qualification for such benefits is confirmed or denied, and (3) under physician orders we provide services topatients that require immediate treatment. We provide for an allowance against accounts receivable that could become uncollectible by establishing anallowance to reduce the carrying value of such receivables to their estimated net realizable value. Generally, we estimate thisallowance based on the aging of our accounts receivable by hospital, our historical collection experience by hospital and foreach type of payer over a look-back period, and other relevant factors. Based on our accounts receivable from self-paypatients and co-pays and deductibles owed to us by patients with insurance at December 31, 2016, a 10% decrease orincrease in our self-pay collection rate, or approximately 3%, which we believe could be a reasonable likely change, wouldresult in an unfavorable or favorable adjustment to provision for doubtful accounts of approximately $9 million. There arevarious factors that can impact collection trends, such as changes in the economy, which in turn have an impact onunemployment 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 practicesrelated to collection efforts. These factors continuously change and can have an impact on collection trends and ourestimation 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 from patients with insurance, to their estimated net realizable value at the time of billing.Generally, uncollected balances are assigned to Conifer between 90 to 180 days, once patient responsibility has beenidentified. When accounts are assigned to Conifer by the hospital, the accounts are completely written off the hospital’sbooks through the provision for doubtful accounts, and an estimated future recovery amount is calculated and recorded as areceivable on the hospital’s books at the same time. The estimated future recovery amount is adjusted based on the aging ofthe accounts and changes to actual recovery rates. The estimated future recovery amount for self-pay accounts is writtendown whereby it is fully reserved if the amount is not paid within two years after the account is assigned to Conifer. At thepresent time, our more recent acquisitions have not yet been fully integrated into our Conifer collections processes. Managed care accounts are collected through the regional business offices of Conifer, whereby the account balancesremain in the related hospital’s patient accounting system and on the hospital’s books, and are adjusted based on an analysisof the net realizable value as they age. Generally, managed care accounts collected by Conifer are gradually written downwhereby they are fully reserved if the accounts are not paid within two years. Changes in the collectability of aged managed care accounts receivable are ongoing and impact our provision fordoubtful accounts. We continue to experience payment pressure from managed care companies concerning amounts of pastbillings. We aggressively pursue collection of these accounts receivable using all means at our disposal, includingarbitration and litigation, but we may not be successful. ACCRUALS FOR GENERAL AND PROFESSIONAL LIABILITY RISKS We accrue for estimated professional and general liability claims, to the extent not covered by insurance, when theyare probable and can be reasonably estimated. We maintain reserves, which are based on modeled estimates for the portion ofour professional liability risks, including incurred but not reported claims, to the extent we do not have insurance coverage.Our liability consists of estimates established based upon discounted calculations using several factors, including thenumber of expected claims, estimates of losses for these claims based on recent and historical settlement amounts, estimatesof incurred but not reported claims based on historical experience, the timing of historical payments, and risk free discountrates used to determine the present value of projected payments. We consider the number of expected claims, average cost perclaim and discount rate to be the most significant assumptions in estimating accruals for general and professional liabilities.Our liabilities are adjusted for new claims information in the period such information becomes known. Malpractice expenseis recorded within other operating expenses in the accompanying Consolidated Statements of Operations. Our estimated reserves for professional and general liability claims will change significantly if future trends differfrom projected trends. We believe it is reasonably likely for there to be a 500 basis point increase or decrease in our 94 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsfrequency or severity trend. Based on our reserves and other information at December 31, 2016, a 500 basis point increase inour frequency trend would increase the estimated reserves by $71 million, and a 500 decrease in our frequency trend woulddecrease the estimated reserves by $53 million. A 500 basis point increase in our severity trend would increase the estimatedreserves by $93 million, and a 500 basis point decrease in our severity trend would decrease the estimated reserves by $77million. Because our estimated reserves for future claim payments are discounted to present value, a change in our discountrate assumption could also have a significant impact on our estimated reserves. Our discount rate was 2.25%, 2.09% and1.97% at December 31, 2016, 2015 and 2014, respectively. A 100 basis point increase or decrease in the discount rate wouldchange the estimated reserves by $22 million. In addition, because of the complexity of the claims, the extended period oftime to settle the claims and the wide range of potential outcomes, our ultimate liability for professional and general liabilityclaims could change materially from our current estimates. The table below shows the case reserves and incurred but not reported and loss development reserves as ofDecember 31, 2016, 2015 and 2014: December 31, 2016 2015 2014 Case reserves $189 $219 $253 Incurred but not reported and loss development reserves 675 584 472 Total undiscounted reserves $864 $803 $725 Several actuarial methods, including the incurred, paid loss development and Bornhuetter-Ferguson methods, areapplied to our historical loss data to produce estimates of ultimate expected losses and the resulting incurred but not reportedand loss development reserves. These methods use our specific historical claims data related to paid losses and lossadjustment expenses, historical and current case reserves, reported and closed claim counts, and a variety of hospital censusinformation. These analyses are considered in our determination of our estimate of the professional liability claims, includingthe incurred but not reported and loss development reserve estimates. The determination of our estimates involves subjectivejudgment and could result in material changes to our estimates in future periods if our actual experience is materiallydifferent than our assumptions. Malpractice claims generally take four to five years to settle from the time of the initial reporting of the occurrenceto the settlement payment. Accordingly, the percentage of undiscounted reserves at both December 31, 2016 and 2015representing unsettled claims is approximately 98%.The following table, which includes both our continuing and discontinued operations, presents the amount of ouraccruals for professional and general liability claims and the corresponding activity therein: Years Ended December 31, 2016 2015 2014 Accrual for professional and general liability claims, beginning of the year $755 $681 $711 Assumed from acquisition — 29 — Expense (income) related to: Current year 228 151 144 Prior years 43 95 57 Expense (income) from discounting (4) (3) 7 Total incurred loss and loss expense 267 243 208 Paid claims and expenses related to: Current year — (3) (3) Prior years (228) (195) (235) Total paid claims and expenses (228) (198) (238) Accrual for professional and general liability claims, end of year $794 $755 $681 (1)Total malpractice expense for continuing operations, including premiums for insured coverage, was $281 million, $283 million and$232 million in the years ended December 31, 2016, 2015 and 2014, respectively.95 (1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsACCRUALS FOR DEFINED BENEFIT PLANS Our defined benefit plan obligations and related costs are calculated using actuarial concepts. The discount rate is acritical assumption in determining the elements of expense and liability measurement. We evaluate this critical assumptionannually. Other assumptions include employee demographic factors such as retirement patterns, mortality, turnover and rateof compensation increase. During the years ended December 31, 2016 and 2015, the Society of Actuaries issued newmortality improvement scales (MP-2016 and MP‑2015, respectively), which we incorporated into the estimates of ourdefined benefit plan obligations at December 31, 2016 and 2015. The discount rate enables us to state expected future cash payments for benefits as a present value on themeasurement date. The guideline for setting these rates is a high-quality long-term corporate bond rate. A lower discount rateincreases the present value of benefit obligations and impacts pension expense. Our discount rates for 2016 ranged from4.25% to 4.42% and our discount rate for 2015 ranged from 4.67% to 4.75%. The assumed discount rate for pension plansreflects the market rates for high-quality corporate bonds currently available. A 100 basis point decrease in the assumeddiscount rate would increase total net periodic pension expense for 2017 by approximately $3 million and would increasethe projected benefit obligation at December 31, 2016 by approximately $187 million. A 100 basis point increase in theassumed discount rate would decrease net periodic pension expense for 2017 by approximately $3 million and decrease theprojected benefit obligation at December 31, 2016 by approximately $154 million. IMPAIRMENT OF LONG-LIVED ASSETS We evaluate our long-lived assets for possible impairment annually or whenever events or changes in circumstancesindicate that the carrying amount of the asset, or related group of assets, may not be recoverable from estimated futureundiscounted cash flows. If the estimated future undiscounted cash flows are less than the carrying value of the assets, wecalculate the amount of an impairment charge if the carrying value of the long-lived assets exceeds the fair value of theassets. The fair value of the assets is estimated based on appraisals, established market values of comparable assets or internalestimates of future net cash flows expected to result from the use and ultimate disposition of the asset. The estimates of thesefuture cash flows are based on assumptions and projections we believe to be reasonable and supportable. They require oursubjective judgments and take into account assumptions about revenue and expense growth rates. These assumptions mayvary by type of facility and presume stable, improving or, in some cases, declining results at our hospitals, depending ontheir 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. Insuch circumstances, our estimates of fair value are based on appraisals, established market prices for comparable assets orinternal estimates of future net cash flows. Fair value estimates can change by material amounts in subsequent periods. Many factors and assumptions canimpact the estimates, including the following risks: ·future financial results of our hospitals, which can be impacted by volumes of insured patients and declines incommercial managed care patients, terms of managed care payer arrangements, our ability to collect accountsdue from uninsured and managed care payers, loss of volumes as a result of competition, and our ability tomanage costs such as labor costs, which can be adversely impacted by union activity and the shortage ofexperienced nurses; ·changes in payments from governmental healthcare programs and in government regulations such as reductionsto Medicare and Medicaid payment rates resulting from government legislation or rule-making or frombudgetary 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. 96 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDuring the year ended December 31, 2016, we recorded $87 million of impairment charges. This amount includedcharges of approximately $54 million for the write-down of buildings, equipment and other long-lived assets, primarilycapitalized software cost classified as other intangible assets, to their estimated fair values at four of our hospitals. Materialadverse trends in our most recent estimates of future undiscounted cash flows of the hospitals indicated the carrying value ofthe hospitals’ long-lived assets was not recoverable from the estimated future cash flows. We believe the most significantfactors contributing to the adverse financial trends include reductions in volumes of insured patients, shifts in payer mix fromcommercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and highlevels of uninsured patients. As a result, we updated the estimate of the fair value of the hospitals’ long-lived assets andcompared the fair value estimate to the carrying value of the hospitals’ long-lived assets. Because the fair value estimateswere lower than the carrying value of the long-lived assets, an impairment charge was recorded for the difference in theamounts. Unless the anticipated future financial trends of these hospitals improve to the extent that the estimated futureundiscounted cash flows exceed the carrying value of the long-lived assets, these hospitals are at risk of future impairments,particularly if we spend significant amounts of capital at the hospitals without generating a corresponding increase in thehospitals’ fair value or if the fair value of the hospitals’ real estate or equipment declines. The aggregate carrying value ofassets held and used of the hospitals for which impairment charges were recorded was $163 million as of December 31, 2016after recording the impairment charges. We also recorded $19 million of impairment charges related to investments and$14 million related to other intangible assets, primarily contract related intangibles and capitalized software costs notassociated with the hospitals described above. Of the total impairment charges recognized for the year ended December 31,2016, $76 million related to our Hospital Operations and other segment, $8 million related to our Ambulatory Care segment,and $3 million related to our Conifer segment. We also had three hospitals whose estimated future undiscounted cash flowsdid not exceed the carrying value of long-lived assets. However, in each case, the fair value of those assets, based onindependent appraisals, established market values of comparable assets or internal estimates exceeded the carrying value, sono impairment was recorded. Future adverse trends that result in necessary changes in the assumptions underlying theseestimates 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 lessthan the carrying value of the assets, impairment charges would occur and could be material. During the year ended December 31, 2015, we recorded $168 million of impairment charges. We recorded animpairment charge of approximately $147 million to write-down assets held for sale to their estimated fair value, lessestimated costs to sell, as a result of entering into a definitive agreement for the sale of SLUH during the three months endedJune 30, 2015, as further described in Note 4. We also recorded impairment charges of approximately $19 million for thewrite-down of buildings, equipment and other long-lived assets, primarily capitalized software cost classified as otherintangible assets, to their estimated fair values at two of our hospitals. The aggregate carrying value of assets held and used ofthe hospitals for which impairment charges were recorded was $45 million as of December 31, 2015 after recording theimpairment charge. We also recorded $2 million related to investments. We also had four hospitals whose estimated futureundiscounted cash flows did not exceed the carrying value of long-lived assets. However, in each case, the fair value of thoseassets, based on independent appraisals, established market values of comparable assets or internal estimates exceeded thecarrying value, so no impairment was recorded. Future adverse trends that result in necessary changes in the assumptionsunderlying these estimates of future undiscounted cash flows could result in the hospitals’ estimated cash flows being lessthan the carrying value of the assets, which would require a fair value assessment of the long-lived assets and, if the fair valueamount is less than the carrying value of the assets, 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 otherintangible assets acquired in purchase business combinations and determined to have indefinite useful lives are notamortized, but instead are subject to impairment tests performed at least annually. For goodwill, we perform the test at thereporting 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 abusiness that is to be sold or otherwise disposed of exceeds its fair value, then we reduce the carrying value, including anyallocated 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,97 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsdeclining results at our hospitals, depending on their circumstances. If the presumed level of performance does not occur asexpected, impairment may result. As of December 31, 2016, our continuing operations consisted of three reportable segments, Hospital Operationsand other, Ambulatory Care and Conifer. Within our Hospital Operations and other segment, our regions and markets arereporting units used to perform our goodwill impairment analysis and are one level below our reportable business segmentlevel. Our Hospital Operations and other segment was structured as follows at December 31, 2016: ·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 andPennsylvania; ·Our Southern region included all of our hospitals and other operations in Alabama, Missouri, South Carolinaand Tennessee; ·Our Texas region included all of our hospitals and other operations in New Mexico and Texas; ·Our Western region included all of our hospitals and other operations in Arizona and California; and ·Our Detroit market included all of our hospitals and other operations in the Detroit, Michigan area. These regions and markets are reporting units used to perform our goodwill impairment analysis and are one level below ourhospital operations reportable business segment level. We also perform a goodwill impairment analysis for our Conifer andAmbulatory Care reporting units. The allocated goodwill balance related to our Hospital Operations and other segment totals approximately$3.373 billion, of which the Texas Region has the largest balance at $1.894 billion. In our latest impairment analysis as ofDecember 31, 2016, the estimated fair value of the Texas Region exceeded the carrying value of long-lived assets, includinggoodwill, by approximately 11%. The allocated goodwill balance related to our Ambulatory Care segment, consisting generally of assets acquired in2015 and 2016, totals approximately $3.447 billion. For the Ambulatory Care segment, we performed a qualitative analysisunder the Financial Accounting Standards Board’s Accounting Standards Update 2011-08, “Intangibles—Goodwill andOther (Topic 350): Testing Goodwill for Impairment,” and concluded that it was more likely than not that the fair value ofthe reporting unit exceeded its carrying value. Factors considered in the analysis included the length of time since theacquisition date fair value analyses were performed, recent and estimated future operating trends. The allocated goodwill balance related to our Conifer segment totals approximately $605 million. In our latestimpairment analysis as of December 31, 2016, the estimated fair value of the Conifer segment exceeded the carrying value oflong-lived assets, including goodwill, by approximately 135%. ACCOUNTING FOR INCOME TAXES We account for income taxes using the asset and liability method. This approach requires the recognition of deferredtax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts andthe tax bases of assets and liabilities. Income tax receivables and liabilities and deferred tax assets and liabilities arerecognized based on the amounts that more likely than not will be sustained upon ultimate settlement with taxingauthorities. 98 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDeveloping our provision for income taxes and analysis of uncertain tax positions requires significant judgment andknowledge of federal and state income tax laws, regulations and strategies, including the determination of deferred tax assetsand liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. We assess the realization of our deferred tax assets to determine whether an income tax valuation allowance isrequired. Based on all available evidence, both positive and negative, and the weight of that evidence to the extent suchevidence can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred taxassets 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 taxbenefits; and ·The carryforward period associated with the deferred tax assets and liabilities. During the year ended December 31, 2015, we increased the valuation allowance by $9 million, $5 million due tothe acquisition of USPI and $4 million due to changes in expected realizability of deferred tax assets, primarily related tounutilized state net operating loss carryforwards. During the year ended December 31, 2016, we decreased the valuationallowance by $24 million primarily due to the expiration or worthlessness of unutilized state net operating loss carryovers.The remaining balance in the valuation allowance as of December 31, 2016 is $72 million. We consider many factors when evaluating our uncertain tax positions, and such judgments are subject to periodicreview. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the followingconditions is satisfied: (1) the more likely than not recognition threshold is satisfied; (2) the position is ultimately settledthrough negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge theposition has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the morelikely than not recognition threshold is no longer satisfied. While we believe we have adequately provided for our income tax receivables or liabilities and our deferred taxassets or liabilities, adverse determinations by taxing authorities or changes in tax laws and regulations could have a materialadverse effect on our consolidated financial position, results of operations or cash flows. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The table below presents information about certain of our market-sensitive financial instruments atDecember 31, 2016. The fair values were determined based on quoted market prices for the same or similar instruments. Theaverage effective interest rates presented are based on the rate in effect at the reporting date. The effects of unamortizedpremiums and discounts are excluded from the table. Maturity Date, Years Ending December 31, 2017 2018 2019 2020 2021 Thereafter Total Fair Value (Dollars in Millions) Fixed rate long-term debt $191 $1,157 $1,694 $3,421 $1,958 $6,169 $14,590 $13,653 Average effective interestrates 6.2% 6.5% 5.5% 6.7% 4.7% 8.0% 6.8% Variable rate long-term debt $ — $ — $ — $900 $ — $ — $900 $896 Average effective interestrates —% —% —% 4.5% —% —% 4.5% 99 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsAt December 31, 2016, the potential reduction of annual pre-tax earnings due to a one percentage point (100 basispoint) increase in variable interest rates on long-term debt would be approximately $9 million. At December 31, 2016, we had long-term, market-sensitive investments held by our captive insurance subsidiaries.Our market risk associated with our investments in debt securities classified as non-current assets is substantially mitigatedby the long-term nature and type of the investments in the portfolio. We have no affiliation with partnerships, trusts or other entities (sometimes referred to as “special-purpose” or“variable-interest” entities) whose purpose is to facilitate off-balance sheet financial transactions or similar arrangements byus. As a result, we have no exposure to the financing, liquidity, market or credit risks associated with such entities. We do not hold or issue derivative instruments for trading purposes and are not a party to any instruments withleverage or prepayment features.100 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING To Our Shareholders: Management is responsible for establishing and maintaining adequate internal control over financial reporting, assuch term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Management assessed theeffectiveness of Tenet’s internal control over financial reporting as of December 31, 2016. This assessment was performedunder the supervision of and with the participation of management, including the chief executive officer and chief financialofficer. In making this assessment, management used criteria based on the framework in Internal Control — IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based onthe assessment using the COSO framework, management concluded that Tenet’s internal control over financial reporting waseffective as of December 31, 2016. Tenet’s internal control over financial reporting as of December 31, 2016 has been audited by Deloitte & ToucheLLP, an independent registered public accounting firm, as stated in their report, which is included herein. Deloitte & ToucheLLP has also audited Tenet’s Consolidated Financial Statements as of and for the year ended December 31, 2016, and thatfirm’s audit report on such Consolidated Financial Statements is also included herein. Internal control over financial reporting cannot provide absolute assurance of achieving financial reportingobjectives because of its inherent limitations. Internal control over financial reporting is a process that involves humandiligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internalcontrol over financial reporting also can be circumvented by collusion or improper management override. Because of suchlimitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal controlover financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore,it is possible to design into the process safeguards to reduce, though not eliminate, this risk. /s/ TREVOR FETTER /s/ DANIEL J. CANCELMI Trevor Fetter Daniel J. CancelmiChief Executive Officer and Chairmanof the Board of Directors Chief Financial OfficerFebruary 27, 2017 February 27, 2017 101 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsREPORT 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, 2016, based on criteria established in Internal Control—Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management isresponsible 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 overFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financialreporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’sprincipal executive and principal financial officers, or persons performing similar functions, and effected by thecompany’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recordedas necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,and that receipts and expenditures of the company are being made only in accordance with authorizations of managementand directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financialstatements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion orimproper management override of controls, material misstatements due to error or fraud may not be prevented or detectedon a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting tofuture periods are subject to the risk that the controls may become inadequate because of changes in conditions, or thatthe 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 ofDecember 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates), the consolidated financial statements and financial statement schedule as of and for the year ended December 31,2016, of the Company and our report dated February 27, 2017, expressed an unqualified opinion on those consolidatedfinancial statements and financial statement schedule. /s/ DELOITTE & TOUCHE LLPDallas, TexasFebruary 27, 2017 102 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsREPORT 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, 2016 and 2015, and the related consolidated statements of operations, comprehensiveincome (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2016. Ouraudits also included the consolidated financial statement schedule listed in the Index at Item 15. These consolidatedfinancial statements and financial statement schedule are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on the consolidated financial statements and financial statement schedule based onour audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financialposition of the Company at December 31, 2016 and 2015, and the results of its operations and its cash flows for each ofthe three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted inthe United States of America. Also, in our opinion, such consolidated financial statement schedule, when considered inrelation 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 (UnitedStates), the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria establishedin Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the TreadwayCommission and our report dated February 27, 2017, expressed an unqualified opinion on the Company’s internal controlover financial reporting. /s/ DELOITTE & TOUCHE LLPDallas, TexasFebruary 27, 2017103 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsCONSOLIDATED BALANCE SHEETSDollars in Millions December 31, December 31, 2016 2015ASSETS Current assets: Cash and cash equivalents $716 $356Accounts receivable, less allowance for doubtful accounts ($1,031 atDecember 31, 2016 and $887 at December 31, 2015) 2,897 2,704Inventories of supplies, at cost 326 309Income tax receivable 4 7Assets held for sale 29 550Other current assets 1,285 1,245Total current assets 5,257 5,171Investments and other assets 1,250 1,175Deferred income taxes 871 776Property and equipment, at cost, less accumulated depreciation and amortization($4,974 at December 31, 2016 and $4,323 at December 31, 2015) 8,053 7,915Goodwill 7,425 6,970Other intangible assets, at cost, less accumulated amortization ($772at December 31, 2016 and $659 at December 31, 2015) 1,845 1,675Total assets $24,701 $23,682 LIABILITIES AND EQUITY Current liabilities: Current portion of long-term debt $191 $127Accounts payable 1,329 1,380Accrued compensation and benefits 872 880Professional and general liability reserves 181 177Accrued interest payable 210 205Liabilities held for sale 9 101Accrued legal settlement costs 8 294Other current liabilities 1,234 1,144Total current liabilities 4,034 4,308Long-term debt, net of current portion 15,064 14,383Professional and general liability reserves 613 578Defined benefit plan obligations 626 595Deferred income taxes 279 37Other long-term liabilities 610 557Total liabilities 21,226 20,458Commitments and contingencies Redeemable noncontrolling interests in equity of consolidated subsidiaries 2,393 2,266Equity: Shareholders’ equity: Common stock, $0.05 par value; authorized 262,500,000 shares; 148,106,249shares issued at December 31, 2016 and 146,920,454 shares issued atDecember 31, 2015 7 7Additional paid-in capital 4,827 4,815Accumulated other comprehensive loss (258) (164)Accumulated deficit (1,742) (1,550)Common stock in treasury, at cost, 48,420,650 shares at December 31, 2016 and48,425,298 shares at December 31, 2015 (2,417) (2,417)Total shareholders’ equity 417 691Noncontrolling interests 665 267Total equity 1,082 958Total liabilities and equity $24,701 $23,682 See accompanying Notes to Consolidated Financial Statements. 104 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsCONSOLIDATED STATEMENTS OF OPERATIONSDollars in Millions, Except Per-Share Amounts Years Ended December 31, 2016 2015 2014Net operating revenues: Net operating revenues before provision for doubtful accounts $21,070 $20,111 $17,908Less: Provision for doubtful accounts 1,449 1,477 1,305Net operating revenues 19,621 18,634 16,603Equity in earnings of unconsolidated affiliates 131 99 12Operating expenses: Salaries, wages and benefits 9,356 9,011 8,023Supplies 3,124 2,963 2,630Other operating expenses, net 4,891 4,555 4,114Electronic health record incentives (32) (72) (104)Depreciation and amortization 850 797 849Impairment and restructuring charges, and acquisition-related costs 202 318 153Litigation and investigation costs 293 291 25Gains on sales, consolidation and deconsolidation of facilities (151) (186) —Operating income 1,219 1,056 925Interest expense (979) (912) (754)Loss from early extinguishment of debt — (1) (24)Investment earnings 8 1 —Net income from continuing operations, before income taxes 248 144 147Income tax expense (67) (68) (49)Net income from continuing operations, before discontinued operations 181 76 98Discontinued operations: Net loss from operations (6) (5) (17)Litigation and investigation (costs) benefit — 8 (18)Income tax benefit (expense) 1 (1) 13Net income (loss) from discontinued operations (5) 2 (22)Net income 176 78 76Less: Net income attributable to noncontrolling interests 368 218 64Net income available (loss attributable) to Tenet Healthcare Corporationcommon shareholders $(192) $(140) $12Amounts available (attributable) to Tenet Healthcare Corporation commonshareholders Net income (loss) from continuing operations, net of tax $(187) $(142) $34Net income (loss) from discontinued operations, net of tax (5) 2 (22)Net income (loss) attributable to Tenet Healthcare Corporation commonshareholders $(192) $(140) $12Earnings (loss) per share available (attributable) to Tenet Healthcare Corporationcommon shareholders: Basic Continuing operations $(1.88) $(1.43) $0.35Discontinued operations (0.05) 0.02 (0.23) $(1.93) $(1.41) $0.12Diluted Continuing operations $(1.88) $(1.43) $0.34Discontinued operations (0.05) 0.02 (0.22) $(1.93) $(1.41) $0.12Weighted average shares and dilutive securities outstanding (in thousands): Basic 99,321 99,167 97,801Diluted 99,321 99,167 100,287See accompanying Notes to Consolidated Financial Statements. 105 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsCONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)Dollars in Millions Years Ended December 31, 2016 2015 2014 Net income $176 $78 $76 Other comprehensive income (loss): Adjustments for defined benefit plans (73) 3 (258) Amortization of net actuarial loss included in net periodic benefit costs 12 12 4 Unrealized gains (losses) on securities held as available-for-sale 2 (2) 3 Foreign currency translation adjustments (53) 5 — Other comprehensive income (loss) before income taxes (112) 18 (251) Income tax benefit (expense) related to items of othercomprehensive income (loss) 18 — 93 Total other comprehensive income (loss), net of tax (94) 18 (158) Comprehensive net income (loss) 82 96 (82) Less: Comprehensive income attributable to noncontrolling interests 368 218 64 Comprehensive loss attributable to Tenet Healthcare Corporationcommon shareholders $(286) $(122) $(146) See accompanying Notes to Consolidated Financial Statements. 106 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYDollars in Millions,Share Amounts in Thousands Tenet Healthcare Corporation Shareholders’ Equity Accumulated Common Stock Additional Other Shares Issued Par Paid-in Comprehensive Accumulated Treasury Noncontrolling Outstanding Amount Capital Loss Deficit Stock Interests Total EquityBalance at December 31, 2013 96,860 $7 $4,572 $(24) $(1,422) $(2,378) $123 $878Net income — — — — 12 — 31 43Distributions paid tononcontrolling interests — — — — — — (37) (37)Contributions fromnoncontrolling interests — — — — — — 7 7Other comprehensive income — — — (158) — — — (158)Purchases (sales) of businessesand noncontrolling interests — — (22) — — — 10 (12)Stock-based compensationexpense and issuance ofcommon stock 1,522 — 64 — — — — 64Balances at December 31, 2014 98,382 $7 $4,614 $(182) $(1,410) $(2,378) $134 $785Net income (loss) — — — — (140) — 52 (88)Distributions paid tononcontrolling interests — — — — — — (50) (50)Contributions fromnoncontrolling interests — — — — — — 3 3Other comprehensive income — — — 18 — — — 18Purchases (sales) of businessesand noncontrolling interests — — 124 — — — 128 252Repurchases of common stock (1,243) — — — — (40) — (40)Stock-based compensationexpense and issuance ofcommon stock 1,356 — 77 — — 1 — 78Balances at December 31, 2015 98,495 $7 $4,815 $(164) $(1,550) $(2,417) $267 $958Net income (loss) — — — — (192) — 138 (54)Distributions paid tononcontrolling interests — — — — — — (111) (111)Other comprehensive loss — — — (94) — — — (94)Purchases (sales) of businessesand noncontrolling interests — — (40) — — — 146 106Purchase accountingadjustments — — — — — — 225 225Stock-based compensationexpense, tax benefit andissuance of common stock 1,191 — 52 — — — — 52Balances at December 31, 2016 99,686 $7 $4,827 $(258) $(1,742) $(2,417) $665 $1,082 See accompanying Notes to Consolidated Financial Statements. 107 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsCONSOLIDATED STATEMENTS OF CASH FLOWSDollars in Millions Years Ended December 31, 2016 2015 2014 Net income $176 $78 $76 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 850 797 849 Provision for doubtful accounts 1,449 1,477 1,305 Deferred income tax expense 41 42 30 Stock-based compensation expense 68 69 51 Impairment and restructuring charges, and acquisition-related costs 202 318 153 Litigation and investigation costs 293 291 25 Loss from early extinguishment of debt — 1 24 Gains on sales, consolidation and deconsolidation of facilities (151) (186) — Equity in earnings of unconsolidated affiliates, net of distributions received (13) (99) (10) Amortization of debt discount and debt issuance costs 41 41 28 Pre-tax (income) loss from discontinued operations 6 (3) 35 Other items, net (1) 59 (30) Changes in cash from operating assets and liabilities: Accounts receivable (1,604) (1,632) (1,896) Inventories and other current assets (83) (130) (314) Income taxes (8) 18 3 Accounts payable, accrued expenses and other current liabilities (51) 68 505 Other long-term liabilities 40 38 44 Payments for restructuring charges, acquisition-related costs, andlitigation costs and settlements (691) (200) (168) Net cash used in operating activities from discontinued operations, excluding incometaxes (6) (21) (23) Net cash provided by operating activities 558 1,026 687 Cash flows from investing activities: Purchases of property and equipment — continuing operations (875) (842) (933) Purchases of businesses or joint venture interests, net of cash acquired (117) (940) (428) Proceeds from sales of facilities and other assets 573 549 6 Proceeds from sales of marketable securities, long-term investments and other assets 62 60 52 Purchases of equity investments (39) (134) (12) Other assets (31) (4) (8) Other items, net (3) (6) 1 Net cash used in investing activities (430) (1,317) (1,322) Cash flows from financing activities: Repayments of borrowings under credit facility (1,895) (2,815) (2,430) Proceeds from borrowings under credit facility 1,895 2,595 2,245 Repayments of other borrowings (154) (2,049) (683) Proceeds from other borrowings 760 3,158 1,608 Repurchases of common stock — (40) — Debt issuance costs (12) (80) (27) Distributions paid to noncontrolling interests (218) (110) (45) Proceeds from sale of noncontrolling interests 22 11 Purchase of noncontrolling interests (186) (268) — Proceeds from exercise of stock options 4 15 26 Other items, net 16 37 21 Net cash provided by financing activities 232 454 715 Net increase in cash and cash equivalents 360 163 80 Cash and cash equivalents at beginning of period 356 193 113 Cash and cash equivalents at end of period $716 $356 $193 Supplemental disclosures: Interest paid, net of capitalized interest $(932) $(859) $(726) Income tax payments, net $(33) $(7) $(8) See accompanying Notes to Consolidated Financial Statements. 108 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNOTES 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 adiversified healthcare services company. At December 31, 2016, we operated 79 hospitals, 20 short-stay surgical hospitals,approximately 470 outpatient centers, nine facilities in the United Kingdom and six health plans (certain of which areclassified as held for sale, as described in Note 4) through our subsidiaries, partnerships and joint ventures, including USPIHolding Company, Inc. (“USPI joint venture”). We hold noncontrolling interests in 124 facilities, which are recorded usingthe equity method of accounting. Our Conifer Holdings, Inc. (“Conifer”) subsidiary provides healthcare business processservices in the areas of hospital and physician revenue cycle management and value-based care solutions to healthcaresystems, as well as individual hospitals, physician practices, self-insured organizations, health plans and other entities. Effective June 16, 2015, we completed the transaction that combined our freestanding ambulatory surgery andimaging center assets with the short-stay surgical facility assets of United Surgical Partners International, Inc. (“USPI”) intoour new USPI joint venture. We also refinanced approximately $1.5 billion of existing USPI debt and paid approximately$424 million to align the respective valuations of the assets contributed to the joint venture. In April 2016, we paidapproximately $127 million to purchase additional shares, which increased our ownership interest in the USPI joint venturefrom 50.1% to approximately 56.3%. In addition, we completed the acquisition of European Surgical Partners Ltd. (“Aspen”)for approximately $226 million on June 16, 2015. Aspen has nine private hospitals and clinics in the United Kingdom. Basis of Presentation Our Consolidated Financial Statements include the accounts of Tenet and its wholly owned and majority-ownedsubsidiaries. We eliminate intercompany accounts and transactions in consolidation, and we include the results of operationsof businesses that are newly acquired in purchase transactions from their dates of acquisition. We account for significantinvestments in other affiliated companies using the equity method. Unless otherwise indicated, all financial and statisticaldata included in these notes to our Consolidated Financial Statements relate to our continuing operations, with dollaramounts expressed in millions (except per-share amounts). Certain prior-year amounts have also been reclassified to conform to current-year presentation, primarily related tothe lines presented on our Consolidated Statements of Cash Flows. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the UnitedStates of America (“GAAP”), requires us to make estimates and assumptions that affect the amounts reported in ourConsolidated Financial Statements and these accompanying notes. We regularly evaluate the accounting policies andestimates we use. In general, we base the estimates on historical experience and on assumptions that we believe to bereasonable given the particular circumstances in which we operate. Although we believe all adjustments considerednecessary for a fair presentation have been included, actual results may vary from those estimates. Financial and statisticalinformation we report to other regulatory agencies may be prepared on a basis other than GAAP or using differentassumptions or reporting periods and, therefore, may vary from amounts presented herein. Although we make every effort toensure that the information we report to those agencies is accurate, complete and consistent with applicable reportingguidelines, we cannot be responsible for the accuracy of the information they make available to the public. 109 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTranslation of Foreign Currencies The accounts of Aspen were measured in its local currency (the pound sterling) and then translated into U.S. dollars.All assets and liabilities were translated using the current rate of exchange at the balance sheet date. Results of operationswere translated using the average rates prevailing throughout the period of operations. Translation gains or losses resultingfrom changes in exchange rates are accumulated in shareholders’ equity. Deferred U.S. taxes have not been provided withrespect to translation gains or losses because Aspen’s accumulated earnings are indefinitely reinvested outside the UnitedStates. 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 areperformed. Net operating revenues before provision for doubtful accounts primarily consist of net patient service revenuesthat are recorded based on established billing rates (i.e., gross charges), less estimated discounts for contractual and otherallowances, principally for patients covered by Medicare, Medicaid, managed care and other health plans, as well as certainuninsured patients under our Compact with Uninsured Patients (“Compact”) and other uninsured discount and charityprograms. Gross charges are retail charges. They are not the same as actual pricing, and they generally do not reflect what ahospital is ultimately paid and, therefore, are not displayed in our consolidated statements of operations. Hospitals aretypically paid amounts that are negotiated with insurance companies or are set by the government. Gross charges are used tocalculate Medicare outlier payments and to determine certain elements of payment under managed care contracts (such asstop-loss payments). Because Medicare requires that a hospital’s gross charges be the same for all patients (regardless ofpayer category), gross charges are what hospitals charge all patients prior to the application of discounts and allowances. Revenues under the traditional fee-for-service Medicare and Medicaid programs are based primarily on prospectivepayment systems. Retrospectively determined cost-based revenues under these programs, which were more prevalent inearlier periods, and certain other payments, such as Indirect Medical Education, Direct Graduate Medical Education,disproportionate share hospital and bad debt expense reimbursement, 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 byMedicare and Medicaid auditors and administrative and judicial review, and it can take several years until final settlement ofsuch matters is determined and completely resolved. Because the laws, regulations, instructions and rule interpretationsgoverning Medicare and Medicaid reimbursement are complex and change frequently, the estimates recorded by us couldchange by material amounts. We have a system and estimation process for recording Medicare net patient revenue and estimated cost reportsettlements. This results in us recording accruals to reflect the expected final settlements on our cost reports. For filed costreports, we record the accrual based on those cost reports and subsequent activity, and record a valuation allowance againstthose cost reports based on historical settlement trends. The accrual for periods for which a cost report is yet to be filed isrecorded 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 generally must be filed within five months after the end of the annual costreporting 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, 2016, 2015 and 2014 by $54 million, $64 million, and $20 million,respectively. Estimated cost report settlements and valuation allowances are included in accounts receivable in theaccompanying Consolidated Balance Sheets (see Note 3). We believe that we have made adequate provision for anyadjustments that may result from final determination of amounts earned under all the above arrangements with Medicare andMedicaid. Revenues under managed care plans are based primarily on payment terms involving predetermined rates perdiagnosis, per-diem rates, discounted fee-for-service rates and/or other similar contractual arrangements. These revenues arealso subject to review and possible audit by the payers, which can take several years before they are completely resolved. Thepayers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to110 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsadjustment on a patient-by-patient basis in the ordinary course of business by the payers following their review andadjudication of each particular bill. We estimate the discounts for contractual allowances at the individual hospital levelutilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimateour expected reimbursement for patients of managed care plans based on the applicable contract terms. Contractualallowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms as well aspayment history. Although we do not separately accumulate and disclose the aggregate amount of adjustments to theestimated reimbursement for every patient bill, we believe our estimation and review process enables us to identify instanceson 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 provisionfor adjustments to estimated contractual allowances for managed care plans. Managed care accounts, net of contractualallowances recorded, are further reduced to their net realizable value through provision for doubtful accounts based onhistorical collection trends for these payers and other factors that affect the estimation process. We know of no claims, disputes or unsettled matters with any payer that would materially affect our revenues forwhich we have not adequately provided for in the accompanying Consolidated Financial Statements. Under our Compact or other uninsured discount programs, the discount offered to certain uninsured patients isrecognized as a contractual allowance, which reduces net operating revenues at the time the self-pay accounts are recorded.The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable valuethrough provision for doubtful accounts based on historical collection trends for self-pay accounts and other factors thataffect the estimation process. We also provide charity care to patients who are financially unable to pay for the healthcare services they receive.Most patients who qualify for charity care are charged a per-diem amount for services received, subject to a cap. Except forthe per-diem amounts, our policy is not to pursue collection of amounts determined to qualify as charity care; therefore, wedo not report these amounts in net operating revenues or in provision for doubtful accounts. Patient advocates from Conifer’sMedical Eligibility Program screen patients in the hospital to determine whether those patients meet eligibility requirementsfor financial assistance programs. They also expedite the process of applying for these government programs. The table below shows the sources of net operating revenues before provision for doubtful accounts from continuingoperations: Years Ended December 31, 2016 2015 2014 General Hospitals: Medicare $3,374 $3,403 $3,395 Medicaid 1,346 1,451 1,482 Managed care 10,126 10,098 9,027 Indemnity, self-pay and other 1,621 1,726 1,561 Acute care hospitals — other revenue 21 63 53 Other: Other operations 4,582 3,370 2,390 Net operating revenues before provision for doubtful accounts $21,070 $20,111 $17,908 Provision for Doubtful Accounts Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co-pays anddeductibles due from patients with insurance, at the time of service while complying with all federal and state statutes andregulations, including, but not limited to, the Emergency Medical Treatment 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 withoutdelaying to obtain insurance information. In non-emergency circumstances or for elective procedures and services, it is ourpolicy to verify insurance prior to a patient being treated; however, there are various exceptions that111 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentscan occur. Such exceptions can include, for example, instances where (1) we are unable to obtain verification because thepatient’s insurance company was unable to be reached or contacted, (2) a determination is made that a patient may beeligible for benefits under various government programs, such as Medicaid or Victims of Crime, and it takes several days orweeks before qualification for such benefits is confirmed or denied, and (3) under physician orders we provide services topatients that require immediate treatment. We provide for an allowance against accounts receivable that could become uncollectible by establishing anallowance to reduce the carrying value of such receivables to their estimated net realizable value. Generally, we estimate thisallowance based on the aging of our accounts receivable by hospital, our historical collection experience by hospital and foreach type of payer over a look-back period, and other relevant factors. A significant portion of our provision for doubtfulaccounts relates to self-pay patients, as well as co-pays and deductibles owed to us by patients with insurance. Paymentpressure from managed care payers also affects our provision for doubtful accounts. We typically experience ongoingmanaged care payment delays and disputes; however, we continue to work with these payers to obtain adequate and timelyreimbursement 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 withinsurance, and business practices related to collection efforts. These factors continuously change and can have an impact oncollection trends and our estimation process. Electronic Health Record Incentives Under certain provisions of the American Recovery and Reinvestment Act of 2009 (“ARRA”), federal incentivepayments are available to hospitals, physicians and certain other professionals when they adopt, implement or upgrade(“AIU”) certified electronic health record (“EHR”) technology or become “meaningful users,” as defined under ARRA, ofEHR technology in ways that demonstrate improved quality, safety and effectiveness of care. We recognize Medicaid EHRincentive payments in our consolidated statements of operations for the first payment year when: (1) CMS approves a state’sEHR incentive plan; and (2) our hospital or employed physician acquires certified EHR technology (i.e., when AIU criteriaare met). Medicaid EHR incentive payments for subsequent payment years are recognized in the period during which thespecified meaningful use criteria are met. We recognize Medicare EHR incentive payments when: (1) the specifiedmeaningful use criteria are met; and (2) contingencies in estimating the amount of the incentive payments to be received areresolved. During the years ended December 31, 2016, 2015 and 2014, certain of our hospitals and physicians satisfied theCMS AIU and/or meaningful use criteria. As a result, we recognized approximately $32 million, $72 million and $104million of Medicare and Medicaid EHR incentive payments as a reduction to expense in our Consolidated Statement ofOperations for the years ended December 31, 2016, 2015 and 2014, respectively. Cash and Cash Equivalents We treat highly liquid investments with original maturities of three months or less as cash equivalents. Cash andcash equivalents were approximately $716 million and $356 million at December 31, 2016 and 2015, respectively. As ofDecember 31, 2016 and 2015, our book overdrafts were approximately $279 million and $301 million, respectively, whichwere classified as accounts payable. At December 31, 2016 and 2015, approximately $232 million and $171 million, respectively, of total cash and cashequivalents in the accompanying Consolidated Balance Sheets were intended for the operations of our captive insurancesubsidiaries and our health plan-related businesses. Also at December 31, 2016 and 2015, we had $179 million and $133 million, respectively, of property andequipment purchases accrued for items received but not yet paid. Of these amounts, $141 million and $95 million,respectively, were included in accounts payable. During the years ended December 31, 2016 and 2015, we entered into non-cancellable capital leases ofapproximately $160 million and $162 million, respectively, primarily for equipment. 112 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsInvestments 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 atrading portfolio. At December 31, 2016 and 2015, we had no significant investments in securities classified as either held-to-maturity or trading. We carry securities classified as available-for-sale at fair value. We report their unrealized gains andlosses, net of taxes, as accumulated other comprehensive income (loss) unless we determine that a loss is other-than-temporary, at which point we would record a loss in our consolidated statements of operations. We include realized gains orlosses in our consolidated statements of operations based on the specific identification method. Investments in Unconsolidated AffiliatesWe control 215 of the facilities within our Ambulatory Care segment and, therefore, consolidate their results. Weaccount for many of the facilities our Ambulatory Care segment operates (108 of 323 at December 31, 2016), four of thehospitals our Hospital Operations and other segment operates, and 12 additional facilities in which our Hospital Operationsand other segment holds a ownership interests under the equity method as investments in unconsolidated affiliates and reportonly our share of net income attributable to the investee as equity in earnings of unconsolidated affiliates in theaccompanying Consolidated Statements of Operations. Summarized financial information for these equity method investeesis included in the following table. For investments acquired during the reported periods, amounts reflect 100% of theinvestee’s results beginning on the date of our acquisition of the investment. December 31, 2016 December 31, 2015Current assets $943 $866Noncurrent assets $991 $854Current liabilities $(320) $(301)Noncurrent liabilities $(345) $(377)Noncontrolling interests $(494) $(309) Years Ended December 31, 2016 2015Net operating revenues $2,823 $1,335Net income $573 $436Net income attributable to the investees $343 $356 Our equity method investment that contributes the most to our equity in earnings of unconsolidated affiliates is Texas HealthVentures Group, LLC (“THVG”), which is operated by our USPI joint venture. THVG represented $61 million of the total$131 million equity in earnings of unconsolidated affiliates we recognized for the year ended December 31, 2016 and $35million of the total $99 million equity in earnings of unconsolidated affiliates we recognized for the year ended December31, 2015. Property and Equipment Additions and improvements to property and equipment exceeding established minimum amounts with a useful lifegreater than one year are capitalized at cost. Expenditures for maintenance and repairs are charged to expense as incurred. Weuse the straight-line method of depreciation for buildings, building improvements and equipment. The estimated useful lifefor buildings and improvements is primarily 15 to 40 years, and for equipment three to 15 years. Newly constructed hospitalsare usually depreciated over 50 years. We record capital leases at the beginning of the lease term as assets and liabilities. Thevalue recorded is the lower of either the present value of the minimum lease payments or the fair value of the asset. Suchassets, 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 the years ended December 31, 2016, 2015 and 2014,capitalized interest was $22 million, $12 million and $25 million, respectively. We evaluate our long-lived assets for possible impairment annually or whenever events or changes in circumstancesindicate that the carrying amount of the asset, or related group of assets, may not be recoverable from estimated futureundiscounted cash flows. If the estimated future undiscounted cash flows are less than the carrying value of the assets, wecalculate the amount of an impairment if the carrying value of the long-lived assets exceeds the113 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsfair value of the assets. The fair value of the assets is estimated based on appraisals, established market values of comparableassets or internal estimates of future net cash flows expected to result from the use and ultimate disposition of the asset. Theestimates of these future cash flows are based on assumptions and projections we believe to be reasonable and supportable.They require our subjective judgments and take into account assumptions about revenue and expense growth rates. Theseassumptions may vary by type of facility and presume stable, improving or, in some cases, declining results at our hospitals,depending on their circumstances. We report long-lived assets to be disposed of at the lower of their carrying amounts or fair values less costs to sell. Insuch circumstances, our estimates of fair value are based on appraisals, established market prices for comparable assets orinternal estimates of future net cash flows. Goodwill and Other Intangible Assets Goodwill represents the excess of costs over the fair value of assets of businesses acquired. Goodwill and otherintangible assets acquired in purchase business combinations and determined to have indefinite useful lives are notamortized, but instead are subject to impairment tests performed at least annually. For goodwill, we perform the test at thereporting 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 ofexceeds its fair value, we reduce the carrying value, including any allocated goodwill, to fair value. Estimates of fair valueare based on appraisals, established market prices for comparable assets or internal estimates of future net cash flows andpresume stable, improving or, in some cases, declining results at our hospitals, depending on their circumstances. Other intangible assets primarily consist of capitalized software costs, which are amortized on a straight-line basisover the estimated useful life of the software, which ranges from three to 15 years, costs of acquired management and othercontract service rights, most of which have indefinite lives, and miscellaneous intangible assets. Accruals for General and Professional Liability Risks We accrue for estimated professional and general liability claims, when they are probable and can be reasonablyestimated. The accrual, which includes an estimate for incurred but not reported claims, is updated each quarter based on amodel of projected payments using case-specific facts and circumstances and our historical loss reporting, development andsettlement patterns and is discounted to its net present value using a risk-free discount rate 2.25% at December 31, 2016 and2.09% at December 31, 2015. To the extent that subsequent claims information varies from our estimates, the liability isadjusted in the period such information becomes available. Malpractice expense is presented within other operatingexpenses in the accompanying Consolidated Statements of Operations. Income Taxes We account for income taxes using the asset and liability method. This approach requires the recognition of deferredtax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts andthe tax bases of assets and liabilities. Income tax receivables and liabilities and deferred tax assets and liabilities arerecognized based on the amounts that more likely than not will be sustained upon ultimate settlement with taxingauthorities. Developing our provision for income taxes and analysis of uncertain tax positions requires significant judgment andknowledge of federal and state income tax laws, regulations and strategies, including the determination of deferred tax assetsand liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. We assess the realization of our deferred tax assets to determine whether an income tax valuation allowance isrequired. Based on all available evidence, both positive and negative, and the weight of that evidence to the extent such114 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsevidence can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred taxassets 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 taxbenefits; 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 periodicreview. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the followingconditions is satisfied: (1) the more likely than not recognition threshold is satisfied; (2) the position is ultimately settledthrough negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge theposition has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the morelikely than not recognition threshold is no longer satisfied. Segment Reporting We primarily operate acute care hospitals and related healthcare facilities. Our general hospitals generated 78%,83% and 87% of our net operating revenues before provision for doubtful accounts in the years endedDecember 31, 2016, 2015 and 2014, respectively. Each of our operating regions and markets related to our general hospitalsreport directly to our president of hospital operations. Major decisions, including capital resource allocations, are made at theconsolidated level, not at the regional, market or hospital level. Our Hospital Operations and other segment is comprised of our acute care hospitals, ancillary outpatient facilities,urgent care centers, microhospitals, physician practices and health plans (certain of which are classified as held for sale asdescribed in Note 4). In the three months ended June 30, 2015, we began reporting Ambulatory Care as a separate reportablebusiness segment. Previously, our business consisted of our Hospital Operations and other segment and our Conifer segment,which provides healthcare business process services in the areas of hospital and physician revenue cycle management andvalue-based care solutions to healthcare systems, as well as individual hospitals, physician practices, self-insuredorganizations and health plans. Effective June 16, 2015, we completed the joint venture transaction that combined our freestanding ambulatorysurgery and imaging center assets with USPI’s short-stay surgical facility assets. We contributed our interests in49 ambulatory surgery centers and 20 imaging centers, which had previously been included in our Hospital Operations andother segment, to the joint venture. We also completed the acquisition of Aspen effective June 16, 2015, which includes nineprivate hospitals and clinics in the United Kingdom. Our Ambulatory Care segment is comprised of the operations of ourUSPI joint venture and Aspen facilities. The factors for determining the reportable segments include the manner in whichmanagement evaluates operating performance combined with 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 andcan be measured at fair value, rather than at the date of a commitment to an exit or disposal plan.115 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNOTE 2. EQUITY Noncontrolling Interests Our noncontrolling interests balances at December 31, 2016 and 2015 in our Consolidated Statements of Shareholders’Equity were comprised of $89 million and $20 million, respectively, from our Hospital Operations and other segment, and$576 million and $247 million, respectively, from our Ambulatory Care segment. Our net income attributable tononcontrolling interests for the years ended December 31, 2016, 2015 and 2014 were comprised of $11 million, $24 millionand $30 million, respectively, from our Hospital Operations and other segment, and $127 million, $28 million and$1 million, respectively, from our Ambulatory Care segment. Share Repurchase Program In November 2015, 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 2016. Pursuant to the share repurchaseprogram, we paid approximately $40 million to repurchase a total of 1,242,806 shares during the period from thecommencement of the program through December 31, 2015. There were no purchases under the program during the yearended December 31, 2016. Total Number of Maximum Dollar Value Total Number of Average Price Shares Purchased as of Shares That May Yet Shares Paid Per Part of Publicly Be Purchased Under Period Purchased Share Announced Program the Program (In Thousands) (In Thousands) (In Millions) November 1, 2015 through November 30,2015 978 $32.71 978 $468 December 1, 2015 throughDecember 31, 2015 265 30.25 265 460 November 1, 2015 throughDecember 31, 2015 1,243 $32.18 1,243 $460 NOTE 3. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS The principal components of accounts receivable are shown in the table below: December 31, December 31, 2016 2015Continuing operations: Patient accounts receivable $3,799 $3,486Allowance for doubtful accounts (1,031) (887)Estimated future recoveries 141 144Net cost reports and settlements payable and valuation allowances (14) (42) 2,895 2,701Discontinued operations 2 3Accounts receivable, net $2,897 $2,704 At December 31, 2016 and 2015, our allowance for doubtful accounts was 27.1% and 25.4%, respectively, of ourpatient accounts receivable. Our allowance was impacted by higher patient co–pays and deductibles, as well increases in ouruninsured revenues and volumes during the three months ended December 31, 2016 compared to the same period in 2015.Additionally, the composition of our accounts receivable has been impacted by our acquisition and divestiture activity. Accounts that are pursued for collection through Conifer’s regional business offices are maintained on our hospitals’books and reflected in patient accounts receivable with an allowance for doubtful accounts established to reduce the carryingvalue of such receivables to their estimated net realizable value. Generally, we estimate this116 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsallowance based on the aging of our accounts receivable by hospital, our historical collection experience by hospital and foreach type of payer, and other relevant factors. At December 31, 2016 and 2015, our allowance for doubtful accounts for self-pay was 85.4% and 80.6%, respectively, of our self-pay patient accounts receivable, including co-pays and deductibles owedby patients with insurance. At December 31, 2016 and 2015, our allowance for doubtful accounts for managed care was 9.9%and 7.5%, respectively, of our managed care patient accounts receivable. Accounts assigned to our Conifer subsidiary are written off and excluded from patient accounts receivable andallowance for doubtful accounts; however, an estimate of future recoveries from all accounts at our Conifer subsidiary isdetermined based on historical experience and recorded on our hospitals’ books as a component of accounts receivable in theaccompanying Consolidated Balance Sheets. At the present time, our more recent acquisitions have not yet been fullyintegrated into our Conifer collections processes. We also provide charity care to patients who are financially unable to pay for the healthcare services they receive.Most patients who qualify for charity care are charged a per-diem amount for services received, subject to a cap. Except forthe per-diem amounts, our policy is not to pursue collection of amounts determined to qualify as charity care; therefore, wedo not report these amounts in net operating revenues. Most states include an estimate of the cost of charity care in thedetermination of a hospital’s eligibility for Medicaid disproportionate share hospital (“DSH”) payments. These payments areintended to mitigate our cost of uncompensated care, as well as reduced Medicaid funding levels. Generally, our method ofmeasuring the estimated costs uses adjusted self-pay/charity patient days multiplied by selected operating expenses (whichinclude salaries, wages and benefits, supplies and other 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 outpatientservices by multiplying actual self-pay/charity patient days by the sum of gross self-pay/charity inpatient revenues and grossself-pay/charity outpatient revenues and dividing the results by gross self-pay/charity inpatient revenues. The table belowshows our estimated costs of caring for our self-pay patients and charity care patients and revenues attributable to MedicaidDSH and other supplement revenues we recognize for the years ended December 31, 2016, 2015 and 2014. Years Ended December 31, 2016 2015 2014Estimated costs for: Self-pay patients $644 $678 $620Charity care patients $146 $191 $180Medicaid DSH and other supplemental revenues $906 $888 $817 At December 31, 2016 and 2015, we had approximately $537 million and $387 million, respectively, of receivables recordedin other current assets and approximately $139 million and $139 million, respectively, of payables recorded in other currentliabilities in the accompanying Consolidated Balance Sheets related to California’s provider fee program. NOTE 4. ASSETS AND LIABILITIES HELD FOR SALE In the three months ended September 30, 2016, certain of our health plan assets and liabilities met the criteria to beclassified as held for sale. In accordance with the guidance in the Financial Accounting Standards Board’s AccountingStandards Codification (“ASC”) 360, “Property, Plant and Equipment,” we classified $27 million of our health plan assets as“assets held for sale” in current assets and $13 million of our health plan liabilities as “liabilities held for sale” in currentliabilities in the accompanying Consolidated Balance Sheet at December 31, 2016. Our hospitals, physician practices and related assets in Georgia met the criteria to be classified as assets held for salein the three months ended June 30, 2015. In accordance with ASC 360, we classified $549 million of our assets in Georgia as“assets held for sale” in current assets and $101 million of our liabilities in Georgia as “liabilities held for sale” in currentliabilities in the accompanying Consolidated Balance Sheet at December 31, 2015. We completed the sale of our Georgiaassets on March 31, 2016 at a transaction price of approximately $575 million and recognized a gain on sale ofapproximately $113 million. Because we did not sell the related accounts receivable with respect to the pre-closing period,net receivables of approximately $46 million are included in accounts receivable, less allowance for doubtful accounts in theaccompanying Consolidated Balance Sheet at December 31, 2016. 117 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsIn the three months ended June 30, 2015, we entered into a definitive agreement for the sale of the assets of our SaintLouis University Hospital (“SLUH”) to Saint Louis University. In accordance with the guidance in the Financial AccountingStandards Board’s Accounting Standards Codification (“ASC”) 360, “Property, Plant and Equipment,” we classified SLUH’sassets as “assets held for sale” in current assets and SLUH’s liabilities as “liabilities held for sale” in current liabilities in ourConsolidated Balance Sheet at June 30, 2015. These assets and liabilities were recorded at the lower of their carrying amountor their fair value less estimated costs to sell. As a result of this anticipated transaction, we recorded an impairment charge of$147 million for the write-down of assets held for sale to their estimated fair value, less estimated costs to sell, in the threemonths ended June 30, 2015. We completed the sale of SLUH on August 31, 2015 at a transaction price of approximately$32 million, excluding working capital and subject to customary purchase price adjustments. Because we did not sellSLUH’s accounts receivable related to the pre-closing period, net receivables of approximately $12 million are included inaccounts receivable, less allowance for doubtful accounts, in the accompanying Consolidated Balance Sheet atDecember 31, 2016. Our hospitals, physician practices and related assets in North Carolina also met the criteria to be classified as assetsheld for sale in the three months ended June 30, 2015. We completed the sale of our North Carolina assets onDecember 31, 2015 at a transaction price of approximately $191 million and recognized a gain on sale of approximately$3 million. Because we did not sell the related accounts receivable related to the pre-closing period, net receivables ofapproximately $8 million are included in accounts receivable, less allowance for doubtful accounts in the accompanyingConsolidated Balance Sheet at December 31, 2016. During the three months ended March 31, 2015, we entered into definitive agreements to form two joint ventureswith affiliates of Baylor Scott & White Holdings (“BSW Holdings”), the parent company of Baylor Scott & White Health,involving the ownership and operation of the hospitals formerly known as Centennial Medical Center, Doctors Hospital atWhite Rock Lake, Lake Pointe Medical Center and Texas Regional Medical Center at Sunnyvale (collectively, “our NorthTexas hospitals”) – which we continue to operate – and Baylor Medical Center at Garland – which is operated by an affiliateof BSW Holdings, which, through its affiliates, holds a majority ownership interest in the joint ventures. The transactionsclosed on December 31, 2015 at a net transaction price of approximately $288 million, and we recorded a gain ondeconsolidation of these facilities of approximately $151 million. We also recorded an equity investment in the new jointventures of approximately $164 million, which included $11 million of cash contributed at closing. NOTE 5. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION-RELATED COSTS We recognized impairment charges on long-lived assets in 2016, 2015 and 2014 because the fair values of thoseassets or groups of assets indicated that the carrying amount was not recoverable. The fair value estimates were derived fromappraisals, established market values of comparable assets, or internal estimates of future net cash flows. These fair valueestimates can change by material amounts in subsequent periods. Many factors and assumptions can impact the estimates,including the future financial results of the hospitals, how the hospitals are operated in the future, changes in healthcareindustry trends and regulations, and the nature of the ultimate disposition of the assets. In certain cases, these fair valueestimates assume the highest and best use of hospital assets in the future to a market place participant is other than as ahospital. In these cases, the estimates are based on the fair value of the real property and equipment if utilized other than as ahospital. The impairment recognized does not include the costs of closing the hospitals or other future operating costs, whichcould be substantial. Accordingly, the ultimate net cash realized from the hospitals, should we choose to sell them, could besignificantly less than their impaired value. Our impairment tests presume stable, improving or, in some cases, declining operating results in our facilities, whichare based on programs and initiatives being implemented that are designed to achieve the facility’s most recent projections.If these projections are not met, or if in the future negative trends 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. At December 31, 2016, our continuing operations consisted of three reportable segments, Hospital Operations andother, Ambulatory Care and Conifer. Within our Hospital Operations and other segment, our regions and markets arereporting units used to perform our goodwill impairment analysis and are one level below our reportable business segments. 118 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOur Hospital Operations and other segment was structured as follows at December 31, 2016: ·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 andPennsylvania; ·Our Southern region included all of our hospitals and other operations in Alabama, Missouri, South Carolinaand Tennessee; ·Our Texas region included all of our hospitals and other operations in New Mexico and Texas; ·Our Western region included all of our hospitals and other operations in Arizona and California; and ·Our Detroit market included all of our hospitals and other operations in the Detroit, Michigan area. These regions and markets are reporting units used to perform our goodwill impairment analysis and are one level below ourhospital operations reportable business segment. We also perform a goodwill impairment analysis for our Conifer andAmbulatory Care reporting units. Effective in January 2017, our Florida, Northeast and Southern regions and our Detroitmarket were combined to form our Eastern region. Our Eastern region includes all of our hospitals and other operations inAlabama, Florida, Illinois, Massachusetts, Michigan, Missouri, Pennsylvania, South Carolina and Tennessee. Subsequent tothis change, our Hospital Operations and other segment is comprised of our Eastern, Texas and Western regions. We periodically incur costs to implement restructuring efforts for specific operations, which are recorded in ourstatement of operations as they are incurred. Our restructuring plans focus on various aspects of operations, includingaligning our operations in the most strategic and cost-effective structure. Certain restructuring and acquisition-related costsare based on estimates. Changes in estimates are recognized as they occur. Year Ended December 31, 2016 During the year ended December 31, 2016, we recorded impairment and restructuring charges and acquisition-related costs of $202 million. This amount included impairment charges of approximately $54 million for the write-down ofbuildings, equipment and other long-lived assets, primarily capitalized software cost classified as other intangible assets, totheir estimated fair values at four of our hospitals. Material adverse trends in our most recent estimates of future undiscountedcash flows of the hospitals indicated the carrying value of the hospitals’ long-lived assets was not recoverable from theestimated future cash flows. We believe the most significant factors contributing to the adverse financial trends includereductions in volumes of insured patients, shifts in payer mix from commercial to governmental payers combined withreductions in reimbursement rates from governmental payers, and high levels of uninsured patients. As a result, we updatedthe estimate of the fair value of the hospitals’ long-lived assets and compared the fair value estimate to the carrying value ofthe hospitals’ long-lived assets. Because the fair value estimates were lower than the carrying value of the long-lived assets,an impairment charge was recorded for the difference in the amounts. Unless the anticipated future financial trends of thesehospitals improve to the extent that the estimated future undiscounted cash flows exceed the carrying value of the long-livedassets, these hospitals are at risk of future impairments, particularly if we spend significant amounts of capital at the hospitalswithout generating a corresponding increase in the hospitals’ fair value or if the fair value of the hospitals’ real estate orequipment declines. The aggregate carrying value of assets held and used of the hospitals for which impairment charges wererecorded was $163 million as of December 31, 2016 after recording the impairment charges. We also recorded $19 million ofimpairment charges related to investments and $14 million related to other intangible assets, primarily contract relatedintangibles and capitalized software costs not associated with the hospitals described above. Of the total impairment chargesrecognized for the year ended December 31, 2016, $76 million related to our Hospital Operations and other segment, $8million related to our Ambulatory Care segment, and $3 million related to our Conifer segment. We also recorded$35 million of employee severance costs, $14 million of restructuring costs, $14 million of contract and lease terminationfees, and $52 million in acquisition-related costs, which include $20 million of transaction costs and $32 million ofacquisition integration costs. 119 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsYear Ended December 31, 2015 During the year ended December 31, 2015, we recorded impairment and restructuring charges and acquisition-related costs of $318 million, including $168 million of impairment charges. We recorded an impairment charge ofapproximately $147 million to write-down assets held for sale to their estimated fair value, less estimated costs to sell, as aresult of entering into a definitive agreement for the sale of SLUH during the three months ended June 30, 2015, as furtherdescribed in Note 4. We also recorded impairment charges of approximately $19 million for the write-down of buildings,equipment and other long-lived assets, primarily capitalized software cost classified as other intangible assets, to theirestimated fair values at two of our hospitals. The aggregate carrying value of assets held and used of the hospital for which animpairment charge was recorded was $45 million as of December 31, 2015 after recording the impairment charge. We alsorecorded $2 million related to investments. We also recorded $25 million of employee severance costs, $6 million ofrestructuring costs, $19 million of contract and lease termination fees, and $100 million in acquisition-related costs, whichinclude $55 million of transaction costs and $45 million of acquisition integration charges. Year Ended December 31, 2014 During the year ended December 31, 2014, we recorded impairment and restructuring charges and acquisition-related costs of $153 million. This amount included a $20 million impairment charge for the write-down of buildings andequipment of one of our previously impaired hospitals to their estimated fair values, primarily due to a decline in the fairvalue of real estate in the market in which the hospital operates and a decline in the estimated fair value of equipment. Theaggregate carrying value of assets held and used of the hospital for which an impairment charge was recorded was $23million as of December 31, 2014 after recording the impairment charge. We also recorded $16 million of employee severancecosts, $19 million of contract and lease termination fees, $3 million of restructuring costs, and $95 million in acquisition-related costs, which include $16 million of transaction costs and $79 million of acquisition integration charges. NOTE 6. LONG-TERM DEBT AND LEASE OBLIGATIONS The table below shows our long-term debt as of December 31, 2016 and 2015: December 31, December 31, 2016 2015 Senior unsecured notes: 5% due 2019 $1,100 $1,100 5/2% due 2019 500 500 6/4% due 2020 300 300 8% due 2020 750 750 8/8% due 2022 2,800 2,800 6/4% due 2023 1,900 1,900 6/8% due 2031 430 430 Senior secured notes: 6/4% due 2018 1,041 1,041 4/4% due 2020 500 500 6% due 2020 1,800 1,800 Floating % due 2020 900 900 4/2% due 2021 850 850 4/8% due 2021 1,050 1,050 7/2% due 2022 750 — Capital leases and mortgage notes 819 852 Unamortized issue costs, note discounts and premiums (235) (263) Total long-term debt 15,255 14,510 Less current portion 191 127 Long-term debt, net of current portion $15,064 $14,383 120 1313713131Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsCredit Agreement We have a senior secured revolving credit facility (as amended, the “Credit Agreement”) which provides, subject toborrowing availability, for revolving loans in an aggregate principal amount of up to $1 billion, with a $300 millionsubfacility for standby letters of credit. Obligations under the Credit Agreement, which has a scheduled maturity date ofDecember 4, 2020, are guaranteed by substantially all of our domestic wholly-owned hospital subsidiaries and are secured bya first-priority lien on the accounts receivable owned by us and the subsidiary guarantors. Outstanding revolving loansaccrue interest at a base rate plus a margin ranging from 0.25% to 0.75% per annum or the London Interbank Offered Rate(“LIBOR”) plus a margin ranging from 1.25% to 1.75% per annum, in each case based on available credit. An unusedcommitment fee payable on the undrawn portion of the revolving loans ranges from 0.25% to 0.375% per annum based onavailable credit. Our borrowing availability is based on a specified percentage of eligible accounts receivable, including self-pay accounts. At December 31, 2016, we had no cash borrowings outstanding under the Credit Agreement and we hadapproximately $2 million of standby letters of credit outstanding. Based on our eligible receivables, approximately $998million was available for borrowing under the revolving Credit Agreement at December 31, 2016. Letter of Credit Facility We have a letter of credit facility (as amended, the “LC Facility”) that provides for the issuance of standby anddocumentary letters of credit, from time to time, in an aggregate principal amount of up to $180 million (subject to increaseto up to $200 million). Obligations under the LC Facility are guaranteed and secured by a first priority pledge of the capitalstock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal ranking basiswith our senior secured first lien notes. On September 15, 2016, we entered into an amendment to the existing letter of creditfacility agreement in order to, among other things, (i) extend the scheduled maturity date of the LC Facility toMarch 7, 2021, (ii) reduce the margin payable with respect to unreimbursed drawings under letters of credit and undrawnletters of credit issued under the LC Facility, and (iii) reduce the commitment fee payable with respect to the undrawn portionof the commitments under the LC Facility. Drawings under any letter of credit issued under the LC Facility that we have not reimbursed within three businessdays after notice thereof accrue interest at a base rate plus a margin equal to 0.50% per annum. An unused commitment fee ispayable at an initial rate of 0.25% per annum with a step up to 0.375% per annum should our secured debt to EBITDA ratioequal or exceed 3.00 to 1.00 at the end of any fiscal quarter. A fee on the aggregate outstanding amount of issued butundrawn letters of credit accrues at a rate of 1.50% per annum. An issuance fee equal to 0.125% per annum of the aggregateface amount of each outstanding letter of credit is payable to the account of the issuer of the related letter of credit. AtDecember 31, 2016, we had approximately $108 million of standby letters of credit outstanding under the LC Facility. Senior Secured Notes All of our senior secured notes are guaranteed by certain of our wholly owned domestic hospital companysubsidiaries and secured by a first-priority pledge of the capital stock and other ownership interests of those subsidiaries. Our7/2% senior secured second lien notes (the “Second Lien Notes”), are secured by a second-priority pledge of the capitalstock and other ownership interests of those subsidiaries, and the remaining senior secured notes are secured by a first-priority pledge of the capital stock and other ownership interests of those subsidiaries. All of our senior secured notes and therelated subsidiary guarantees are our and the subsidiary guarantors’ senior secured obligations. All of our senior securednotes rank equally in right of payment with all of our other senior secured indebtedness. Our senior secured notes rank seniorto any subordinated indebtedness that we or such subsidiary guarantors may incur; they are effectively senior to our and suchsubsidiary guarantors’ existing and future unsecured indebtedness and other liabilities to the extent of the value of thecollateral securing the notes and the subsidiary guarantees; they are effectively subordinated to our and such subsidiaryguarantors’ obligations under our Credit Agreement to the extent of the value of the collateral securing borrowingsthereunder; and they are structurally subordinated to all obligations of our non-guarantor subsidiaries. 121 1Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe indentures setting forth the terms of our senior secured notes contain provisions governing our ability to redeemthe notes and the terms by which we may do so. At our option, we may redeem our senior secured notes, in whole or in part, atany time at a redemption price equal to 100% of the principal amount of the notes redeemed plus the make-whole premiumset forth in the related indenture, together with accrued and unpaid interest thereon, if any, to the redemption date. Certainseries of the senior secured notes may also be redeemed, in whole or in part, at certain redemption prices set forth in theapplicable indentures, together with accrued and unpaid interest. In addition, we may be required to purchase for cash all orany part of each series of our senior secured notes upon the occurrence of a change of control (as defined in the applicableindentures) for a cash purchase price of 101% of the aggregate principal amount of the notes, plus accrued and unpaidinterest. In December 2016, we sold $750 million aggregate amount of Second Lien Notes, which will mature on January 1,2022. We will pay interest on the Second Lien Notes semi-annually in arrears on January 1 and July 1 of each year,commencing on July 1, 2017. The net proceeds of the Second Lien Notes were used, after payment of fees and expenses, torepay indebtedness outstanding under our Credit Agreement and for general corporate purposes. Senior Unsecured Notes All of our senior unsecured notes are general unsecured senior debt obligations that rank equally in right of paymentwith all of our other unsecured senior indebtedness, but are effectively subordinated to our senior secured notes describedabove, the obligations of our subsidiaries and any obligations under our Credit Agreement to the extent of the value of thecollateral. We may redeem any series of our senior unsecured notes, in whole or in part, at any time at a redemption priceequal to 100% of the principal amount of the notes redeemed, plus a make-whole premium specified in the applicableindenture, together with accrued and unpaid interest to the redemption date. Covenants Credit Agreement. Our Credit Agreement contains customary covenants for an asset-backed facility, including aminimum fixed charge coverage ratio to be met if the designated excess availability under the revolving credit facility fallsbelow $100 million, as well as limits on debt, asset sales and prepayments of senior debt. The Credit Agreement also includesa provision, which we believe is customary in receivables-backed credit facilities, that gives our lenders the right to requirethat proceeds of collections of substantially all of our consolidated accounts receivable be applied directly to repayoutstanding loans and other amounts that are due and payable under the Credit Agreement at any time that unused borrowingavailability under the revolving credit facility is less than $100 million for three consecutive business days or if an event ofdefault has occurred and is continuing thereunder. In that event, we would seek to re-borrow under the Credit Agreement tosatisfy our operating cash requirements. Our ability to borrow under the Credit Agreement is subject to conditions that webelieve are customary in revolving credit facilities, including that no events of default then exist. Senior Secured Notes. The indentures governing our senior secured notes contain covenants that, among otherthings, restrict our ability 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, other than in certain transactionsbetween one or more of our wholly owned subsidiaries. These restrictions, however, are subject to a number of exceptionsand qualifications. In particular, there are no restrictions on our ability or the ability of our subsidiaries to incur additionalindebtedness, make restricted payments, pay dividends or make distributions in respect of capital stock, purchase or redeemcapital stock, enter into transactions with affiliates or make advances to, or invest in, other entities (including unaffiliatedentities). In addition, the indentures governing our senior secured notes contain a covenant that neither we nor any of oursubsidiaries will incur secured debt, unless at the time of and after giving effect to the incurrence of such debt, the aggregateamount of all such secured debt (including the aggregate principal amount of senior secured notes outstanding at such time)does not exceed the amount that would cause the secured debt ratio (as defined in the indentures) to exceed 4.0 to 1.0;provided that the aggregate amount of all such debt secured by a lien on par to the lien securing the senior secured notes maynot exceed the amount that would cause the secured debt ratio to exceed 3.0 to 1.0. 122 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsSenior Unsecured Notes. The indentures governing our senior unsecured notes contain covenants and conditionsthat have, among other requirements, limitations on (1) liens on “principal properties” and (2) sale and lease-backtransactions with respect to principal properties. A principal property is defined in the senior unsecured notes indentures as ahospital that has an asset value on our books in excess of 5% of our consolidated net tangible assets, as defined in suchindentures. The above limitations do not apply, however, to (1) debt that is not secured by principal properties or (2) debtthat is secured by principal properties if the aggregate of such secured debt does not exceed 15% of our consolidated nettangible assets, as further described in the indentures. The senior unsecured notes indentures also prohibit the consolidation,merger or sale of all or substantially all assets unless no event of default would result after giving effect to such transaction. Future Maturities Future long-term debt maturities and minimum operating lease payments as of December 31, 2016 are as follows: Years Ending December 31, Later Total 2017 2018 2019 2020 2021 Years Long-term debt, including capitallease obligations $15,490 $192 $1,157 $1,694 $4,321 $1,958 $6,168 Long-term non-cancelable operating leases $1,216 $215 $182 $156 $125 $102 $436 Rental expense under operating leases, including short-term leases, was $335 million, $292 million and$242 million in the years ended December 31, 2016, 2015 and 2014, respectively. Included in rental expense for each ofthese periods was sublease income of $13 million, $12 million and $9 million, respectively, which were recorded as areduction to rental expense.NOTE 7. GUARANTEES Consistent with our policy on physician relocation and recruitment, we provide income guarantee agreements tocertain physicians who agree to relocate to fill a community need in the service area of one of our hospitals and commit toremain in practice in the area for a specified period of time. Under such agreements, we are required to make payments to thephysicians in excess of the amounts they earn in their practices up to the amount of the income guarantee. The incomeguarantee periods are typically 12 months. If a physician does not fulfill his or her commitment period to the community,which is typically three years subsequent to the guarantee period, we seek recovery of the income guarantee payments fromthe physician on a prorated basis. We also provide revenue collection guarantees to hospital-based physician groupsproviding certain services at our hospitals with terms generally ranging from one to three years. At December 31, 2016, the maximum potential amount of future payments under our income guarantees to certainphysicians who agree to relocate and revenue collection guarantees to hospital-based physician groups providing certainservices at our hospitals was $95 million. We had a total liability of $90 million recorded for these guarantees included inother current liabilities at December 31, 2016. At December 31, 2016, we also had issued guarantees of the indebtedness and other obligations of our investees tothird parties, the maximum potential amount of future payments under which was approximately $26 million. Of the total,$14 million relates to the obligations of consolidated subsidiaries, which obligations are recorded in the accompanyingConsolidated Balance Sheet at December 31, 2016. 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 IncentivePlan, which was approved by our shareholders at their 2008 annual meeting. At December 31, 2016, assuming outstandingPerformance Restricted Stock Units for which performance has not yet been determined will achieve Target123 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsperformance, approximately 7.2 million shares of common stock were available under our 2008 Stock Incentive Plan forfuture stock option grants and other incentive awards, including restricted stock units (6.2 million shares remain available ifwe assume Maximum performance for outstanding Performance Restricted Stock Units for which performance has not yetbeen determined). Options have an exercise price equal to the fair market value of the shares on the date of grant andgenerally expire 10 years from the date of grant. A restricted stock unit is a contractual right to receive one share of ourcommon stock or the equivalent value in cash in the future. Options and time-based restricted stock units typically vest one-third on each of the first three anniversary dates of the grant; however, certain special retention awards may have longervesting periods. In addition, we grant performance-based restricted stock units (and, in prior years, have granted performance-based options) that vest subject to the achievement of specified performance goals within a specified timeframe. Our Consolidated Statement of Operations for the years ended December 31, 2016, 2015 and 2014 includes$60 million, $77 million and $51 million, respectively, of pretax compensation costs related to our stock-basedcompensation arrangements ($38 million, $48 million and $32 million, respectively, after-tax). The table below showscertain stock option and restricted stock unit grants and other awards that comprise the stock-based compensation expenserecorded in the year ended December 31, 2016. Compensation cost is measured by the fair value of the awards on their grantdates and is recognized over the requisite service period of the awards, whether or not the awards had any intrinsic valueduring the period. Stock-Based Fair Value Compensation Expense Exercise Price Per Share at for Year Ended Grant Date Awards Per Share Grant Date December 31, 2016 (In Thousands) (In Millions) Restricted Stock Units: May 13, 2016 90 21.92 2 March 10, 2016 658 25.50 5 February 25, 2015 1,400 45.63 21 August 25, 2014 526 59.90 5 February 26, 2014 1,268 44.12 19 June 13, 2013 318 47.13 3 Other grants 5 $60 Prior to our shareholders approving the 2008 Stock Incentive Plan, we granted stock-based awards to our directorsand employees pursuant to other plans. 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 beexercised as determined by the compensation committee of our board of directors. In the event of a change in control, thehuman resources committee of our Board of Directors may, at its sole discretion without obtaining shareholder approval,accelerate the vesting or performance periods of the awards. 124 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsStock Options The following table summarizes stock option activity during the years ended December 31, 2016, 2015 and 2014: Weighted Average Exercise Price Aggregate Weighted Average Options Per Share Intrinsic Value Remaining Life (In Millions) Outstanding at December 31, 2013 3,308,111 $30.79 Granted — Exercised (699,910) 33.53 Forfeited/Expired (624,052) 47.97 Outstanding at December 31, 2014 1,984,149 $24.42 Granted — — Exercised (340,869) 29.85 Forfeited/Expired (36,438) 42.08 Outstanding at December 31, 2015 1,606,842 $22.87 Granted — — Exercised (111,715) 17.88 Forfeited/Expired (59,206) 18.68 Outstanding at December 31, 2016 1,435,921 $22.87 $2 2.1years Vested and expected to vest at December 31, 2016 1,435,921 $22.87 $2 2.1years Exercisable at December 31, 2016 1,435,921 $22.87 $2 2.1years There were 111,715 stock options exercised during the year ended December 31, 2016 with an aggregated intrinsicvalue of approximately $1 million, and 340,869 stock options exercised during the same period in 2015 with an aggregateintrinsic value of approximately $8 million. There were no stock options granted in the years ended December 31, 2016 or2015. The following table summarizes information about our outstanding stock options at December 31, 2016: Options Outstanding Options Exercisable Weighted Average Number of Remaining Weighted Average Number of Weighted Average Range of Exercise Prices Options Contractual Life Exercise Price Options Exercise Price $0.00 to $4.569 172,219 2.2years $4.56 172,219 $4.56 $4.57 to $25.089 827,315 2.8years 20.85 827,315 20.85 $25.09 to $32.569 182,000 0.2years 26.40 182,000 26.40 $32.57 to $42.529 254,387 1.2years 39.31 254,387 39.31 1,435,921 2.1years $22.87 1,435,921 $22.87 As of December 31, 2016, approximately 96.1% of all our outstanding options were held by current employees andapproximately 3.9% were held by former employees. Approximately 12% of our outstanding options were in-the-money, thatis, they had exercise price less than the $14.84 market price of our common stock on December 31, 2016, and approximately88% were out-of-the-money, that is, they had an exercise price of more than $14.84 as shown in the table below: In-the-Money Options Out-of-the-Money Options All Options Outstanding % of Total Outstanding % of Total Outstanding % of Total Current employees 150,975 87.5% 1,228,869 97.3% 1,379,844 96.1% Former employees 21,544 12.5% 34,533 2.7% 56,077 3.9% Totals 172,519 100.0% 1,263,402 100.0% 1,435,921 100.0% % of all outstanding options 12.0% 88.0% 100.0% 125 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsRestricted Stock Units The following table summarizes restricted stock unit activity during the years ended December 31, 2016, 2015and 2014: Restricted Stock Weighted Average Grant Units Date Fair Value Per Unit Unvested at December 31, 2013 2,707,222 $33.34 Granted 1,772,276 48.42 Vested (1,009,927) 27.49 Forfeited (169,851) 36.64 Unvested at December 31, 2014 3,299,720 $40.99 Granted 1,718,057 45.51 Vested (1,210,159) 38.40 Forfeited (180,386) 42.46 Unvested at December 31, 2015 3,627,232 $44.69 Granted 1,626,329 30.05 Vested (1,644,616) 42.95 Forfeited (434,412) 38.59 Unvested at December 31, 2016 3,174,533 $38.75 In the year ended December 31, 2016, we granted 737,493 restricted stock units subject to time-vesting of which504,511 will vest and be settled ratably over a three-year period from the grant date, 57,139 will vest and be settled on thethird anniversary of the grant date and 175,843 will vest and be settled on the fifth anniversary of the grant date. In addition,in May 2016, we made an annual grant of 90,105 restricted stock units to our non-employee directors for the 2016-2017board service year, which units vested immediately and will settle in shares of our common stock on the third anniversary ofthe date of the grant. The Board of Directors appointed four new members, two in January 2016 and two in November 2016.We made initial grants totaling 13,190 restricted stock units to these directors, as well as prorated annual grants totaling19,648 restricted stock units. Both the initial grants and the annual grants vested immediately, however the initial grants willnot settle until the directors’ separation from the Board, while the annual grants settle on the third anniversary of the grantdate. In addition, we granted 474,443 performance-based restricted stock units to certain of our senior officers; the vesting ofthese restricted stock units is contingent on our achievement of specified three-year performance goals for the years 2016 to2018. Provided the goals are achieved, the performance-based restricted stock units will vest and settle on the thirdanniversary of the grant date. The actual number of performance-based restricted stock units that could vest will range from0% to 200% of the 474,443 units granted, depending on our level of achievement with respect to the performance goals.Moreover, in the year ended December 31, 2016, we granted 291,540 restricted stock units as a result of our level ofachievement with respect to prior-year target performance goals. In the year ended December 31, 2015, we granted 1,142,230 restricted stock units subject to time-vesting, of which1,067,383 will vest and be settled ratably over a three-year period from the grant date and 31,000 will vest 100% on the fifthanniversary of the grant date. In addition, in May 2015, we made an annual grant of 43,847 restricted stock units to our non-employee directors for the 2015-2016 board service year, which units vested immediately and will settle in shares of ourcommon stock on the third anniversary of the date of the grant. In March 2015, following the appointment of a new memberof our Board of Directors, we made an initial grant of 1,311 restricted stock units to that director, which units vestedimmediately, but will not settle until her separation from the Board, as well as a prorated annual grant of 526 restricted stockunits for the 2014-2015 board service year, which units vested immediately, but will not settle until the earlier of three yearsfrom the date of grant or her separation from the board. Also, we granted 306,968 performance-based restricted stock units tocertain of our senior officers; the vesting of these restricted stock units is contingent on our achievement of a specified one-year performance goal for the year ending December 31, 2015. The performance-based restricted stock units will vest ratablyover a three-year period from the grant date. As of December 31, 2016, there were $66 million of total unrecognized compensation costs related to restrictedstock units. These costs are expected to be recognized over a weighted average period of 1.9 years. 126 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsEmployee Stock Purchase Plan We have an employee stock purchase plan under which we are currently authorized to issue up to 5,062,500 sharesof common stock to our eligible employees. As of December 31, 2016, there were approximately 3,853,179 shares availablefor issuance under our employee stock purchase plan. Under the terms of the plan, eligible employees may elect to havebetween 1% and 10% of their base earnings withheld each quarter to purchase shares of our common stock. Shares arepurchased at a price equal to 95% of the closing price on the last day of the quarter. The plan requires a one-year holdingperiod for all shares issued. The holding period does not apply upon termination of employment. Under the plan, noindividual may purchase, in any year, shares with a fair market value in excess of $25,000. The plan is currently notconsidered to be compensatory. We sold the following numbers of shares under our employee stock purchase plan in the years endedDecember 31, 2016, 2015 and 2014: Years Ended December 31, 2016 2015 2014 Number of shares 217,184 145,290 162,128 Weighted average price $17.21 $43.96 $46.91 Employee Retirement Plans Substantially all of our employees, upon qualification, are eligible to participate in one of our defined contribution401(k) plans. Under the plans, employees may contribute a portion of their eligible compensation, and we match suchcontributions annually up to a maximum percentage for participants actively employed, as defined by the plan documents.Employer matching contributions will vary by plan. Plan expenses, primarily related to our contributions to the plan, wereapproximately $116 million, $105 million and $92 million for the years ended December 31, 2016, 2015 and 2014,respectively. Such amounts are reflected in salaries, wages and benefits in the accompanying Consolidated Statements ofOperations. We maintain three frozen non-qualified defined benefit pension plans (“SERPs”) that provide supplementalretirement benefits to certain of our current and former executives. One of these SERPs was frozen during the year endedDecember 31, 2014. These plans are not funded, and plan obligations for these plans are paid from our working capital.Pension benefits are generally based on years of service and compensation. Upon completing the acquisition of Vanguard onOctober 1, 2013, we assumed a frozen qualified defined benefit plan (“DMC Pension Plan”) covering substantially all of theemployees of our Detroit market that were hired prior to June 1, 2003. The benefits paid under the DMC Pension Plan areprimarily based on years of service and final average earnings. During the years ended December 31, 2016 and 2015, theSociety of Actuaries issued new mortality improvement scales (MP-2016 and MP‑2015, respectively), which we incorporatedinto the estimates of our defined benefit plan obligations at December 31, 2016 and 2015. These changes to our mortalityassumptions decreased our projected benefit obligations as of December 31, 2016 and 2015 by approximately $20 millionand $25 million, respectively. The following tables127 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentssummarize the balance sheet impact, as well as the benefit obligations, funded status and rate assumptions associated withthe SERPs and the DMC Pension Plan based on actuarial valuations prepared as of December 31, 2016 and 2015: December 31, 2016 2015 Reconciliation of funded status of plans and the amounts included inthe Consolidated Balance Sheets: Projected benefit obligations Beginning obligations $(1,455) $(1,559) Service cost (2) (3) Interest cost (69) (64) Actuarial gain(loss) (58) 96 Benefits paid 109 75 Ending obligations (1,475) (1,455) Fair value of plans assets Beginning plan assets 815 898 Gain (loss) on plan assets 36 (36) Employer contribution 25 8 Benefits paid (90) (55) Ending plan assets 786 815 Funded status of plans $(689) $(640) Amounts recognized in the Consolidated Balance Sheets consist of: Other current liability $(63) $(45) Other long-term liability $(626) $(595) Accumulated other comprehensive loss $322 $261 SERP Assumptions: Discount rate 4.25% 4.75% Compensation increase rate 3.00% 3.00% Measurement date December 31, 2016 December 31, 2015 DMC Pension Plan Assumptions: Discount rate 4.42% 4.67 Compensation increase rate Frozen Frozen Measurement date December 31, 2016 December 31, 2015 (1)The accumulated benefit obligation at December 31, 2016 and 2015 was approximately $1.461 billion and $1.443 billion, respectively. 128 (1)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe components of net periodic benefit costs and related assumptions are as follows: Years Ended December 31, 2016 2015 2014 Service costs $2 $3 $3 Interest costs 69 64 66 Expected return on plan assets (51) (57) (60) Amortization of net actuarial loss 12 12 4 Net periodic benefit cost $32 $22 $13 SERP Assumptions: Discount rate 4.75% 4.25% 5.00% Long-term rate of return on assets n/a n/a n/a Compensation increase rate 3.00% 3.00% 3.00% Measurement date January 1, 2016 January 1, 2015 January 1, 2014 Census date January 1, 2016 January 1, 2015 January 1, 2014 DMC Pension Plan Assumptions: Discount rate 4.67% 4.16% 5.18% Long-term rate of return on assets 6.50% 6.50% 7.00% Compensation increase rate Frozen Frozen Frozen Measurement date January 1, 2016 January 1, 2015 January 1, 2014 Census date January 1, 2016 January 1, 2015 January 1, 2014 Net periodic benefit costs for the current year are based on assumptions determined at the valuation date of the prioryear for the SERPs and the DMC Pension Plan. We recorded gain/(loss) adjustments of $(61) million, $15 million and ($254) million in other comprehensiveincome (loss) in the years ended December 31, 2016, 2015 and 2014, respectively, to recognize changes in the funded statusof our SERPs and the DMC Pension Plan. Changes in the funded status are recorded as a direct increase or decrease toshareholders’ equity through accumulated other comprehensive loss. Net actuarial gains/(losses) of $(73) million, $3 millionand ($258) million during the years ended December 31, 2016, 2015 and 2014, respectively, and the amortization of netactuarial loss of $12 million, $12 million and $4 million for the years ended December 31, 2016, 2015 and 2014,respectively, were recognized in other comprehensive income (loss). Cumulative net actuarial losses of $322 million, $261million and $276 million as of December 31, 2016, 2015 and 2014, respectively, and unrecognized prior service costs of lessthan $1 million as of each of the years ended December 31, 2016, 2015 and 2014, have not yet been recognized ascomponents of net periodic benefit costs. To develop the expected long-term rate of return on plan assets assumption, the DMC Pension Plan considers thecurrent level of expected returns on risk-free investments (primarily government bonds), the historical level of risk premiumassociated with the other asset classes in which the portfolio is invested and the expectations for future returns on each assetclass. The expected return for each asset class is then weighted based on the target asset allocation to develop the expectedlong-term rate of return on assets assumption for the portfolio. The weighted-average asset allocations by asset category as ofDecember 31, 2016, were as follows: Asset Category Target Actual Cash and cash equivalents 6% 7% United States government obligations 1% 1% Equity securities 50% 49% Debt Securities 43% 43% The DMC Pension Plan assets are invested in separately managed portfolios using investment management firms.The objective for all asset categories is to maximize total return without assuming undue risk exposure. The DMC PensionPlan maintains a well-diversified asset allocation that best meets these objectives. The DMC Pension Plan assets are largelycomprised of equity securities, which include companies with various market capitalization sizes in addition to internationaland 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. Under129 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsthe investment policy of the DMC Pension Plan, investments in derivative securities are not permitted for the sole purpose ofspeculating 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 toeconomic indicators, such as gross domestic product, consumer price index and U.S. monetary policy that may affect theperformance of their account. The performance of all managers and the aggregate asset allocation are formally reviewed on aquarterly basis, with a rebalancing of the asset allocation occurring at least once a year. The current asset allocation objectiveis 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 ofDecember 31, 2016 and 2015, aggregated by the level in the fair value hierarchy within which those measurements aredetermined. Fair value methodologies for Level 1, Level 2 and Level 3 are consistent with the inputs described in Note 18. December 31, 2016 (Level 1) (Level 2) (Level 3) Cash and cash equivalents $60 $60 $— $— United States government obligations 5 5 — — Fixed Income funds 335 335 — — Equity securities 386 386 — — $786 $786 $— $— December 31, 2015 (Level 1) (Level 2) (Level 3) Cash and cash equivalents $44 $44 $— $— United States government obligations 5 5 — — Fixed Income funds 354 354 — — Equity securities 412 412 — — $815 $815 $— $— The following table presents the estimated future benefit payments to be made from the SERPs and the DMCPension Plan, a portion of which will be funded from plan assets, for the next five years and in the aggregate for the five yearsthereafter: Years Ending December 31, Five Years Total 2017 2018 2019 2020 2021 Thereafter Estimated benefit payments $941 $85 $88 $91 $93 $95 $489 The SERP and DMC Pension Plan obligations of $689 million at December 31, 2016 are classified in theaccompanying Consolidated Balance Sheet as an other current liability ($63 million) and defined benefit plan obligations($626 million) based on an estimate of the expected payment patterns. We expect to make total contributions to the plans ofapproximately $62 million for the year ending December 31, 2017.130 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNOTE 9. PROPERTY AND EQUIPMENT The principal components of property and equipment are shown in the table below: December 31, 2016 2015 Land $667 $680 Buildings and improvements 7,277 7,041 Construction in progress 339 191 Equipment 4,744 4,326 13,027 12,238 Accumulated depreciation and amortization (4,974) (4,323) Net property and equipment $8,053 $7,915 Property and equipment is stated at cost, less accumulated depreciation and amortization and impairment write-downs related to assets held and used. NOTE 10. GOODWILL AND OTHER INTANGIBLE ASSETS The following table provides information on changes in the carrying amount of goodwill, which is included in theaccompanying Consolidated Balance Sheets as of December 31, 2016 and 2015: 2016 2015 Hospital Operations and other As of January 1: Goodwill $5,552 $5,642 Accumulated impairment losses (2,430) (2,430) Total 3,122 3,212 Goodwill acquired during the year and purchase price allocation adjustments 251 100 Goodwill allocated to assets held for sale — (190) Total $3,373 $3,122 As of December 31: Goodwill $5,803 $5,552 Accumulated impairment losses (2,430) (2,430) Total $3,373 $3,122 Ambulatory Care As of January 1: Goodwill $3,243 $95 Accumulated impairment losses — — Total 3,243 95 Goodwill acquired during the year and purchase price allocation adjustments 236 3,161 Impact of foreign currency translation (32) (13) Total $3,447 $3,243 As of December 31: Goodwill $3,447 $3,243 Accumulated impairment losses — — Total $3,447 $3,243 131 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents 2016 2015 Conifer As of January 1: Goodwill $605 $606 Accumulated impairment losses — — Total 605 606 Goodwill acquired during the year and purchase price allocation adjustments — (1) Total $605 $605 As of December 31: Goodwill $605 $605 Accumulated impairment losses — — Total $605 $605 The following table provides information regarding other intangible assets, which are included in theaccompanying Consolidated Balance Sheets as of December 31, 2016 and 2015: Gross Carrying Accumulated Net Book Amount Amortization Value At December 31, 2016: Capitalized software costs $1,562 $(676) $886 Trade names 106 — 106 Contracts 845 (43) 802 Other 104 (53) 51 Total $2,617 $(772) $1,845 At December 31, 2015: Capitalized software costs $1,456 $(594) $862 Trade Names 106 — 106 Contracts 653 (26) 627 Other 119 (39) 80 Total $2,334 $(659) $1,675 Estimated future amortization of intangibles with finite useful lives as of December 31, 2016 is as follows: Years Ending December 31, Later Total 2017 2018 2019 2020 2021 Years Amortization of intangible assets $1,190 $186 $171 $147 $123 $86 $477 132 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNOTE 11. INVESTMENTS AND OTHER ASSETS The principal components of investments and other assets in our accompanying Consolidated Balance Sheets are asfollows: December 31, 2016 2015 Marketable debt securities $49 $59 Equity investments in unconsolidated healthcare entities 935 817 Total investments 984 876 Cash surrender value of life insurance policies 28 28 Long-term deposits 34 36 Land held for expansion, long-term receivables and other assets 204 235 Investments and other assets $1,250 $1,175 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 shares and debt instruments are adjusted at the end of each accounting period to their marketvalues through a credit or charge to other comprehensive income (loss), net of taxes. At both December 31, 2016 and 2015,there were approximately $1 million of accumulated unrealized losses on these investments. NOTE 12. ACCUMULATED OTHER COMPREHENSIVE LOSS Our accumulated other comprehensive loss is comprised of the following: December 31, 2016 2015 Adjustments for defined benefit plans $(205) $(169) Foreign currency translation adjustments (53) 5 Accumulated other comprehensive loss $(258) $(164) The tax effect allocated to the adjustments for our defined benefit plans was approximately $18 million for the yearended December 31, 2016 and less than $1 million for the year ended December 31, 2015.NOTE 13. PROPERTY AND PROFESSIONAL AND GENERAL LIABILITY INSURANCE Property Insurance We have property, business interruption and related insurance coverage to mitigate the financial impact ofcatastrophic events or perils that is subject to deductible provisions based on the terms of the policies. These policies are onan occurrence basis. For the policy period April 1, 2016 through March 31, 2017, we have coverage totaling $600 millionper occurrence, after deductibles and exclusions, with annual aggregate sub-limits of $100 million each for floods andearthquakes and a per-occurrence sub-limit of $200 million for windstorms with no annual aggregate. With respect to firesand other perils, excluding floods, earthquakes and windstorms, the total $600 million limit of coverage per occurrenceapplies. Deductibles are 5% of insured values up to a maximum of $25 million for floods, California earthquakes and wind-related claims, and 2% of insured values for New Madrid fault earthquakes, with a maximum per claim deductible of$25 million. Other covered losses, including fires and other perils, have a minimum deductible of $1 million. Professional and General Liability Reserves At December 31, 2016 and 2015, the aggregate current and long-term professional and general liability reserves inour accompanying Consolidated Balance Sheets were approximately $794 million and $755 million, respectively. Thesereserves include the reserves recorded by our captive insurance subsidiaries and our self-insured retention reserves recordedbased on modeled estimates for the portion of our professional and general liability risks, including incurred but not reportedclaims, for which we do not have insurance coverage. We estimated the reserves for losses and related133 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsexpenses using expected loss-reporting patterns discounted to their present value under a risk-free rate approach using aFederal Reserve seven-year maturity rate of 2.25%, 2.09% and 1.97% at December 31, 2016, 2015 and 2014, respectively. If the aggregate limit of any of our professional and general liability policies is exhausted, in whole or in part, itcould deplete or reduce the limits available to pay any other material claims applicable to that policy period. Included in other operating expenses, net, in the accompanying Consolidated Statements of Operations ismalpractice expense of $281 million, $283 million and $232 million for the years ended December 31, 2016, 2015 and 2014,respectively. NOTE 14. CLAIMS AND LAWSUITS We operate in a highly regulated and litigious industry. Healthcare companies are subject to numerousinvestigations by various governmental agencies. Further, private parties have the right to bring qui tam 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. We and our subsidiaries have received inquiries in recent years fromgovernment agencies, and we may receive similar inquiries in future periods. We are also subject to class action lawsuits,employment-related claims and other legal actions in the ordinary course of business. Some of these actions may involvelarge demands, as well as substantial defense costs. We cannot predict the outcome of current or future legal actions againstus or the effect that judgments or settlements in such matters may have on us. We are also subject to a non-prosecution agreement, as described below. If we fail to comply with this agreement, wecould be subject to criminal prosecution, substantial penalties and exclusion from participation in federal healthcareprograms, any of which could adversely impact our business, financial condition, results of operations or cash flows. We record accruals for estimated losses relating to claims and lawsuits when available information indicates that aloss is probable and we can reasonably estimate the amount of the loss or a range of loss. Significant judgment is required inboth the determination of the probability of a loss and the determination as to whether a loss is reasonably estimable. Thesedeterminations are updated at least quarterly and are adjusted to reflect the effects of negotiations, settlements, rulings,advice of legal counsel and technical experts, and other information and events pertaining to a particular matter. If a loss on amaterial matter is reasonably possible and estimable, we disclose an estimate of the loss or a range of loss. In cases where wehave not disclosed an estimate, we have concluded that the loss is either not reasonably possible or the loss, or a range ofloss, is not reasonably estimable, based on available information. Resolution of Clinica de la Mama Qui Tam Action and Criminal Investigation As previously disclosed, on September 30, 2016, the Company and certain of its subsidiaries, includingTenet HealthSystem Medical, Inc. (“THSMI”), Atlanta Medical Center, Inc. (“AMCI”) and North Fulton Medical Center, Inc.(“NFMCI”), executed agreements with the U.S. Department of Justice (“DOJ”) and others to resolve the Clinica de la Mamacivil qui tam litigation and criminal investigation. In October 2016, AMCI and NFMCI pled guilty to conspiring to violatethe federal anti-kickback statute and defraud the United States. In addition, we paid approximately $517 million, includinginterest costs, in monetary forfeitures and settlement payments to the DOJ and other state entities. As a result of the resolutionagreements, the previously disclosed civil qui tam litigation captioned United States of America, ex rel. Ralph D. Williams v.Health Management Associates, Inc., et al., which was filed in the U.S. District Court for the Middle District of Georgia, wasdismissed. As required by the resolution agreements, THSMI also entered into a Non-Prosecution Agreement (“NPA”) with theDOJ’s Criminal Division, Fraud Section, and the U.S. Attorney’s Office for the Northern District of Georgia (together, the“Offices”). Among other things, the NPA provides that if, during the term of the agreement, THSMI commits any felony underfederal law, or if the Company commits any felony related to the federal anti-kickback statute, or if THSMI or the Companyfail to cooperate or otherwise fail to fulfill the obligations set forth in the NPA, then THSMI, the Company and their affiliatesshall be subject to prosecution for any federal criminal violation of which the Offices have knowledge,134 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsincluding, but not limited to, the conduct described in the NPA. The Offices have sole discretion over determining whetherthere has been a breach of the NPA and whether to pursue prosecution. Pursuant to the NPA, on February 1, 2017, we retained two independent co-monitors (the “Monitor”), who arepartners in a national law firm, to assess, oversee and monitor the Company’s compliance with its obligations under the NPA.The NPA is scheduled to expire on February 1, 2020 (three years from the date on which the Monitor was retained); however,the Offices have the right to extend or shorten the term of the NPA under certain conditions. For additional information regarding the foregoing matters, we refer you to the Company’s Form 8-K filed onOctober 3, 2016, which summarizes the terms and conditions, and includes copies, of the resolution agreements. Shareholder Litigation On October 7, 2016, a purported shareholder of the Company’s common stock filed a complaint in the U.S. DistrictCourt for the Central District of California against the Company and several current and former executive officers in a mattercaptioned Pennington v. Tenet Healthcare Corporation, et al. The plaintiff is seeking class certification on behalf of allpersons who acquired the Company’s securities between February 28, 2012 and October 3, 2016. On October 10, 2016, asecond purported shareholder filed a complaint in the U.S. District Court for the Northern District of Texas (Dallas Division)against the Company and two current executive officers in a matter captioned Yamany v. Tenet Healthcare Corporation, etal. The plaintiff in this case is seeking class certification on behalf of all persons who acquired the Company’s securitiesbetween February 26, 2013 and September 30, 2016. Both complaints allege that false or misleading statements or omissionsconcerning the Company’s financial performance and compliance policies, specifically with respect to the Clinica de laMama matters described above, caused the price of the Company’s common stock to be artificially inflated. On February 10,2017, the judge in the Yamany matter entered an order consolidating the cases in the Northern District of Texas (DallasDivision) and appointing four lead plaintiffs. The case is now captioned In re Tenet Healthcare Corporation SecuritiesLitigation. Plaintiffs have until April 11, 2017 to file an amended and consolidated complaint. On November 23, 2016, December 20, 2016 and January 23, 2017, three purported shareholders of the Company’scommon stock filed separate shareholder derivative lawsuits on behalf of the Company against current and former officersand directors. The complaints generally track the allegations in the securities class action complaints described above andclaim that the plaintiffs did not make demand on the current directors to bring the lawsuits because such a demand wouldhave been futile. On January 30, 2017, the judge in the matter captioned Stewart, derivatively on behalf of Tenet HealthcareCorporation entered an order consolidating that case with the matter captioned City of Warren Police and Fire RetirementSystem, derivatively on behalf of Tenet Healthcare Corporation, both of which were filed in Dallas County District Court,and appointing lead counsel and liaison counsel for plaintiffs. The consolidated case is now captioned In re TenetHealthcare Corporation Shareholder Derivative Litigation. On February 23, 2017, the plaintiffs filed a VerifiedConsolidated Shareholder Derivative Petition. The third matter, filed in the U.S. District Court for the Northern District ofTexas, is captioned Horwitz, derivatively on behalf of Tenet Healthcare Corporation. The Company intends to vigorouslydefend against the allegations in the purported shareholder class actions and shareholder derivative lawsuits. Antitrust Class Action Lawsuit Filed by Registered Nurses in San Antonio In Maderazo, et al. v. VHS San Antonio Partners, L.P. d/b/a Baptist Health Systems, et al., filed in June 2006 in theU.S. District Court for the Western District of Texas, a purported class of registered nurses employed by three unaffiliated SanAntonio-area hospital systems allege those hospital systems, including Baptist Health System, and other unidentified SanAntonio regional hospitals violated Section §1 of the federal Sherman Act by conspiring to depress nurses’ compensationand exchanging compensation-related information among themselves in a manner that reduced competition and suppressedthe wages paid to such nurses. The suit seeks unspecified damages (subject to trebling under federal law), interest, costs andattorneys’ fees. The case had been stayed since 2008; however, in July 2015, the court lifted the stay and re-openeddiscovery. We will continue to seek to defeat class certification and vigorously defend ourselves against the plaintiffs’allegations. It remains impossible at this time to predict the outcome of these proceedings with any certainty; however, webelieve that the ultimate resolution of this matter will not have a material effect on our business, financial condition or resultsof operations.135 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Ordinary Course Matters We are also subject to other claims and lawsuits arising in the ordinary course of business, including potentialclaims related to, among other things, the care and treatment provided at our hospitals and outpatient facilities, theapplication of various federal and state labor laws, tax audits and other matters. Although the results of these claims andlawsuits 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 or financial condition. New claims or inquiries may be initiated against us from time to time. These matters could (1) require us to paysubstantial damages or amounts in judgments or settlements, which, individually or in the aggregate, could exceed amounts,if any, that may be recovered under our insurance policies where coverage applies and is available, (2) cause us to incursubstantial expenses, (3) require significant time and attention from our management, and (4) cause us to close or sellhospitals or otherwise modify the way we conduct business. The following table presents reconciliations of the beginning and ending liability balances in connection with legalsettlements and related costs recorded during the years ended December 31, 2016, 2015 and 2014: Balances at Litigation and Balances at Beginning Investigation Cash End of of Period Costs Payments Other Period Year Ended December 31, 2016 Continuing operations $299 $293 $(582) $2 $12 Discontinued operations — — — — — $299 $293 $(582) $2 $12 Year Ended December 31, 2015 Continuing operations $73 $291 $(72) $7 $299 Discontinued operations 10 (8) (2) — — $83 $283 $(74) $7 $299 Year Ended December 31, 2014 Continuing operations $64 $25 $(16) $ — $73 Discontinued operations 6 18 (14) — 10 $70 $43 $(30) $ — $83 For the years ended December 31, 2016, 2015 and 2014, we recorded net costs of $293 million, $283 million and$43 million, respectively, in connection with significant legal proceedings and governmental reviews. NOTE 15. REDEEMABLE NONCONTROLLING INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARIES In October 2015, we formed a new joint venture with Baptist Health System, Inc. to own and operate a healthcarenetwork serving Birmingham and central Alabama. We have a 60% ownership interest in the joint venture, and we managethe network’s operations. Baptist Health System contributed four hospitals—Citizens Baptist Medical Center, PrincetonBaptist Medical Center, Shelby Baptist Medical Center and Walker Baptist Medical Center—to the joint venture, and wecontributed Brookwood Medical Center. The network also includes each contributed hospital’s related businesses. We paidapproximately $184 million to align the respective valuations of the assets contributed to the joint venture. The jointventure’s operating agreement includes a put option that the minority owners may exercise on their respectivenoncontrolling interest upon the occurrence of certain specified events. The redemption value is calculated using a fairmarket value analysis. As a result of this transaction, we recorded approximately $322 million of redeemable noncontrollinginterests. In August 2015, we formed a joint venture with Dignity Health and Ascension Health to own and operateCarondelet Health Network (the “Carondelet JV”) based in Tucson, Arizona. We own a 60% controlling interest in the new136 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsjoint venture and manage the operations of the network. Affiliates of Dignity Health and Ascension Health (the “minorityowners”) own the remaining 40% noncontrolling interest in the Carondelet JV. The joint venture’s operating agreementincludes a put option that the minority owners may exercise on their respective noncontrolling interest onSeptember 1, 2025. The redemption value is calculated using a fair market value analysis. As a result of this transaction, werecorded approximately $68 million of redeemable noncontrolling interests. In June 2015, we formed a new joint venture by combining our freestanding ambulatory surgery and imaging centerassets with the short-stay surgical facility assets of USPI. In connection with the formation of the USPI joint venture, weentered into a stockholders agreement pursuant to which we and our joint venture partners agreed to certain rights andobligations with respect to the governance of the joint venture. As part of the USPI transaction, we also entered into a put/call agreement (the “Put/Call Agreement”) that containsput and call options with respect to the equity interests in the joint venture held by our joint venture partners. Each yearstarting in 2016, our joint venture partners must put to us at least 12.5%, and may put up to 25%, of the equity held by themin the joint venture immediately after the closing. In each year that our joint venture partners are to deliver a put and do notput the full 25% of the USPI joint venture’s shares allowable, we may call the difference between the number of shares ourjoint venture partners put and the maximum number of shares they could have put that year. In addition, the Put/CallAgreement contains certain other call options pursuant to which we will have the ability to acquire all of the ownershipinterests from our joint venture partners controlled by Welsh, Carson, Anderson & Stowe (“Welsh Carson”) between 2018and 2020. In the event of a put by our joint venture partners controlled by Welsh Carson, we will have the ability to choosewhether to settle the purchase price in cash or shares of our common stock and, in the event of a call by us, our joint venturepartners controlled by Welsh Carson will have the ability to choose whether to settle the purchase price in cash or shares ofour common stock. In addition, we entered into a separate put call agreement (the “Baylor Put/Call Agreement”) with Baylor UniversityMedical Center (“Baylor”) that contains put and call options with respect to the equity interests in the USPI joint ventureheld by Baylor (3.01% at December 31, 2016). Each year starting in 2021, Baylor may put up to one-third of their total sharesheld as of January 1, 2017 in the joint venture. In each year that Baylor does not put the full 33.3% of the USPI jointventure’s shares allowable, we may call the difference between the number of shares Baylor put and the maximum number ofshares they could have put that year. In addition, the Baylor Put/Call Agreement contains a call option pursuant to which wehave the ability to acquire all of Baylor’s ownership interest by 2024. We have the ability to choose whether to settle thepurchase price for the Baylor put/call in cash or shares of our common stock. Based on the nature of these put/call structures, the minority shareholders’ interests in the USPI joint venture isclassified as redeemable noncontrolling interests in our Consolidated Balance Sheet at December 31, 2015. As a result of thistransaction, we recorded approximately $1.48 billion of redeemable noncontrolling interests. In January 2016, Welsh,Carson, Anderson & Stowe, on behalf of our joint venture partners, delivered a put notice for the minimum number of sharesthey were required to put to us in 2016 according to the Put/Call Agreement. In April 2016, we paid approximately $127million to purchase these shares, which increased our ownership interest in the USPI joint venture to approximately 56.3%. In January 2017, Welsh, Carson, Anderson & Stowe, on behalf of our joint venture partners, delivered a put notice for theminimum number of shares they are required to put to us in 2017 according to the Put/Call Agreement. The estimated amountwe will pay to repurchase these shares, which represent a 6.25% interest in our USPI joint venture, is between $159 millionand $170 million. When we acquired Vanguard Health Systems, Inc. (“Vanguard”) in October 2013, we obtained a 51% controllinginterest in a limited liability company that held the assets and liabilities of Valley Baptist Health System (“Valley Baptist”),which consists of two hospitals in Brownsville and Harlingen, Texas. The remaining 49% noncontrolling interest in the jointventure was held by the former owner of Valley Baptist (the “seller”). The joint venture operating agreement included a putoption that would allow the seller to require us to purchase all or a portion of the seller’s remaining noncontrolling interest inthe limited liability company at certain specified time periods. In connection with the seller’s exercise and the settlement ofthe put option, we acquired the remaining 49% noncontrolling interest from the seller on February 11, 2015 in exchange forapproximately $254 million in cash, which was applied to and reduced our redeemable noncontrolling interests, with thedifference between the payment and the carrying value of approximately $270 million recorded as additional paid-in capital.The redemption value of the put option was calculated pursuant to the terms of the operating137 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsagreement based on the operating results and the debt of the joint venture. As a result, we now own 100% of Valley Baptist. In January 2015, Conifer announced a 10-year extension and expansion of its agreement with Catholic HealthInitiatives (“CHI”) to provide patient access, revenue integrity and patient financial services to 90 CHI hospitals through2032. At that time, CHI increased its minority ownership position in Conifer’s principal operating subsidiary, Conifer HealthSolutions, LLC, to approximately 23.8%, resulting in an increase in our redeemable noncontrolling interests ofapproximately $47 million. The following table shows the changes in redeemable noncontrolling interests in equity of consolidated subsidiariesduring the years ended 2016 and 2015: December 31, 2016 2015Balances at beginning of period $2,266 $401Net income 230 166Distributions paid to noncontrolling interests (105) (60)Purchase accounting adjustments (47) —Purchases and sales of businesses and noncontrolling interests, net 49 1,759Balances at end of period $2,393 $2,266 Our redeemable noncontrolling interests balances at December 31, 2016 and 2015 in the table above werecomprised of $520 million and $463 million, respectively, from our Hospital Operations and other segment, $1.715 billionand $1.698 billion, respectively, from our Ambulatory Care segment, and $158 million and $105 million, respectively, fromour Conifer segment. Our net income attributable to redeemable noncontrolling interests for the years endedDecember 31, 2016 and 2015, respectively, on our Consolidated Statements of Operations were comprised of $31 millionand $31 million, respectively, from our Hospital Operations and other segment, $285 million and $138 million, respectively,from our Ambulatory Care segment, and $52 million and $49 million, respectively, from our Conifer segment. NOTE 16. INCOME TAXES The provision for income taxes for continuing operations for the years ended December 31, 2016, 2015 and 2014consists of the following: Years Ended December 31, 2016 2015 2014 Current tax expense (benefit): Federal $12 $(2) $(12) State 14 28 18 26 26 6 Deferred tax expense (benefit): Federal 34 24 46 State 7 18 (3) 41 42 43 $67 $68 $49 A reconciliation between the amount of reported income tax expense (benefit) and the amount computed bymultiplying income (loss) from continuing operations before income taxes by the statutory federal income tax rate is shownbelow. State income tax expense for the year ended December 31, 2016 includes $35 million of expense related to the writeoff of expired or worthless unutilized state net operating loss carryforwards for which a full valuation allowance had beenprovided in prior years. A corresponding tax benefit of $35 million is included for the year ended December 31, 2016 toreflect the reduction in the valuation allowance. Foreign pretax loss for the years ended December 31, 2016 and December31, 2015 was $16 million and $4 million, respectively.138 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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, 2016 2015 2014Tax expense at statutory federal rate of 35% $87 $50 $52State income taxes, net of federal income tax benefit 16 18 5Expired state net operating losses, net of federal income tax benefit 35 11 34Tax attributable to noncontrolling interests (106) (59) (23)Nondeductible goodwill 29 22 —Nontaxable gains (11) (11) —Nondeductible litigation costs 37 44 —Nondeductible acquisition costs 1 4 2Nondeductible health insurance provider fee 2 2 3Changes in valuation allowance (25) 4 (20)Change in tax contingency reserves, including interest (9) 7 (2)Amendment of prior-year tax returns — (17) —Prior-year provision to return adjustments and other changes in deferred taxes 12 (12) (5)Other items (1) 5 3 $67 $68 $49 Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets andliabilities for financial reporting purposes and the amount used for income tax purposes. The following table discloses thosesignificant components of our deferred tax assets and liabilities, including any valuation allowance: December 31, 2016 December 31, 2015 Assets Liabilities Assets Liabilities Depreciation and fixed-asset differences $ — $683 $ — $718 Reserves related to discontinued operations and restructuring charges 13 — 15 — Receivables (doubtful accounts and adjustments) 231 — 185 — Deferred gain on debt exchanges — 21 — 32 Accruals for retained insurance risks 351 — 318 — Intangible assets — 548 — 366 Other long-term liabilities 141 — 141 — Benefit plans 457 — 459 — Other accrued liabilities 60 — 99 — Investments and other assets — 130 — 69 Net operating loss carryforwards 653 — 715 — Stock-based compensation 45 — 40 — Other items 118 23 54 6 2,069 1,405 2,026 1,191 Valuation allowance (72) — (96) — $1,997 $1,405 $1,930 $1,191 Below is a reconciliation of the deferred tax assets and liabilities and the corresponding amounts reported in theaccompanying Consolidated Balance Sheets. December 31, 2016 2015 Deferred income tax assets $871 $776 Deferred tax liabilities (279) (37) Net deferred tax asset $592 $739 During the year ended December 31, 2016, we decreased the valuation allowance by $24 million primarily due tothe expiration or worthlessness of unutilized state net operating loss carryovers. The remaining balance in the valuationallowance at December 31, 2016 is $72 million. During the year ended December 31, 2015, the valuation allowanceincreased by $9 million, $5 million due to the acquisition of USPI and $4 million due to changes in expected realizability ofdeferred tax assets. The balance in the valuation allowance as of December 31, 2015 was $96 million.139 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDuring the year ended December 31, 2014, the valuation allowance decreased by $20 million, primarily due to the expirationof unutilized state net operating loss carryovers. We account for uncertain tax positions in accordance with ASC 740-10-25, which prescribes a comprehensivemodel for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken orexpected to be taken in income tax returns. The table below summarizes the total changes in unrecognized tax benefitsduring the year ended December 31, 2016. The additions and reductions for tax positions include the impact of items forwhich the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductions.Such amounts include unrecognized tax benefits that have impacted deferred tax assets and liabilities at December 31, 2016,2015 and 2014. Continuing Discontinued Operations Operations Total Balance at December 31, 2013 $43 $ — $43 Reductions for tax positions of prior years (1) — (1) Additions for current-year tax positions 1 — 1 Reductions due to a lapse of statute of limitations (5) — (5) Balance at December 31, 2014 $38 $ — $38 Additions for prior-year tax positions 1 — 1 Additions for current-year tax positions 5 — 5 Reductions due to a lapse of statute of limitations (4) — (4) Balance at December 31, 2015 $40 $ — $40 Additions for prior-year tax positions 2 — 2 Reductions for tax positions of prior years — — — Additions for current-year tax positions — — — Reductions due to a lapse of statute of limitations (7) — (7) Balance at December 31, 2016 $35 $ — $35 The total amount of unrecognized tax benefits as of December 31, 2016 was $35 million, of which $32 million, ifrecognized, would affect our effective tax rate and income tax expense (benefit) from continuing operations. Income taxexpense in the year ended December 31, 2016 includes a benefit of $9 million in continuing operations attributable to adecrease in our estimated liabilities for uncertain tax positions, net of related deferred tax effects. The total amount ofunrecognized tax benefits as of December 31, 2015 was $40 million, of which $37 million, if recognized, would affect oureffective tax rate and income tax expense (benefit) from continuing operations. Income tax expense in the year endedDecember 31, 2015 includes expense of $2 million in continuing operations attributable to an increase in our estimatedliabilities for uncertain tax positions, net of related deferred tax effects. The total amount of unrecognized tax benefits as ofDecember 31, 2014 was $38 million, of which $31 million, if recognized, would affect our effective tax rate and income taxexpense (benefit) from continuing operations. Income tax expense in the year ended December 31, 2014 includes a benefit of$6 million in continuing operations attributable to a decrease in our estimated liabilities for uncertain tax positions, net ofrelated deferred tax effects. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense in ourconsolidated statements of operations. Approximately $1 million of interest and penalties related to accrued liabilities foruncertain tax positions related to continuing operations are included in the accompanying Consolidated Statement ofOperations for the year ended December 31, 2016. Total accrued interest and penalties on unrecognized tax benefits as ofDecember 31, 2016 were $4 million, all of which related to continuing operations. The Internal Revenue Service (“IRS”) has completed audits of our tax returns for all tax years ending on or beforeDecember 31, 2007, and of Vanguard’s tax returns for fiscal years ending on or before October 1, 2013. All disputed issueswith respect to these audits have been resolved and all related tax assessments (including interest) have been paid. Our taxreturns for years ended after December 31, 2007 and Vanguard’s tax returns for fiscal years ended after October 1, 2013remain subject to examination by the IRS. USPI tax returns for years ended after December 31, 2011 remain subject to audit. 140 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsAs of December 31, 2016, approximately $5 million of unrecognized federal and state tax benefits, as well asreserves for interest and penalties, may decrease in the next 12 months as a result of the settlement of audits, the filing ofamended tax returns or the expiration of statutes of limitations. At December 31, 2016, our carryforwards available to offset future taxable income consisted of (1) federal netoperating loss (“NOL”) carryforwards of approximately $1.7 billion pretax expiring in 2025 to 2034, (2) approximately$30 million in alternative minimum tax credits with no expiration, (3) general business credit carryforwards of approximately$24 million expiring in 2023 through 2036, and (4) state NOL carryforwards of $3.0 billion expiring in 2017 through 2036for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is $19 million. Our ability toutilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code ifcertain ownership changes in our company occur during a rolling three-year period. These ownership changes includepurchases of common stock under share repurchase programs (see Note 2), the offering of stock by us, the purchase or sale ofour stock by 5% shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock.If such ownership changes by 5% shareholders result in aggregate increases that exceed 50 percentage points during thethree-year period, then Section 382 imposes an annual limitation on the amount of our taxable income that may be offset bythe NOL carryforwards or tax credit carryforwards at the time of ownership change.NOTE 17. EARNINGS (LOSS) PER COMMON SHARE The following table is a reconciliation of the numerators and denominators of our basic and diluted earnings (loss)per common share calculations for our continuing operations for the years ended December 31, 2016, 2015 and 2014. Netincome available (loss attributable) is expressed in millions and weighted average shares are expressed in thousands. Net Income Available (Loss Attributable) to Common Weighted Shareholders AverageShares Per-Share (Numerator) (Denominator) Amount Year Ended December 31, 2016 Net loss attributable to Tenet Healthcare Corporation commonshareholders for basic loss per share $(187) 99,321 $(1.88) Effect of dilutive stock options, restricted stock units and deferredcompensation units — — — Net loss attributable to Tenet Healthcare Corporation commonshareholders for diluted loss per share $(187) 99,321 $(1.88) Year Ended December 31, 2015 Net loss attributable to Tenet Healthcare Corporation commonshareholders for basic loss per share $(142) 99,167 $(1.43) Effect of dilutive stock options, restricted stock units and deferredcompensation units — — — Net loss attributable to Tenet Healthcare Corporation commonshareholders for diluted loss per share $(142) 99,167 $(1.43) Year Ended December 31, 2014 Net income attributable to Tenet Healthcare Corporation commonshareholders for basic earnings per share $34 97,801 $0.35 Effect of dilutive stock options, restricted stock units and deferredcompensation units — 2,486 (0.01) Net income attributable to Tenet Healthcare Corporation commonshareholders for diluted earnings per share $34 100,287 $0.34 141 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsAll potentially dilutive securities were excluded from the calculation of diluted earnings (loss) per share for theyears ended December 31, 2016 and 2015 because we did not report income from continuing operations available tocommon shareholders in those periods. In circumstances where we do not have income from continuing operations availableto common shareholders, the effect of stock options and other potentially dilutive securities is anti-dilutive, that is, a lossfrom continuing operations attributable to common shareholders has the effect of making the diluted loss per share less thanthe basic loss per share. Had we generated income from continuing operations available to common shareholders in the yearsended December 31, 2016 and 2015, the effect (in thousands) of employee stock options, restricted stock units and deferredcompensation units on the diluted shares calculation would have been an increase in shares of 1,421 and 2,380 for the yearsended December 31, 2016 and 2015, respectively. NOTE 18. FAIR VALUE MEASUREMENTS Our financial assets and liabilities recorded at fair value on a recurring basis primarily relate to investments inavailable-for-sale securities held by our captive insurance subsidiaries. The following tables present information about ourassets and liabilities that are measured at fair value on a recurring basis as of December 31, 2016 and 2015. The followingtables also indicate the fair value hierarchy of the valuation techniques we utilized to determine such fair value hierarchy ofthe valuation techniques we utilized to determine such fair values. In general, fair values determined by Level 1 inputsutilize quoted prices (unadjusted) in active markets for identical assets or liabilities. We consider a security that trades atleast weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, suchas quoted prices for similar assets, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservabledata points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Quoted Prices in Active Significant Markets for Significant Other Unobservable Identical Assets Observable Inputs InputsInvestments December 31, 2016 (Level 1) (Level 2) (Level 3)Marketable debt securities — noncurrent $49 $23 $26 $ — $49 $23 $26 $ — Quoted Prices in Active Significant Markets for Significant Other Unobservable Identical Assets Observable Inputs InputsInvestments December 31, 2015 (Level 1) (Level 2) (Level 3)Marketable debt securities — noncurrent $59 $24 $35 $ — $59 $24 $35 $ — 142 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsOur non-financial assets and liabilities not permitted or required to be measured at fair value on a recurring basistypically relate to long-lived assets held and used, long-lived assets held for sale and goodwill. We are required to provideadditional disclosures about fair value measurements as part of our financial statements for each major category of assets andliabilities measured at fair value on a non-recurring basis. The following table presents this information and indicates the fairvalue 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 notapplicable to non-financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that areobservable, such as definitive sales agreements, appraisals or established market values of comparable assets. Fair valuesdetermined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there islittle, if any, market activity for the asset or liability, such as internal estimates of future cash flows. Quoted Prices in Active Significant Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs December 31, 2016 (Level 1) (Level 2) (Level 3) Long-lived assets held and used $163 $— $163 $— Other than temporarily impairedequity method investments $27 $— $27 $— Quoted Prices in Active Significant Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs December 31, 2015 (Level 1) (Level 2) (Level 3)Long-lived assets held and used $45 $— $45 $— As described in Note 5, in the years ended December 31, 2016 and 2015, we recorded impairment charges incontinuing operations of $54 million and $19 million, respectively, for the write-down of buildings, equipment and otherlong-lived assets to their estimated fair values. These impairment charges recorded in the 2016 period related to four of ourhospitals, while the impairment charges recognized in the 2015 period related to two of our hospitals. We also recorded $19million of impairment charges related to investments and $14 million related to other intangible assets, primarily contractrelated intangibles and capitalized software costs not associated with the hospitals described above, in the year endedDecember 31, 2016. The fair value of our long-term debt (except for borrowings under the Credit Agreement) is based on quoted marketprices (Level 1). The inputs used to establish the fair value of the borrowings outstanding under the Credit Agreement areconsidered to be Level 2 inputs, which include inputs other than quoted prices included in Level 1 that are observable, eitherdirectly or indirectly. At December 31, 2016 and 2015, the estimated fair value of our long-term debt was approximately93.9% and 96.2%, respectively, of the carrying value of the debt.NOTE 19. ACQUISITIONS During the year ended December 31, 2016, we completed the transaction that allowed us to consolidate fivemicrohospitals that were previously recorded as equity method investments. We also acquired majority interests in 28ambulatory surgery centers (all of which are owned by our USPI joint venture) and various physician practices. The fair valueof the consideration conveyed in the acquisitions (the “purchase price”) was $117 million. During the year ended December 31, 2015, we completed the transaction that combined our freestandingambulatory surgery and imaging center assets with USPI’s short-stay surgical facility assets into a new joint venture. We alsocompleted the acquisition of Aspen, a network of nine private hospitals and clinics in the United Kingdom. In addition, webegan operating Hi-Desert Medical Center, which is a 59-bed acute care hospital in Joshua Tree, California, and its relatedhealthcare facilities, including a 120-bed skilled nursing facility, an ambulatory surgery center and an imaging center, undera long-term lease agreement. Furthermore, we formed a new joint venture with Dignity Health and Ascension Health to ownand operate Carondelet Health Network, which is comprised of three hospitals with over 900 licensed beds, related physicianpractices, ambulatory surgery, imaging and urgent care centers, and other affiliated143 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsbusinesses, in Tucson and Nogales, Arizona. We also formed a new joint venture with Baptist Health Systems, Inc. to ownand operate a healthcare network serving Birmingham and central Alabama. We have a 60% ownership in the joint venture,and manage the network’s operations. The network has more than 1,700 licensed beds, nine outpatient centers, 68 physicianclinics, delivering primarily and specialty care, and more than 7,000 employees and approximately 1,500 affiliatedphysicians. Additionally, we acquired majority interests in nine ambulatory surgery centers and purchased 35 urgent carecenters (all of which are owned by our USPI joint venture), and various physician practice entities. The fair value of theconsideration conveyed in the acquisitions (the “purchase price”) was $940 million. During the year ended December 31, 2014, we acquired a majority interest in Texas Regional Medical Center atSunnyvale, a 70-bed hospital in Sunnyvale, Texas, a suburban community east of Dallas, and completed our acquisition ofEmanuel Medical Center, a 209-bed hospital in Turlock, California, located approximately 100 miles southeast of SanFrancisco. We also acquired five ambulatory surgery centers, three urgent care centers, one diagnostic imaging center, SPiHealthcare, a provider of revenue cycle management, health information management and software solutions, and variousphysician practice entities in the same period. The fair value of the consideration conveyed in the acquisitions (the “purchaseprice”) was $428 million. We are required to allocate the purchase prices of acquired businesses to assets acquired or liabilities assumed and, ifapplicable, noncontrolling interests based on their fair values. The excess of the purchase price allocated over those fairvalues is recorded as goodwill. The purchase price allocations for certain acquisitions completed in 2016 is preliminary. Weare in process of finalizing the purchase price allocations, including valuations of the acquired property and equipment,other intangible assets and noncontrolling interests for some of our 2016 acquisitions; therefore, those purchase priceallocations are subject to adjustment once the valuations are completed. During the year ended December 31, 2016, we madeadjustments to the purchase price allocations for businesses acquired in 2015 that increased goodwill by approximately $59million and increased depreciation and amortization expense by approximately $7 million for our Hospital Operations andother segment. During the year ended December 31, 2016, we made adjustments to the purchase price allocations forbusinesses acquired in 2015 that decreased goodwill by approximately $36 million for our Ambulatory Care segment. Preliminary or final purchase price allocations for all the acquisitions made during the years endedDecember 31, 2016 and 2015 are as follows: 2016 2015 2014Current assets $51 $457 $34Property and equipment 38 1,059 113Other intangible assets 7 361 46Goodwill 464 3,374 340Other long-term assets (56) 557 2Current liabilities (30) (443) (30)Deferred taxes — long term — (128) (18)Other long-term liabilities (15) (2,146) (23)Redeemable noncontrolling interests in equity of consolidated subsidiaries (190) (1,974) (21)Noncontrolling interests (119) (147) (15)Cash paid, net of cash acquired (117) (940) (428)Gains on consolidations $33 $30 $ — The goodwill generated from these transactions, the majority of which will not be deductible for income tax purposes, can beattributed to the benefits that we expect to realize from operating efficiencies and growth strategies. Of the total $464 millionof goodwill recorded for acquisitions completed during the year ended December 31, 2016, $192 million was recorded in ourHospital Operations and other segment, and $272 million was recorded in our Ambulatory Care segment. Approximately$20 million, $45 million and $16 million in transaction costs related to prospective and closed acquisitions were expensedduring the years ended December 31, 2016, 2015 and 2014, respectively, and are included in impairment and restructuringcharges, and acquisition-related costs in the accompanying Consolidated Statements of Operations. 144 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDuring the year ended December 31, 2016 and 2015, we recognized gains totaling $33 million and $30 million,associated with stepping up our ownership interests in previously held equity investments, which we began consolidatingafter we acquired controlling interests. Pro Forma Information – Unaudited Effective June 16, 2015, we combined our freestanding ambulatory surgery and imaging center assets with the short-stay surgical facility assets of United Surgical Partners International, Inc. (“USPI”) into the USPI joint venture. We refinancedapproximately $1.5 billion of existing USPI debt, which was allocated to the joint venture through an intercompany loan,and paid approximately $424 million to align the respective valuations of the assets contributed to the joint venture. We alsocompleted the Aspen acquisition for approximately $226 million. The following table provides 2016 actual results compared to 2015 and 2014 pro forma information for Tenet as ifthe USPI joint venture and Aspen acquisition had occurred at the beginning of the year ended December 31, 2014. The netincome of USPI for the December 31, 2015 was adjusted by $30 million to remove a nonrecurring loss on extinguishment ofdebt. Years Ended December 31, 2016 2015 2014Net operating revenues $19,621 $19,018 $17,423Equity in earnings of unconsolidated affiliates $131 $143 $129Net loss attributable to common shareholders $(192) $(171) $(40)Net loss per share attributable to common shareholders $(1.93) $(1.73) $(0.41)NOTE 20. SEGMENT INFORMATION Our business consists of our Hospital Operations and other segment, our Ambulatory Care segment and our Conifersegment. The factors for determining the reportable segments include the manner in which management evaluates operatingperformance combined with the nature of the individual business activities. Our Hospital Operations and other segment is comprised of our acute care hospitals, ancillary outpatient facilities,urgent care centers, microhospitals, physician practices and health plans (certain of which are classified as held for sale asdescribed in Note 4). We also own various related healthcare businesses. At December 31, 2016, our subsidiaries operated79 hospitals, primarily serving urban and suburban communities in 12 states, and six health plans (certain of which areclassified as held for sale, as described in Note 4), as well as hospital-based outpatient centers, freestanding emergencydepartments and freestanding urgent care centers. Our Ambulatory Care segment is comprised of the operations of our USPI joint venture and our nine Aspen facilitiesin the United Kingdom. At December 31, 2016, our USPI joint venture had interests in 239 ambulatory surgery centers, 34urgent care centers, 21 imaging centers and 20 short-stay surgical hospitals in 27 states. Our Conifer segment provides healthcare business process services in the areas of hospital and physician revenuecycle management and value-based care solutions to healthcare systems, as well as individual hospitals, physician practices,self-insured organizations, health plans and other entities. At December 31, 2016, Conifer provided services to more than 800Tenet and non-Tenet hospitals and other clients nationwide. In 2012, we entered into agreements documenting the terms andconditions of various services Conifer provides to Tenet hospitals, as well as certain administrative services our HospitalOperations and other segment provides to Conifer. The pricing terms for the services provided by each party to the otherunder these contracts were based on estimated third-party pricing terms in effect at the time the agreements were signed. 145 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsThe following table includes amounts for each of our reportable segments and the reconciling items necessary toagree to amounts reported in the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations: December 31, December31, 2016 2015 Assets: Hospital Operations and other $17,871 $17,353 Ambulatory Care 5,722 5,159 Conifer 1,108 1,170 Total $24,701 $23,682 Years Ended December 31, 2016 2015 2014Capital expenditures: Hospital Operations and other $799 $786 $899Ambulatory Care 51 28 9Conifer 25 28 25Total $875 $842 $933 Net operating revenues: Hospital Operations and other $16,904 $16,928 $15,681Ambulatory Care 1,797 959 320Conifer Tenet 651 666 591Other customers 920 747 602Total Conifer revenues 1,571 1,413 1,193Intercompany eliminations (651) (666) (591)Total $19,621 $18,634 $16,603 Equity in earnings of unconsolidated affiliates: Hospital Operations and other $9 $16 $12Ambulatory Care 122 83 —Total $131 $99 $12 Adjusted EBITDA: Hospital Operations and other $1,521 $1,653 $1,651Ambulatory Care 615 358 98Conifer 277 265 203Total $2,413 $2,276 $1,952 Depreciation and amortization: Hospital Operations and other $709 $702 $810Ambulatory Care 91 46 14Conifer 50 49 25Total $850 $797 $849 Adjusted EBITDA $2,413 $2,276 $1,952Depreciation and amortization (850) (797) (849)Impairment and restructuring charges, and acquisition-related costs (202) (318) (153)Litigation and investigation costs (293) (291) (25)Interest expense (979) (912) (754)Investment earnings (losses) 8 1 —Loss from early extinguishment of debt — (1) (24)Gains on sales, consolidation and deconsolidation of facilities 151 186 —Net income from continuing operations before income taxes $248 $144 $147146 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsNOTE 21. RECENT ACCOUNTING STANDARDS Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). In August 2015, the FASB amended theguidance to defer the effective date of this standard by one year. ASU 2014-09 affects any entity that either enters intocontracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unlessthose contracts are within the scope of other standards. The core principle of the guidance in ASU 2014-09 is that an entityshould recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services. We are currently evaluatingthe requirements of the new standard to insure that we have processes, systems and internal controls in place to collect thenecessary information to implement the standard, which will be effective for us beginning in 2018. Early adoption ispermitted starting with annual periods beginning after December 31, 2016, but we do not plan to early adopt the newstandard. It is our current intention to use a modified retrospective method of application to adopt ASU 2014‑09.We will usea portfolio approach to apply the new model to classes of payers with similar characteristics and will likely revise theapproach we use to analyze cash collection trends for certain classes of payers once the final portfolios are determined,including the selection of the appropriate collection look-back period. Adoption of ASU 2014‑09 will result in changes toour presentation for and disclosure of revenue related to uninsured or underinsured patients. Currently, a significant portionof our provision for doubtful accounts relates to self-pay patients as well as co-pays and deductibles owed to us by patientswith insurance in our Hospital Operations and other segment. Under ASU 2014-09, the estimated uncollectible amounts duefrom these patients will generally be considered a direct reduction to net operating revenues and, correspondingly, will resultin a material reduction in the amounts presented separately as provision for doubtful accounts. While the adoption of ASU2014-09 will have a material effect on the amounts presented in certain categories on our Consolidated Statements ofOperations, we do not expect it to materially impact our results of operations. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which affects any entitythat enters into a lease (as that term is defined in ASU 2016-02), with some specified scope exceptions. The main differencebetween the guidance in ASU 2016-02 and current GAAP is the recognition of lease assets and lease liabilities by lessees forthose leases classified as operating leases under current GAAP. Recognition of these assets and liabilities will have a materialimpact to our Consolidated Balance Sheet upon adoption. In transition, lessees and lessors are required to recognize andmeasure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes anumber of optional practical expedients. We are currently evaluating the potential impact of this guidance, which will beeffective for us beginning in 2019. In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718) Improvementsto Employee Share-Based Payment Accounting” (“ASU 2016-09”), which affects all entities that issue share-based paymentawards to their employees. The guidance in ASU 2016-09 simplifies several aspects of the accounting for share-basedpayment transactions, including the income tax consequences, classification of awards as either equity or liabilities, andclassification on the statement of cash flows. Upon adoption of ASU 2016-09, we expect to record previously unrecognizedexcess tax benefits of approximately $56 million as a deferred tax asset and a cumulative effect adjustment to retainedearnings as of January 1, 2017. Prospectively, all excess tax benefits and deficiencies will be recognized as income taxbenefit or expense in our Consolidated Statement of Operations when awards vest. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of CertainCash Receipts and Cash Payments” (“ASU 2016-15”), which applies to all entities that are required to present a statement ofcash flows under Topic 230. ASU 2016-15 addresses the presentation and classification of cash flows related to (i) debtprepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments withcoupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingentconsideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v)proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies),(vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and(viii) separately identifiable cash flows and application of the predominance principle. The amendments147 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contentsin ASU 2016-05 should be applied using a retrospective transition method to each period presented, unless it isimpracticable. We are currently evaluating the potential impact of this guidance, which will be effective for us beginning in2018. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) Restricted Cash” (“ASU2016-18”), which applies to all entities that have restricted cash or restricted cash equivalents and are required to present astatement of cash flows under Topic 230. ASU 2016-18 requires that a statement of cash flows explain the change during theperiod in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash andcash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cashflows. The amendments in ASU 2016-18 do not provide a definition of restricted cash or restricted cash equivalents. Theamendments in ASU 2016-18 should be applied using a retrospective transition method to each period presented. We arecurrently evaluating the potential impact of this guidance, which will be effective for us beginning in 2018. NOTE 22. SUBSEQUENT EVENTS On February 19, 2017, we purchased the land and improvements associated with our Palm Beach Gardens MedicalCenter, which we previously leased, for approximately $44 million.148 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsSUPPLEMENTAL FINANCIAL INFORMATION SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Year Ended December 31, 2016 First Second Third Fourth Net operating revenues $5,044 $4,868 $4,849 $4,860 Net loss attributable to Tenet Healthcare Corporationcommon shareholders $(59) $(46) $(8) $(79) Net income $34 $39 $80 $23 Net loss per share attributable to Tenet Healthcare Corporationcommon shareholders: Basic $(0.60) $(0.46) $(0.08) $(0.79) Diluted $(0.60) $(0.46) $(0.08) $(0.79) Year Ended December 31, 2015 First Second Third Fourth Net operating revenues $4,424 $4,492 $4,692 $5,026 Net income available (loss attributable) to Tenet HealthcareCorporation common shareholders $47 $(61) $(29) $(97) Net income (loss) $76 $(28) $28 $2 Earnings (loss) per share available (attributable) to TenetHealthcare Corporation common shareholders: Basic $0.48 $(0.61) $(0.29) $(0.98) Diluted $0.47 $(0.61) $(0.29) $(0.98) Quarterly operating results are not necessarily indicative of the results that may be expected for the full year.Reasons for this include, but are not limited to: overall revenue and cost trends, particularly the timing and magnitude ofprice changes; fluctuations in contractual allowances and cost report settlements and valuation allowances; managed carecontract negotiations, settlements or terminations and payer consolidations; changes in Medicare and Medicaid regulations;Medicaid and other supplemental funding levels set by the states in which we operate; the timing of approval by the Centersfor Medicare and Medicaid Services of Medicaid provider fee revenue programs; trends in patient accounts receivablecollectability and associated provisions for doubtful accounts; fluctuations in interest rates; levels of malpractice insuranceexpense and settlement trends; the timing of when we meet the criteria to recognize electronic health record incentives;impairment of long-lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to naturaldisasters and other weather-related occurrences; litigation and investigation costs; gains (losses) on sales, consolidation anddeconsolidation of facilities; 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 toemployees and directors; gains or losses from early extinguishment of debt; and changes in occupancy levels and patientvolumes. Factors that affect patient volumes and, thereby, the results of operations at our hospitals and related healthcarefacilities include, but are not limited to: the business environment, economic conditions and demographics of localcommunities in which we operate; the number of uninsured and underinsured individuals in local communities treated at ourhospitals; seasonal cycles of illness; climate and weather conditions; physician recruitment, retention and attrition; advancesin technology and treatments that reduce length of stay; local healthcare competitors; managed care contract negotiations orterminations; the number of patients with high-deductible health insurance plans; any unfavorable publicity about us, or ourjoint venture partners, that impacts our relationships with physicians and patients; changes in healthcare regulations and theparticipation of individual states in federal programs; and the timing of elective procedures. These considerations apply toyear-to-year comparisons as well. 149 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 FINANCIALDISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls andprocedures 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. The evaluation was performed under the supervision andwith the participation of management, including our chief executive officer and chief financial officer. Based upon thatevaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures areeffective to ensure that material information is recorded, processed, summarized and reported by management on a timelybasis in order to comply with our disclosure obligations under the Exchange Act and the SEC rules thereunder. We have completed our analysis of the systems of disclosure controls and procedures and internal control overfinancial reporting related to the USPI joint venture and Aspen transactions. Furthermore, we integrated our USPI jointventure and Aspen into our broader framework of controls as of December 31, 2016. There were no changes in our internalcontrol over financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting. Management’s report on internal control over financial reporting is set forth on page 101 and is incorporated hereinby reference. The independent registered public accounting firm that audited the financial statements included in this reporthas issued an attestation report on our internal control over financial reporting as set forth on page 102 herein. ITEM 9B. OTHER INFORMATION None. 150 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsPART 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 inaccordance with General Instruction G(3) to Form 10-K. Information concerning our executive officers appears under Item 1,Executive Officers, of Part I of this report, and information concerning our Standards of Conduct, by which all of ouremployees, including our chief executive officer, chief financial officer and principal accounting officer, are required toabide appears under Item 1, 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 inaccordance with General Instruction G(3) to Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS Information required by this Item is hereby incorporated by reference to our definitive proxy statement inaccordance with General Instruction G(3) to Form 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 inaccordance with General Instruction G(3) to Form 10-K. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information required by this Item is hereby incorporated by reference to our definitive proxy statement inaccordance with General Instruction G(3) to Form 10-K.151 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 104 through 148. FINANCIAL STATEMENT SCHEDULES Schedule II—Valuation and Qualifying Accounts (included on page 161). All other schedules and financial statements of the Registrant are omitted because they are not applicable or notrequired or because the required information is included in the Consolidated Financial Statements or notes thereto. FINANCIAL STATEMENTS REQUIRED BY RULE 3-09 OF REGULATION S-X The consolidated financial statements of Texas Health Ventures Group, L.L.C. and subsidiaries (“THVG”), which areincluded due to the significance of the equity in earnings of unconsolidated affiliates we recognized from our investment inTHVG for the year ended December 31, 2016, can be found on pages F-1 through F-18. All other schedules and financial statements of THVG are omitted because they are not applicable or not required orbecause the required information is included in the Consolidated Financial Statements or notes thereto. EXHIBITS Unless otherwise indicated, the following exhibits are filed with this report: (2)Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession (a)Contribution and Purchase Agreement, dated March 23, 2015, by and among the Registrant,USPI Group Holdings, Inc., Ulysses JV Holding I L.P., Ulysses JV Holding II L.P. andBB Blue Holdings, Inc. (Incorporated by reference to Exhibit 2.1 to Registrant’s Current Report onForm 8‑K, dated and filed March 23, 2015) (b)Put/Call Agreement, dated June 16, 2015, by and among the Registrant, USPI Group Holdings, Inc.,Ulysses JV Holding I L.P., Ulysses JV Holding II L.P. and USPI Holding Company, Inc. (Incorporatedby reference to Exhibit 2(b) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June30, 2015, filed August 3, 2015) (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 to Exhibit 3(a) to Registrant’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2008, filed August 5, 2008) (b)Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock, parvalue $0.15 per share, dated January 7, 2011 (Incorporated by reference to Exhibit 3.1 to Registrant’sCurrent 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 effectiveOctober 10, 2012 (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K,dated October 10, 2012 and filed October 11, 2012) 152 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents(d)Amended and Restated Bylaws of the Registrant, as amended and restated effective January 7, 2011(Incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K, dated and filedJanuary 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 to Exhibit 4.1 to Registrant’s Current Report on Form 8-K, dated November6, 2001 and filed November 9, 2001) (b)Third Supplemental Indenture, dated as of November 6, 2001, between the Registrant and The Bank ofNew York, as trustee, relating to 6⅞% Senior Notes due 2031 (Incorporated by reference to Exhibit 4.4to Registrant’s Current Report on Form 8-K, dated November 6, 2001 and filed November 9, 2001) (c)Twelfth Supplemental Indenture, dated as of August 17, 2010, between the Registrant and The Bank ofNew York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, relating to 8%Senior Notes due 2020 (Incorporated by reference to Exhibit 4.1 to Registrant’s Current Report onForm 8-K, dated and filed August 17, 2010) (d)Fourteenth Supplemental Indenture, dated as of November 21, 2011, by and among the Registrant, TheBank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, and theguarantors party thereto, relating to 6¼% Senior Secured Notes due 2018 (Incorporated by reference toExhibit 4.2 to Registrant’s Current Report on Form 8-K, dated November 21, 2011 and filed November22, 2011) (e)Fifteenth Supplemental Indenture, dated as of October 16, 2012, by and among the Registrant, TheBank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, and theguarantors party thereto, relating to 4¾% Senior Secured Notes due 2020 (Incorporated by reference toExhibit 4.1 to Registrant’s Current Report on Form 8-K, dated and filed October 16, 2012) (f)Sixteenth Supplemental Indenture, dated as of October 16, 2012, between the Registrant and The Bankof New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, relating to6¾% Senior Notes due 2020 (Incorporated by reference to Exhibit 4.2 to Registrant’s Current Reporton Form 8-K, dated and filed October 16, 2012) (g)Seventeenth Supplemental Indenture, dated as of February 5, 2013, by and among the Registrant, TheBank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, and theguarantors party thereto, relating to 4½% Senior Secured Notes due 2021 (Incorporated by reference toExhibit 4.1 to Registrant’s Current Report on Form 8-K, dated and filed February 5, 2013) (h)Twentieth Supplemental Indenture, dated as of May 30, 2013, by and among the Registrant, The Bankof New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, and theguarantors party thereto, relating to 4⅜% Senior Secured Notes due 2021 (Incorporated by reference toExhibit 4.1 to Registrant’s Current Report on Form 8-K, dated May 30, 2013 and filed May 31, 2013) (i)Indenture, dated as of September 27, 2013, among THC Escrow Corporation and The Bank of NewYork 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 on Form 8-K, dated and filedOctober 1, 2013) 153 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents(j)Supplemental Indenture, dated as of October 1, 2013, among the Registrant, certain of its subsidiariesand The Bank of New York Mellon Trust Company, N.A., as trustee, relating to 6% Senior SecuredNotes due 2020 (Incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K,dated and filed October 1, 2013) (k)Indenture, dated as of September 27, 2013, among THC Escrow Corporation and The Bank of NewYork Mellon Trust Company, N.A., as trustee, relating to 8⅛% Senior Notes due 2022 (Incorporated byreference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K, dated and filed October 1, 2013) (l)Supplemental Indenture, dated as of October 1, 2013, among the Registrant, certain of its subsidiariesand The Bank of New York Mellon Trust Company, N.A., as trustee, relating to 8⅛% Senior Notes due2022 (Incorporated by reference to Exhibit 4.4 to Registrant’s Current Report on Form 8-K, dated andfiled October 1, 2013) (m)Twenty-Third Supplemental Indenture, dated as of March 10, 2014, between the Registrant and TheBank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York,relating to 5% Senior Notes due 2019 (Incorporated by reference to Exhibit 4.2 to Registrant’s CurrentReport on Form 8-K, dated March 7, 2014 and filed March 10, 2014) (n)Twenty-Fourth Supplemental Indenture, dated as of September 29, 2014, between the Registrant andThe Bank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York,relating to 5½% Senior Notes due 2019 (Incorporated by reference to Exhibit 4.2 to Registrant’sCurrent Report on Form 8-K dated and filed September 29, 2014) (o)Twenty-Sixth Supplemental Indenture, dated as of June 16, 2015, among the Registrant, The Bank ofNew York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, and theguarantors party thereto, relating to Floating Rate Senior Secured Notes due 2020 (Incorporated byreference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated and filed June 16, 2015) (p)Indenture, dated as of June 16, 2015, between THC Escrow Corporation II and The Bank of New YorkMellon Trust Company, N.A., as trustee, relating to 6¾% Senior Notes due 2023 (Incorporated byreference to Exhibit 4.3 to Registrant’s Current Report on Form 8-K, dated and filed June 16, 2015) (q)Supplemental Indenture, dated as of June 16, 2015, between the Registrant and The Bank of New YorkMellon Trust Company, N.A., as trustee, relating to 6¾% Senior Notes due 2023 (Incorporated byreference to Exhibit 4.4 to Registrant’s Current Report on Form 8-K, dated and filed June 16, 2015) (r)Twenty-Eighth Supplemental Indenture, dated as of December 1, 2016, among the Registrant,The Bank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York,and the guarantors party thereto, relating to 7½% Senior Secured Second Lien Notes due 2022(Incorporated by reference to Exhibit 4.2 to Registrant’s Current Report on Form 8-K, dated and filedDecember 1, 2016) (10)Material Contracts (a)Amended and Restated Credit Agreement, dated as of October 19, 2010, among the Registrant, thelenders 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 leadarrangers, and the joint bookrunners and co-documentation agents named therein154 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents(Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, datedOctober 19, 2010 and filed October 20, 2010) (b)Amendment No. 1, dated as of November 29, 2011, to that certain Amended and Restated CreditAgreement, 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, CitigroupGlobal Markets Inc. and Banc of America Securities LLC, as joint lead arrangers, and the jointbookrunners and co-documentation agents named therein (Incorporated by reference to Exhibit 10.1 toRegistrant’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 CreditAgreement, 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, CitigroupGlobal Markets Inc. and Banc of America Securities LLC, as joint lead arrangers, and the jointbookrunners and co-documentation agents named therein (Incorporated by reference to Exhibit 10(c)to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013, filedFebruary 24, 2014) (d)Amendment No. 3, dated as of December 4, 2015, to that certain Amended and Restated CreditAgreement, dated as of October 19, 2010, among the Registrant, the lenders and issuers party theretoand Citicorp USA, Inc., as administrative agent (Incorporated by reference to Exhibit 10.1 toRegistrant’s Current Report on Form 8-K, dated December 4, 2015 and filed December 9, 2015) (e)Letter of Credit Facility Agreement, dated as of March 7, 2014, among the Registrant, certain financialinstitutions party thereto from time to time as letter of credit participants and issuers, and BarclaysBank PLC, as administrative agent (Incorporated by reference to Exhibit 10.1 to Registrant’s CurrentReport on Form 8-K, dated March 7, 2014 and filed March 10, 2014) (f)Amendment No. 1, dated as of September 15, 2016, to the Letter of Credit Facility Agreement, dated asof March 7, 2014, among the Registrant, certain financial institutions party thereto from time to time asletter of credit participants and issuers, and Barclays Bank PLC, as administrative agent (Incorporatedby reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated September 15, 2016 andfiled September 16, 2016) (g)Guaranty, dated as of March 7, 2014, among Barclays Bank PLC, as administrative agent and theguarantors party thereto (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report onForm 8-K, dated March 7, 2014 and filed March 10, 2014) (h)Stock Pledge Agreement, dated as of March 3, 2009, by and among the Registrant, as pledgor, TheBank of New York Mellon Trust Company, N.A., as collateral trustee, and the other pledgers partythereto (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, datedMarch 3, 2009 and filed March 5, 2009) (i)First Amendment to Stock Pledge Agreement, dated as of May 8, 2009, by and among the Registrant,as pledgor, The Bank of New York Mellon Trust Company, N.A., as collateral trustee, and the otherpledgors party thereto (Incorporated by reference to Exhibit 10(h) to Registrant’s Annual Report onForm 10-K for the year ended December 31, 2015, filed February 22, 2016) (j)Second Amendment to Stock Pledge Agreement, dated as of June 15, 2009, by and among theRegistrant, as pledgor, The Bank of New York Mellon Trust Company, N.A., as collateral trustee, andthe other pledgors party thereto (Incorporated by reference to Exhibit 10.1 to Registrant’s CurrentReport on Form 8-K, dated June 15, 2009 and filed June 16, 2009)155 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents(k)Third Amendment to Stock Pledge Agreement, dated as of March 7, 2014, by and among theRegistrant, as pledgor, The Bank of New York Mellon Trust Company, N.A., as collateral trustee, andthe other pledgors party thereto (Incorporated by reference to Exhibit 10(j) to Registrant’s AnnualReport on Form 10-K for the year ended December 31, 2015, filed February 22, 2016) (l)Fourth Amendment to Stock Pledge Agreement, dated as of March 23, 2015, by and among theRegistrant, as pledgor, The Bank of New York Mellon Trust Company, N.A., as collateral trustee, andthe other pledgors party thereto (Incorporated by reference to Exhibit 10(k) to Registrant’s AnnualReport on Form 10-K for the year ended December 31, 2015, filed February 22, 2016) (m)Collateral Trust Agreement, dated as of March 3, 2009, by and among the Registrant, as pledgor, TheBank of New York Mellon Trust Company, N.A., as collateral trustee, and the other pledgers partythereto (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, datedMarch 3, 2009 and filed March 5, 2009) (n)Exchange and Registration Rights Agreement, dated as of December 1, 2016, among the Registrant,certain of its subsidiaries and Barclays Capital Inc., as representative of the initial purchasers of theNotes named therein (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form8-K, dated and filed December 1, 2016) (o)Settlement Agreement among the United States of America, acting through the United StatesDepartment of Justice and on behalf of the Office of Inspector General of the Department of Health andHuman Services, the State of Georgia, the State of South Carolina, the Registrant, Tenet HealthSystemMedical, Inc., Tenet HealthSystem GB, Inc. n/k/a Atlanta Medical Center, Inc., North Fulton MedicalCenter, Inc., Tenet HealthSystem Spalding, Inc. n/k/a Spalding Regional Medical Center, Inc., andHilton Head Health System, L.P., and Ralph D. Williams (Incorporated by reference to Exhibit 10.1 toRegistrant’s Current Report on Form 8-K dated September 30, 2016 and filed October 3, 2016) (p)Non-Prosecution Agreement among Tenet HealthSystem Medical, Inc., the United States Department ofJustice and the United States Attorney’s Office for the Northern District of Georgia (Incorporated byreference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated September 30, 2016 andfiled October 3, 2016) (q)Support Agreement, dated January 18, 2016, by and among the Registrant, Glenview CapitalManagement, LLC, Glenview Capital Partners, L.P., Glenview Capital Master Fund, Ltd., GlenviewInstitutional Partners, L.P., Glenview Offshore Opportunity Master Fund, Ltd. and Glenview CapitalOpportunity Fund, L.P. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report onForm 8-K, dated January 18, 2016 and filed January 19, 2016) (r)Letter Agreement, dated November 2, 2016, by and among Tenet Healthcare Corporation, GlenviewCapital Management, LLC, Glenview Capital Management, LLC, Glenview Capital Partners, L.P.,Glenview Capital Master Fund, Ltd., Glenview Institutional Partners, L.P., Glenview OffshoreOpportunity Master Fund, Ltd. and Glenview Capital Opportunity Fund, L.P. (Incorporated byreference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, dated November 2, 2016 andfiled November 4, 2016) (s)Letter from the Registrant to Trevor Fetter, dated November 7, 2002 (Incorporated by reference toExhibit 10(k) to Registrant’s Transition Report on Form 10-K for the seven-month transition periodended December 31, 2002, filed May 15, 2003)* (t)Letter from the Registrant to Trevor Fetter dated September 15, 2003 (Incorporated by reference toExhibit 10(l) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003,filed November 10, 2003)*156 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents (u)Letter from the Registrant to Keith B. Pitts dated June 21, 2013 (Incorporated by reference to Exhibit10(j) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013, filedFebruary 24, 2014)* (v)Letter from the Registrant to J. Eric Evans, dated March 22, 2016 (Incorporated by reference to Exhibit10 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filedMay 2, 2016)* (w)Letter from the Registrant to Daniel J. Cancelmi, dated September 6, 2012 (Incorporated by reference toExhibit 10(c) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012,filed November 7, 2012)* (x)Letter from the Registrant to Audrey Andrews, dated January 22, 2013 (Incorporated by reference toExhibit 10(m) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012,filed February 26, 2013)* (y)Tenet Second Amended and Restated Executive Severance Plan, as amended and restated effectiveMay 9, 2012 (Incorporated by reference to Exhibit 10(e) to Registrant’s Quarterly Report on Form 10-Qfor the quarter ended September 30, 2012, filed November 7, 2012)* (z)Tenet Healthcare Corporation Ninth Amended and Restated Supplemental Executive Retirement Plan,as amended and restated effective November 30, 2015 (Incorporated by reference to Exhibit 10(u) toRegistrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 22,2016)* (aa)Ninth Amended and Restated Tenet 2001 Deferred Compensation Plan, as amended and restatedeffective May 9, 2012 (Incorporated by reference to Exhibit 10(g) to Registrant’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2012, filed November 7, 2012)* (bb)Fourth Amended and Restated Tenet 2006 Deferred Compensation Plan, as amended and restatedeffective November 30, 2015 (Incorporated by reference to Exhibit 10(w) to Registrant’sAnnual Report on Form 10-K for the year ended December 31, 2015, filed February 22, 2016)* (cc)Fifth Amended and Restated Tenet Healthcare Corporation 2001 Stock Incentive Plan, as amended andrestated effective May 9, 2012 (Incorporated by reference to Exhibit 10(i) to Registrant’s QuarterlyReport on Form 10-Q for the quarter ended September 30, 2012, filed November 7, 2012)* (dd)Form of Stock Award used to evidence grants of stock options and/or restricted units under theAmended and Restated Tenet Healthcare Corporation 2001 Stock Incentive Plan (Incorporated byreference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K, dated February 14, 2006 andfiled February 17, 2006)* (ee)Sixth Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan, as amended and restatedeffective March 10, 2016 (Incorporated by reference to Exhibit 10 to Registrant’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2016, filed August 1, 2016)* (ff)Forms of Award used to evidence (i) initial grants of restricted stock units to directors, (ii) annual grantsof restricted stock units to directors, (iii) grants of stock options to executives, and (iv) grants ofrestricted stock units to executives, all under the Amended and Restated Tenet Healthcare 2008 StockIncentive Plan (Incorporated by reference to Exhibit 10(aa) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 24, 2009)* 157 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents(gg)Award Agreement, dated June 13, 2013, used to evidence grant of performance-based restricted stockunits to Trevor Fetter under the Amended and Restated Tenet Healthcare 2008 Stock Incentive Plan(Incorporated by reference to Exhibit 10 to Registrant’s Quarterly Report on Form 10-Q for the quarterended June 30, 2013, filed August 6, 2013)* (hh)Form of Award used to evidence grants of performance cash awards under the Amended and RestatedTenet Healthcare Corporation 2001 Stock Incentive Plan and the Amended and Restated TenetHealthcare 2008 Stock Incentive Plan (Incorporated by reference to Exhibit (ee) to Registrant’s AnnualReport on Form 10-K for the year ended December 31, 2009, filed February 23, 2010)* (ii)Tenet Special RSU Deferral Plan (Incorporated by reference to Exhibit 10(d) to Registrant’s QuarterlyReport on Form 10-Q for the quarter ended March 31, 2009, filed May 5, 2009)* (jj)Second Amended Tenet Healthcare Corporation Annual Incentive Plan, as amended and restatedeffective May 9, 2012 (Incorporated by reference to Exhibit 10(k) to Registrant’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2012, filed November 7, 2012)* (kk)Sixth Amended and Restated Tenet Executive Retirement Account, as amended and restated effectiveNovember 30, 2015 (Incorporated by reference to Exhibit 10(ff) to Registrant’s Annual Report on Form10-K for the year ended December 31, 2015, filed February 22, 2016)* (ll)Form of Indemnification Agreement entered into with each of the Registrant’s directors (Incorporatedby reference to Exhibit 10(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2005, filed November 1, 2005) (21)Subsidiaries of the Registrant (23)Consents (a)Consent of Deloitte & Touche LLP (b)Consent of PricewaterhouseCoopers LLP (31)Rule 13a-14(a)/15d-14(a) Certifications (a)Certification of Trevor Fetter, Chief Executive Officer and Chairman of the Board of Directors (b)Certification of Daniel J. Cancelmi, Chief Financial Officer (32)Section 1350 Certifications of Trevor Fetter, Chief Executive Officer and Chairman of the Board of Directors,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. 158 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 dulycaused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TENET HEALTHCARE CORPORATION(Registrant) Date: February 27, 2017By:/s/ R. SCOTT RAMSEY R. 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 thefollowing persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: February 27, 2017By:/s/ TREVOR FETTER Trevor FetterChief Executive Officer and Chairman of the Board of Directors(Principal Executive Officer) Date: February 27, 2017By:/s/ DANIEL J. CANCELMI Daniel J. CancelmiChief Financial Officer(Principal Financial Officer) Date: February 27, 2017By:/s/ R. SCOTT RAMSEY R. Scott RamseyVice President and Controller(Principal Accounting Officer) Date: February 27, 2017By:/s/ JOHN P. BYRNES John P. ByrnesDirector Date: February 27, 2017By:/s/ BRENDA J. GAINES Brenda J. GainesDirector Date: February 27, 2017By:/s/ KAREN M. GARRISON Karen M. GarrisonDirector Date: February 27, 2017By:/s/ EDWARD A. KANGAS Edward A. KangasDirector Date: February 27, 2017By:/s/ J. ROBERT KERREY J. Robert KerreyDirector Date: February 27, 2017By:/s/ FREDA C. LEWIS-HALL, M.D. Freda C. Lewis-Hall, M.D.Director Date: February 27, 2017By:/s/ RICHARD R. PETTINGILL Richard R. PettingillDirector 159 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsDate: February 27, 2017By:/s/ MATTHEW J. RIPPERGER Matthew J. RippergerDirector Date: February 27, 2017By:/s/ RONALD A. RITTENMEYER Ronald A. RittenmeyerDirector Date: February 27, 2017By:/s/ TAMMY ROMO Tammy RomoDirector Date: February 27, 2017By:/s/ RANDOLPH C. SIMPSON Randolph C. SimpsonDirector Date: February 27, 2017By:/s/ JAMES A. UNRUH James A. UnruhDirector Date: February 27, 2017By:/s/ PETER M. WILVER Peter M. WilverDirector 160 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent 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 at Balance at Beginning Costs and Other End of of Period Expenses Deductions Items Period Allowance for doubtful accounts: Year ended December 31, 2016 $887 $1,451 $(1,307) $ — $1,031 Year ended December 31, 2015 $852 $1,480 $(1,388) $(57) $887 Year ended December 31, 2014 $589 $1,305 $(1,042) $ — $852 Valuation allowance for deferred tax assets Year ended December 31, 2016 $96 $(24) $ — $ — $72 Year ended December 31, 2015 $87 $4 $ — $5 $96 Year ended December 31, 2014 $107 $(20) $ — $ — $87 (1)Includes amounts recorded in discontinued operations.(2)Before considering recoveries on accounts or notes previously written off.(3)Accounts written off.(4)Acquisition and divestiture activity. 161 (1)(2)(3)(4)Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2016 CONTENTS Report of Independent Auditors Audited Financial Statements Consolidated Balance Sheet F-3Consolidated Statement of Income F-4Consolidated Statement of Changes in Equity F-5Consolidated Statement of Cash Flows F-6Notes to Consolidated Financial Statements F-7 F-1 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents Independent Auditor’s Report To the Board of ManagersTexas Health Ventures Group, L.L.C.: We have audited the accompanying consolidated financial statements of Texas Health Ventures Group, L.L.C. and itssubsidiaries (the Company), which comprise the consolidated balance sheet as of June 30, 2016, and the related consolidatedstatements of income, of changes in equity, and of cash flows for the year then ended. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordancewith accounting principles generally accepted in the United States of America; this includes the design, implementation, andmaintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that arefree from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted ouraudits in accordance with auditing standards generally accepted in the United States of America. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are freefrom material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidatedfinancial statements. The procedures selected depend on our judgment, including the assessment of the risks of materialmisstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, weconsider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statementsin order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates madeby management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of Texas Health Ventures Group, L.L.C. and its subsidiaries at June 30, 2016, and the results of their operations andtheir cash flows for the year then ended in accordance with accounting principles generally accepted in the United States ofAmerica. /s/ PricewaterhouseCoopers LLPNovember 7, 2016 F-2 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents TEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET – JUNE 30, 2016(in thousands) 2016 ASSETS CURRENT ASSETS: Cash $14,602 Restricted cash — Funds due from United Surgical Partners, Inc. 70,776 Patient receivables, net of allowance for doubtful accounts of $14,952 80,612 Supplies 18,833 Prepaid and other current assets 5,784 Total current assets 190,607 PROPERTY AND EQUIPMENT, net (Note 2) 160,708 OTHER LONG-TERM ASSETS: Investments in unconsolidated affiliates (Note 3) 3,968 Goodwill and intangible assets, net (Note 5) 240,649 Other 178 Total assets $596,110 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable $39,314 Accrued expenses and other 32,252 Current portion of long-term obligations (Note 6) 12,494 Total current liabilities 84,060 LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION (Note 6) 138,924 OTHER LIABILITIES 13,678 Total liabilities 236,662 COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 8 and 9) NONCONTROLLING INTERESTS - REDEEMABLE 89,927 EQUITY: Members’ equity 246,433 Noncontrolling interests – nonredeemable 23,088 Total equity 269,521 Total liabilities and equity $596,110 See accompanying notes to consolidated financial statements.F-3 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED JUNE 30, 2016(in thousands) 2016 REVENUES: Net patient service revenue $881,897 Other income (Note 8) 7,886 Total revenues 889,783 EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES (Note 4) 3,861 OPERATING EXPENSES: Salaries, benefits, and other employee costs 198,257 Medical services and supplies 220,279 Management and royalty fees (Note 8) 34,174 Professional fees 5,803 Purchased services 36,209 Other operating expenses 93,867 Provision for doubtful accounts 21,739 Impairment loss 5,667 Depreciation and amortization 29,091 Total operating expenses 645,086 Operating income 248,558 NONOPERATING INCOME (EXPENSES): Interest expense (14,028) Interest income (Note 8) 364 Other income (expense), net (350) Net income before income taxes 234,544 INCOME TAXES (3,858) Net income 230,686 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS – Redeemable (117,018) NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS – Nonredeemable (4,958) Net income attributable to THVG $108,710 See accompanying notes to consolidated financial statements.F-4 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2016(in thousands) Members’ Equity Noncontrolling Members’ Interests - Equity USP BUMC Equity Nonredeemable Balance at June 30, 2015 253,720 115,909 116,374 232,283 21,437 Net income 113,668 54,246 54,464 108,710 4,958 Distributions to members (105,054) (50,121) (50,321) (100,442) (4,612) Contributions from members 8,912 4,447 4,465 8,912 — Purchase of noncontrolling interests (811) (400) (401) (801) (10) Sale of noncontrolling interests (914) (1,113) (1,116) (2,229) 1,315 Balance at June 30, 2016 $269,521 $122,968 $123,465 $246,433 $23,088 See accompanying notes to consolidated financial statements.F-5 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2016(in thousands) 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $230,686 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts 21,739 Depreciation and amortization 29,091 Amortization of debt issue costs 7 Equity in earnings of unconsolidated affiliates, net of distributions received (232) Loss on fixed asset impairment 5,667 Gain on sale of assets (67) Changes in operating assets and liabilities, net of effects from purchases of new businesses: Increase in patient receivables (36,666) Increase in supplies, prepaids, and other assets (4,937) Increase in accounts payable, accrued expenses, and other liabilities 13,348 Net cash provided by operating activities 258,636 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of new businesses and equity interests, net of cash received of $135 (9,171) Purchases of property and equipment (17,207) Sale of property and equipment 160 Change in deposits and notes receivables 9 Change in funds due from United Surgical Partners, Inc. (12,794) Net cash used in investing activities (39,003) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt obligations $4,624 Payments on debt obligations (14,186) Distributions to noncontrolling interest owners (114,380) Purchases of noncontrolling interests (3,861) Sales of noncontrolling interests 2,272 Contribution from members 8,912 Distributions to members (100,442) Net cash used in financing activities (217,061) INCREASE IN CASH 2,572 CASH, beginning of period 12,030 CASH, end of period $14,602 SUPPLEMENTAL INFORMATION: Cash paid for interest $14,035 Cash paid for income taxes $3,779 Noncash transactions: Assets acquired under capital leases $3,232 Increase in accounts payable due to property and equipment received but not paid $427 Restricted cash borrowed $— Restricted cash used for purchases of equipment $280 Restricted cash used for payments on debt obligations $2,089 See accompanying notes to consolidated financial statements. F-6 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Texas Health Ventures Group, L.L.C. and subsidiaries (THVG or the Company), a Texas limited liability company, wasformed on January 21, 1997, for the primary purpose of developing, acquiring, and operating ambulatory surgery centers andrelated entities. THVG is a joint venture between Baylor University Medical Center, an affiliate of Baylor Scott & WhiteHoldings (BSW Holdings), who owns 50.1% of THVG and USP North Texas, Inc. (USP), a Texas corporation and subsidiaryof United Surgical Partners International, Inc. (USPI), who owns 49.9% of THVG. USPI is a subsidiary of Tenet HealthcareCorporation. BSW Holdings and its affiliates are referred collectively herein as “Baylor”. THVG’s fiscal year ends June 30.USPI is a subsidiary of Tenet Healthcare Corporation. Fiscal years of THVG’s subsidiaries end December 31; however, thefinancial information of these subsidiaries included in these consolidated financial statements is as of, and for the twelvemonths ended, June 30, 2016. THVG owns equity interests in and operates ambulatory surgery centers, surgical hospitals, and related businesses in theDallas/Fort Worth, Texas, metropolitan area. At June 30, 2016, THVG operated twenty-nine facilities (the Facilities) undermanagement contracts, twenty-eight of which are consolidated for financial reporting purposes and one of which isaccounted for under the equity method. In addition, THVG holds an equity method investment in one partnership that ownsthe real estate used by one of the Facilities. THVG has been funded by capital contributions from its members and by cash distributions from the Facilities. The board ofmanagers, which is controlled by Baylor, initiates requests for capital contributions. The Facilities’ operating agreementsprovide that cash flows available for distribution will be distributed, at least quarterly to, THVG and other owners of theFacilities. THVG’s operating agreement provides that the board of managers determine, on at least a quarterly basis, if THVG shouldmake a cash distribution based on a comparison of THVG’s excess cash on hand versus current and anticipated needs,including, without limitation, needs for operating expenses, debt service, acquisitions, and a reasonable contingency reserve.The terms of THVG’s operating agreement provide that any distributions, whether driven by operating cash flows or by othersources, such as the distribution of noncash assets or distributions in the event THVG liquidates, are to be shared accordingto each member’s overall ownership level in THVG. Basis of Accounting THVG maintains its books and records on the accrual basis of accounting, and the consolidated financial statements areprepared in accordance with accounting principles generally accepted in the United States. Management has determined thatthe consolidated entities all perform the same business activities and therefore should be considered as one reportingsegment. Principles of Consolidation The consolidated financial statements include the financial statements of THVG and its wholly owned subsidiaries and otherentities THVG controls. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United Statesrequires management of THVG to make estimates and assumptions that affect the amounts reported in the consolidatedfinancial statements and accompanying notes. Actual results could differ from those estimates. F-7 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Cash Equivalents THVG considers all highly liquid instruments with original maturities when purchased of three months or less to be cashequivalents. There were no cash equivalents at June 30, 2016. Under the Company’s cash management system, checks issuedbut not presented to the bank may result in book cash overdraft balances for accounting purposes. The company reclassifiesbook overdrafts to accounts payable, which are reflected as an operating activity in its consolidated statements of cashflows. Book overdrafts included in accounts payable were approximately $13,300,000 as of June 30, 2016. Patient Receivables Patient receivables are stated at estimated net realizable value. Significant concentrations of patient receivables at June 30,2016 include: 2016 Commercial and managed care providers 64 %Government-related programs 24 %Self-pay patients 12 % 100 % Receivables from government-related programs (i.e. Medicare and Medicaid) represent the only concentrated groups of creditrisk for THVG and management does not believe that there is any credit risk associated with these receivables. Commercialand managed care receivables consist of receivables from various payors involved in diverse activities and subject todiffering economic conditions, and do not represent any concentrated credit risk to THVG. THVG maintains allowances foruncollectible accounts for estimated losses resulting from the payors’ inability to make payments on accounts. THVGassesses the reasonableness of the allowance account based on historic write-offs, the aging of accounts and other currentconditions. Furthermore, management continually monitors and adjusts the allowances associated with its receivables.Accounts are written off when collection efforts have been exhausted. Supplies Supplies, consisting primarily of pharmaceuticals and medical supplies inventories, are stated at cost, which approximatesmarket value, and are expensed as used. Property and Equipment Property and equipment are initially recorded at cost or, when acquired as part of a business combination, at fair value at thedate of acquisition. Depreciation is calculated on the straight line method over the estimated useful lives of the assets. Uponretirement or disposal of assets, the asset and accumulated depreciation accounts are adjusted accordingly, and any gain orloss is reflected in earnings or losses of the respective period. Maintenance costs and repairs are expensed as incurred;significant renewals and betterments are capitalized. Assets held under capital leases are classified as property and equipment and amortized using the straight line method overthe shorter of the useful lives or the lease terms, and the related obligations are recorded as debt. Amortization of propertyand equipment held under capital leases and leasehold improvements is included in depreciation and amortization expensein the consolidated statements of income. THVG records operating lease expense on a straight-line basis unless another systematic and rational allocation is morerepresentative of the time pattern in which the leased property is physically employed. THVG amortizes leaseholdimprovements, including amounts funded by landlord incentives or allowances, for which the related deferred rent isamortized as a reduction of lease expense, over the shorter of their economic lives or the lease term.F-8 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Investments in Unconsolidated Affiliates Investments in unconsolidated affiliates in which THVG exerts significant influence, but has less than a controllingownership, are accounted for under the equity method. THVG exerts significant influence in the operations of itsunconsolidated affiliates through representation on the governing bodies of the investees and additionally, with respect tothe Facilities, through contracts to manage the operations of the investees. Equity in earnings of unconsolidated affiliates consists of THVG’s share of the profits and losses generated from itsnoncontrolling equity investments. Because these operations are central to THVG’s business strategy, equity in earnings ofunconsolidated affiliates is classified as a component of operating income in the accompanying consolidated statements ofincome. THVG has contracts to manage these facilities, which results in THVG having an active role in the operations ofthese facilities. Goodwill Goodwill is not amortized but is instead tested for impairment annually, using the market and income approach, or morefrequently if changing circumstances warrant. Goodwill is reported at the THVG entity level. To determine the fair value of the reporting unit, THVG generally uses apresent value technique (discounted cash flow) corroborated by market multiples and/or data from third-party valuationspecialists. The factor most sensitive to change with respect to THVG’s discounted cash flow analyses is the estimated futurecash flows of each reporting unit which is, in turn, sensitive to THVG’s estimates of future revenue growth and margins forthese businesses. If actual revenue growth and/or margins are lower than THVG’s expectations, the impairment test resultscould differ. THVG bases its fair value estimates on assumptions THVG believes to be reasonable and consistent with marketparticipant assumptions, but that are unpredictable and inherently uncertain. The provisions of the accounting standard for goodwill require that THVG performs a two-step impairment test ongoodwill. In the first step, THVG compares the fair value of each reporting unit to its carrying value. If the fair value of thereporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and THVG is notrequired to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair valueof the reporting unit, then THVG must perform the second step of the impairment test in order to determine the implied fairvalue of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, thenTHVG records an impairment loss equal to the difference. An analysis of the goodwill balance was performed in March of2016 and no such impairment was identified. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carryingamount of an asset, or related groups of assets, may not be fully recoverable from estimated future cash flows. In the event ofimpairment, measurement of the amount of impairment may be based on appraisal, fair values of similar assets, or estimates offuture undiscounted cash flows resulting from use and ultimate disposition of the asset. In June of 2016, THVG determinedthat Lewisville Surgicare Partners, Ltd. (Lewisville), Baylor Surgicare at Ennis, L.L.C. (Ennis), and Arlington SurgicarePartners, Ltd. (Arlington) would be closing due to current and expected negative cash flows. This represents a significantadverse change in the manner in which the facilities’ assets are being used, thus triggering the need to test the facilities’ long-lived assets for impairment. These assets consist of office and medical equipment, furniture, and buildingleases. Management determined the fair value of the furniture and equipment is greater than the total carrying value, usingLevel 2 inputs, and as such no impairment was recorded for those asset groups. Based on the inability to locate a sublessee tooccupy the properties, which are specialized to perform outpatient surgery, and Level 3 inputs, THVG concluded that thethree facility building leases, which are classified as capital leases, were impaired and recordedF-9 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued impairment charges, equal to the remaining un-depreciated carrying value of the facility building leases. THVG recorded animpairment charge in June 2016 for approximately $5,667,000. Fair Value of Financial Instruments The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transactionbetween market participants to sell the asset or transfer the liability. The Company uses fair value measurements based onquoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2) orunobservable inputs (Level 3), depending on the nature of the item being valued. The Company does not have financialassets or liabilities measured at fair value on a recurring basis at June 30, 2016. The carrying amounts of cash, restricted cash,funds due from United Surgical Partners, Inc., accounts receivable, and accounts payable approximate fair value because ofthe short maturity of these instruments. The fair value of the Company’s long-term debt is determined by Level 2 inputs which are an estimation of the discountedfuture cash flows of the debt at rates currently quoted or offered to a comparable company for similar debt instruments ofcomparable maturities by its lenders. At June 30, 2016, the aggregate carrying amount and estimated fair value of long-termdebt were approximately $32,545,000 and $29,336,000, respectively. Revenue Recognition THVG has agreements with third-party payors that provide for payments to THVG at amounts different from its establishedrates. Payment arrangements include prospectively-determined rates per discharge, reimbursed costs, discounted charges,and per diem payments. Net patient service revenue is reported at the estimated net realizable amount from patients, third-party payors, and others for services rendered, including estimated contractual adjustments under reimbursement agreementswith third party payors. Contractual adjustments are accrued on an estimated basis in the period the related services arerendered and adjusted in future periods as final settlements are determined. These contractual adjustments are related to theMedicare and Medicaid programs, as well as managed care contracts. Net patient service revenue from the Medicare and Medicaid programs accounted for approximately 15% of total net patientservice revenue in 2016. Net patient service revenue from commercial and managed care contracts accounted for approximately 80% of net patientservice revenue in 2016. Net patient service revenue from private payors accounted for approximately 5% of total net patient service revenue in 2016. For facilities licensed as hospitals, federal regulations require the submission of annual cost reports covering medical costsand expenses associated with services provided to program beneficiaries. Medicare and Medicaid cost report settlements areestimated in the period services are provided to beneficiaries. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject tointerpretation. As a result, there is a reasonable possibility that recorded estimates with respect to the six THVG facilitieslicensed as hospitals may change as interpretations are clarified. These initial estimates are revised as needed until final costreports are settled. Income Taxes No amounts for federal income taxes have been reflected in the accompanying consolidated financial statements because thefederal tax effects of THVG’s activities accrue to the individual members.F-10 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued The Texas franchise tax applies to all THVG entities and is reflected in the accompanying consolidated statement of income.The tax is calculated on a margin base and is therefore reflected in THVG’s consolidated statement of income for the yearended June 30, 2016 as income tax. THVG follows the provisions of ASC 740, “Income Taxes”, which prescribes a single model to address uncertainty in taxpositions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position isrequired to meet before being recognized in the financial statements. As of June 30, 2016, THVG had no gross unrecognized tax benefits. THVG files a partnership income tax return in the U.S.federal jurisdiction and a franchise tax return in the state of Texas. THVG is no longer subject to U.S. federal income taxexamination for years prior to 2012 and no longer subject to state and local income tax examination for years prior to2011. THVG has identified Texas as a “major” state taxing jurisdiction. THVG does not expect or anticipate a significantchange over the next twelve months in the unrecognized tax benefits. Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources arerecorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Recently Issued Accounting Pronouncements In May 2015, FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of theguidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in anamount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. THVG has not evaluated all of the provisions of ASU 2014-09, which are effective for fiscal years beginning afterDecember 15, 2017, and interim periods within those years, for public business entities and not-for-profit entities that haveissued publicly traded debt, and December 15, 2018 for all other entities. In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as aGoing Concern.” This ASU amendment requires management to assess an entity’s ability to continue as a goingconcern. Management should evaluate whether conditions or events, considered in the aggregate, exist that raise substantialdoubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements areissued. THVG has not evaluated all of the provisions of ASU 2014-15, which are effective for fiscal years ending afterDecember 15, 2016, and interim periods thereafter. In July 2015, FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” This ASU requires an entity tomeasure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in theordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequentmeasurement is unchanged for inventory measured using last-in, first-out (LIFO) or the retail inventory method. Theamendments do not apply to inventory that is measured using LIFO or the retail inventory method. The amendments apply toall other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. THVG has notevaluated all of the provisions, which are effective for fiscal years beginning after December 15, 2016, and interim periodswithin those years, for public business entities and December 15, 2016, and interim periods thereafter, for all other entities. In September 2015, FASB issued ASU 2015-16,”Simplifying the Accounting for Measurement-Period Adjustments.” ThisASU requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement periodand any related income effects in the reporting period in which the adjustment amounts are determined. The ASU alsorequires an entity to present separately on the face of the income statement, or disclose in the notes, the portion of theF-11 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if theadjustment to the estimated amounts had been recognized as of the acquisition date. THVG has not evaluated all of theprovisions, which are effective for fiscal years beginning after December 15, 2015, and interim periods within those years, forpublic business entities and December 15, 2016, and interim periods thereafter, for all other entities. In April 2016, FASB issued ASU 2016-10, “Identifying Performance Obligations and Licensing.” This ASU adds furtherguidance on identifying performance obligations and also improves the operability and understandability of the licensingimplementation guidance. THVG has not evaluated all of the provisions, which are effective for fiscal years beginning afterDecember 15, 2017, and interim periods within those years, for public business entities and not-for-profit entities that haveissued publicly traded debt, and December 15, 2018 for all other entities. In May 2016, FASB issued ASU 2016-12, “Revenue from Contracts with Customers: Narrow-Scope Improvements andPractical Expedients.” This ASU adds further clarification to the new revenue recognition standards issued in ASU 2014-09.THVG has not evaluated all of the provisions, which are effective for fiscal years beginning after December 15, 2017, andinterim periods within those years, for public business entities and not-for-profit entities that have issued publicly tradeddebt, and December 15, 2018 for all other entities. In August 2016, FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This ASUprovides cash flow statement classification guidance. THVG has not evaluated all of the provisions, which are effective forfiscal years beginning after December 15, 2017, and interim periods within those years, for public business entities andDecember 15, 2018 , and interim periods thereafter, for all other entities. 2.PROPERTY AND EQUIPMENT At June 30, 2016, property and equipment and related accumulated depreciation and amortization consisted of the following(in thousands): Estimated Useful Lives 2016 Land — $607 Buildings and leasehold improvements 5-25 years 186,242 Equipment 3-15 years 162,472 Furniture and fixtures 5-15 years 8,640 Construction in progress 2,809 360,770 Less accumulated depreciation (200,062) Net property and equipment $160,708 At June 30, 2016, assets recorded under capital lease arrangements included in property and equipment consisted of thefollowing (in thousands): 2016 Buildings $119,032 Less accumulated depreciation (50,917) Net property and equipment under capital leases $68,115 F-12 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 3.INVESTMENTS IN SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES THVG’s investments in consolidated subsidiaries and unconsolidated affiliates consisted of the following: Percentage Owned Legal Name Facility City June 30,2016 Consolidated subsidiaries (1): DeSoto Surgicare, Ltd. North Texas Surgery Center Desoto 52.1 % Metroplex Surgicare Partners, Ltd. Baylor Surgicare at Bedford Bedford 65.8 Baylor Surgicare at North Dallas, LLC Baylor Surgicare at North Dallas Dallas 56.6 Fort Worth Surgicare Partners, Ltd. Baylor Surgical Hospital of Fort Worth Fort Worth 50.9 Denton Surgicare Partners, Ltd. Baylor Surgicare at Denton Denton 51.0 Garland Surgicare Partners, Ltd. Baylor Surgicare at Garland Garland 50.1 University Surgical Partners of Dallas, L.L.P.(2) N/A Dallas 66.2 Dallas Surgical Partners, L.L.C. Baylor Surgicare Dallas 58.6 MSH Partners, L.L.C. Baylor Medical Center at Uptown Dallas 33.4 North Central Surgical Center, L.L.P. North Central Surgery Center Dallas 33.8 Grapevine Surgicare Partners, Ltd. Baylor Surgicare at Grapevine Grapevine 56.8 Frisco Medical Center, L.L.P. Baylor Scott & White Medical Center - Frisco Frisco 50.3 Physicians Center of Fort Worth, L.L.P. Baylor Surgicare at Fort Worth I & II Fort Worth 53.9 Bellaire Outpatient Surgery Center, L.L.P. Baylor Surgicare at Oakmont Fort Worth 50.1 Park Cities Surgery Center, L.L.C. Park Cities Surgery Center Dallas 50.1 Trophy Club Medical Center, L.P. Baylor Medical Center at Trophy Club Fort Worth 50.1 Rockwall/Heath Surgery Center, L.L.P. Baylor Surgicare at Heath Heath 59.2 North Garland Surgery Center, L.L.P. Baylor Surgicare at North Garland Garland 52.1 Rockwall Ambulatory Surgery Center, L.L.P. Rockwall Surgery Center Rockwall 53.3 Baylor Surgicare at Plano, L.L.C. Baylor Surgicare at Plano Plano 50.1 Arlington Orthopedic and Spine Hospitals, LLC Baylor Orthopedic and Spine Hospital atArlington Arlington 50.1 Baylor Surgicare at Granbury, LLC Baylor Surgicare at Granbury Granbury 50.6 Metrocrest Surgery Center, L.L.C. Baylor Surgicare at Carrollton Carrollton 51.0 Baylor Surgicare at Mansfield, L.L.C. Baylor Surgicare at Mansfield Mansfield 50.3 Tuscan Surgery Center, L.L.C. Tuscan Surgery Center at Las Colinas Las Colinas 51.0 Lone Star Endoscopy Center, L.L.C. Lone Star Endoscopy Keller 51.0 Baylor Surgicare at Plano Parkway, L.L.C. Baylor Surgicare at Plano Parkway Plano 51.0 Texas Endoscopy Centers, LLC Texas Endoscopy Plano/Allen 51.0 Heritage Park Surgical Hospital, LLC Baylor Scott & White Surgical Hospital -Sherman Sherman 52.3 Unconsolidated affiliates: Denton Surgicare Real Estate, Ltd. (3) n/a 49.0 Irving-Coppell Surgical Hospital, L.L.P. Irving-Coppell Surgical Hospital Irving 18.3 MCSH Real Estate Investors, Ltd. (3) n/a 2.0 1.List excludes holding companies, which are wholly-owned by the Company and hold the Company’s investments in the Facilities.2.Partnership that has investment in North Central Surgical Center, Baylor Surgicare, and Baylor Medical Center at Uptown.3.These entities are not surgical facilities and do not have ownership in any surgical facilities. On September 17, 2015, THVG acquired 60.0% of Surgery Center of Garland, LLC, which owned and operated PrecisionSurgery Center (PSC), for approximately $8,900,000. THVG then merged the PSC operations with the existing BaylorSurgicare at Valley View (Valley View), resulting in THVG owning 56.6% in the ambulatory surgical center (ASC). ValleyView’s legal name then changed to Baylor Surgicare at North Dallas, LLC (North Dallas). From the acquisition date to fiscalyear end June 30, 2016, North Dallas accounted for approximately $10,500,000 of total revenues and approximately$2,800,000 of net income, included in the consolidated statement of income. F-13 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued The following table summarizes the recorded values of the assets acquired and liabilities assumed at the date of acquisition(in thousands): Cash and cash equivalents $135 Current assets 631 Long-term assets 140 Goodwill 12,005 Total assets acquired 12,911 Current liabilities 136 Long-term liabilities — Total liabilities assumed 136 Noncontrolling interests 3,862 Net assets acquired $8,913 The acquisition was accounted for in accordance with ASC 805 and the acquisition method was applied. Noncontrollinginterests (NCI) are valued at fair value at acquisition with a discount to reflect lack of control and marketability by the NCIholders. These fair value measurements are determined by Level 2 inputs. The resulting goodwill is attributed to expectedsynergies from combining operations. The results of this acquisition is included in THVG’s consolidated financialstatements from the date of acquisition. Total acquisition costs included in professional fees on THVG’s consolidatedstatement of income were approximately $212,000 for 2016. The following table presents the unaudited pro forma results as if THVG had acquired PSC on July 1, 2015 (inthousands). The pro forma results are not necessarily indicative of the results of operations that would have occurred if theacquisition had been completed on the date indicated, nor is indicative of the future operating results of THVG. Year EndedJune 30, 2016 Total revenues $891,125 Net income attributable to THVG $109,102 4.NONCONTROLLING INTERESTS The Company controls and therefore consolidates the results of 28 of its 29 facilities at June 30, 2016. Similar to itsinvestments in unconsolidated affiliates, the Company regularly engages in the purchase and sale of equity interests withrespect to its consolidated subsidiaries that do not result in a change of control. These transactions are accounted for asequity transactions, as they are undertaken among the Company, its consolidated subsidiaries, and noncontrolling interests,and their cash flow effect is classified within financing activities. During the fiscal year ended June 30, 2016, the Company purchased and sold equity interests in various consolidatedsubsidiaries in the amounts of approximately $3,004,000 and $1,415,000, respectively. The basis difference between theF-14 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Company’s carrying amount and the proceeds received or paid in each transaction is recorded as an adjustment to theCompany’s equity. The impact of these transactions is summarized as follows (in thousands): Year EndedJune 30, 2016 Net income attributable to the Company $108,710 Net transfers to the noncontrolling interests: Decrease in the Company’s equity for losses incurred related to purchases ofsubsidiaries’ equity interests (801) Decrease in the Company’s equity for (losses)/gains related to sales ofsubsidiaries’ equity interests (2,229) Net transfers to noncontrolling interests (3,030) Change in equity from net income attributable to the Company and nettransfers to noncontrolling interests $105,680 As further described in Note 1, upon the occurrence of various fundamental regulatory changes, the Company could beobligated, under the terms of its investees’ partnership and operating agreements, to purchase some or all of thenoncontrolling interests related to the Company’s consolidated subsidiaries. As a result, these noncontrolling interests arenot included as part of the Company’s equity and are carried as noncontrolling interests-redeemable on the Company’sconsolidated balance sheet. The activity in noncontrolling interests-redeemable for the year ended June 30, 2016 issummarized below (in thousands): Balance, June 30, 2015 $79,590 Net income attributable to noncontrolling interests 117,018 Distributions to noncontrolling interests (109,768) Purchases of noncontrolling interests (3,961) Sales of noncontrolling interests 3,186 Noncontrolling interests attributable to business acquisition 3,862 Balance, June 30, 2016 $89,927 5.GOODWILL The following is a summary of changes in the carrying amount of goodwill for the year ended June 30, 2016 (in thousands): Balance, June 30, 2015 $228,612 Additions: Acquisition of Precision Surgery Center 12,005 Adjustments: Acquisition of Sherman (314) Balance, June 30, 2016 $240,303 Goodwill additions resulting from business combinations are recorded and assigned to the parent and noncontrollinginterests. F-15 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued 6.LONG-TERM OBLIGATIONS At June 30, 2016, long-term obligations consisted of the following (in thousands): 2016 Capital lease obligations (Note 7) $118,873 Notes payable to financial institutions 32,545 Total long-term obligations 151,418 Less current portion (12,494) Long-term obligations, less current portion $138,924 The aggregate maturities of notes payable for each of the five years subsequent to June 30, 2016 and thereafter are as follows(in thousands): 2017 $7,235 2018 8,477 2019 6,472 2020 5,782 2021 2,237 Thereafter 2,342 Total long-term obligations $32,545 The Facilities have notes payable to financial institutions which mature at various dates through 2023 and accrue interest atfixed and variable rates ranging from 2% to 11%. Each note is collateralized by certain assets of the respective Facility. Capital lease obligations are collateralized by underlying real estate or equipment and have interest rates ranging from 4% to13%. 7.LEASES The Facilities lease various office equipment, medical equipment, and office space under a number of operating leaseagreements, which expire at various times through the year 2032. Such leases do not involve contingent rentals, nor do theycontain significant renewal or escalation clauses. Office leases generally require the Facilities to pay all executory costs (suchas property taxes, maintenance, and insurance). F-16 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Minimum future payments under noncancelable leases with remaining terms in excess of one year as of June 30, 2016 are asfollows (in thousands): CapitalLeases OperatingLeases Year ending June 30: 2017 $17,577 $22,468 2018 18,278 21,370 2019 17,774 19,643 2020 17,284 18,006 2021 17,421 15,717 Thereafter 122,097 99,652 Total minimum lease payments 210,431 $196,856 Amount representing interest (91,558) Total principal payments $118,873 Total rent expense under operating leases was approximately $31,112,000 for the year ended June 30, 2016, and is includedin other operating expenses in the accompanying consolidated statement of income. 8.RELATED-PARTY TRANSACTIONS THVG operates the Facilities under management and royalty contracts, and THVG in turn is managed by Baylor and USP,resulting in THVG incurring management and royalty fee expense payable to Baylor and USP in amounts equal to themanagement and royalty fee income THVG receives from the Facilities. THVG’s management and royalty fee income fromthe facilities it consolidates for financial reporting purposes eliminates in consolidation with the facilities’ expense andtherefore is not included in THVG’s consolidated revenues. THVG’s management and royalty fee income from facilitieswhich are not consolidated was $600,000 for the year ended June 30, 2016, and is included in other income in theaccompanying consolidated statement of income. The management and royalty fee expense to Baylor and USP was approximately $34,174,000 for the year endedJune 30, 2016 and is reflected in operating expenses in THVG’s consolidated statement of income. Of the total, 64.3% and34.0% represent management fees payable to USP and Baylor, respectively, and 1.7% represents royalty fees payable toBaylor. Under the management and royalty agreements, the Facilities pay THVG an amount ranging from 4.5% to 7.0% of their netpatient service revenue less provision for doubtful accounts annually, subject, in some cases, to an annual cap. In addition, a subsidiary of USPI frequently pays bills on behalf of THVG and has custody of substantially all of THVG’sexcess cash, paying THVG and the Facilities interest income on the net balance at prevailing market rates. Amounts held byUSPI on behalf of THVG and the facilities totaled approximately $80,530,000 at June 30, 2016, net against accrued expensesthat USPI paid on behalf of THVG of approximately $9,754,000 at June 30, 2016. These net amounts are shown in Funds duefrom United Surgical Partners, Inc on the accompanying consolidated balance sheet. The interest income amounted toapproximately $150,000 for the year ended June 30, 2016. 9.COMMITMENTS AND CONTINGENCIES Financial Guarantees THVG guarantees portions of the indebtedness of its investees to third-parties, which could potentially require THVG tomake maximum aggregate payments totaling approximately $5,081,000. Of the total, approximately $3,552,000 relates toF-17 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of ContentsTEXAS HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued the obligations of four consolidated subsidiaries whose obligations are included in THVG’s consolidated balance sheet andrelated disclosures, and approximately $1,529,000 relates to obligations of two consolidated subsidiaries under operatingleases whose obligations are not included in THVG’s consolidated balance sheet and related disclosures. These arrangements (a) consist of guarantees of real estate and equipment financing, (b) are collateralized by all, or a portionof, the investees’ assets, (c) require payments by THVG in the event of a default by the investee primarily obligated under thefinancing, (d) expire as the underlying debt matures at various dates through 2020, or earlier if certain performance targets aremet, and (e) provide no recourse for THVG to recover any amounts from third-parties. The fair value of the guarantee liabilitywas not material to the consolidated financial statements and, therefore, no amounts were recorded at June 30, 2016 related tothese guarantees. When THVG incurs guarantee obligations that are disproportionately greater than the guarantees providedby the investee’s other owners, THVG charges the investee a fair market value fee based on the value of the contingentliability THVG is assuming. Litigation and Professional Liability Claims In their normal course of business, the Facilities are subject to claims and lawsuits relating to patient treatment. THVGbelieves that its liability for damages resulting from such claims and lawsuits is adequately covered by insurance or isadequately provided for in its consolidated financial statements. USPI, on behalf of THVG and each of the Facilities,maintains professional liability insurance that provides coverage on a claims-made basis of $1,000,000 per incident and$11,000,000 in annual aggregate amount with retroactive provisions upon policy renewal. Certain of THVG’s insurancepolicies have deductibles and contingent premium arrangements. THVG believes that the expense recorded through June 30,2016, which was estimated based on historical claims, adequately provides for its exposure under thesearrangements. Additionally, from time to time, THVG may be named as a party to other legal claims and proceedings in theordinary course of business. THVG is not aware of any such claims or proceedings that have more than a remote chance ofhaving a material adverse impact on THVG. 10.SUBSEQUENT EVENTS THVG regularly engages in exploratory discussions or enters into letters of intent with various entities regarding possiblejoint ventures, development, or other transactions. These possible joint ventures, developments of new facilities, or othertransactions are in various stages of negotiation. THVG has performed an evaluation of subsequent events through November 7, 2016, which is the date the consolidatedfinancial statements were available to be issued. In July and September of 2016, THVG purchased units in Frisco Medical Center, L.L.P. (BMCF) for approximately$5,400,000 and $2,400,000, respectively, to fund a re-syndication and to maintain its current ownership. In October of 2016, BMCF purchased a controlling interest of 50.1% of Baylor Surgicare at Baylor Plano, LLC (BSBP), adenovo which is scheduled to commence operations in 2017. The total purchase price paid by BMCF for the acquisition wasapproximately $1,300,000. THVG purchased a direct interest of 12.0% of BSBP for $300,000. Baylor Regional MedicalCenter at Plano (BMCP), a wholly controlled affiliate of BSW Holdings, purchased a direct interest of 9.9% forapproximately $250,000. F-18Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 Subsidiariesof Tenet Healthcare Corporationas of December 31, 2016 Name of Entity State or OtherJurisdiction ofFormation601 N 30th Street I, L.L.C.Delaware601 N 30th Street II, L.L.C.Nebraska601 N 30th Street III, Inc.NebraskaThe 6300 West Roosevelt PartnershipIllinoisAbrazo Health Network EP Clinical Services, LLCArizonaAbrazo Medical Group Urgent Care, LLCDelawareAdvantage Health Care Management Company, LLCDelawareAdvantage Health Network, Inc.FloridaAHM Acquisition Co., Inc.DelawareAlabama Cardiovascular Associates, L.L.C.AlabamaAlabama Hand and Sports Medicine, L.L.C.AlabamaAllegian Insurance CompanyTexasAlvarado Hospital Medical Center, Inc.CaliforniaAMC/North Fulton Urgent Care #1, L.L.C.GeorgiaAMC/North Fulton Urgent Care #2, L.L.C.GeorgiaAMC/North Fulton Urgent Care #3, L.L.C.GeorgiaAMC/North Fulton Urgent Care #4, L.L.C.GeorgiaAMC/North Fulton Urgent Care #5, L.L.C.GeorgiaAMC/North Fulton Urgent Care #6, L.L.C.GeorgiaAmerican Medical (Central), Inc.CaliforniaAMI/HTI Tarzana Encino Joint VentureDelawareAMI Information Systems Group, Inc.CaliforniaAmisub (Heights), Inc.DelawareAmisub (Hilton Head), Inc.South CarolinaAmisub (North Ridge Hospital), Inc.FloridaAmisub of California, Inc.CaliforniaAmisub of North Carolina, Inc.North CarolinaAmisub of South Carolina, Inc.South CarolinaAmisub of Texas, Inc.DelawareAmisub (SFH), Inc.TennesseeAmisub (Twelve Oaks), Inc.DelawareAnaheim MRI Holding, Inc.CaliforniaArizona Health Partners, LLCArizona Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationAsia Outsourcing US, Inc.DelawareAspen Healthcare LimitedEngland and WalesAspen Leasing LimitedEngland and WalesAtlanta Medical Billing Center, L.L.C.GeorgiaAtlanta Medical Center, Inc.GeorgiaAtlanta Medical Center Interventional Neurology Associates, L.L.C.GeorgiaAtlanta Medical Center Neurosurgical & Spine Specialists, L.L.C.GeorgiaAtlanta Medical Center Physician Group, L.L.C.GeorgiaBaptist Accountable Care, LLCTexasBaptist Health Centers, LLCDelawareBaptist Medical Management Service Organization, LLCDelawareBaptist Memorial Hospital System Physician Hospital OrganizationTexasBaptist Physician Alliance ACO, LLCAlabamaBaptist Physician Alliance, LLCAlabamaBBH BMC, LLCDelawareBBH CBMC, LLCDelawareBBH DevelopmentCo, LLCDelawareBBH NP Clinicians, Inc.DelawareBBH PBMC, LLCDelawareBBH SBMC, LLCDelawareBBH WBMC, LLCDelawareBCDC EmployeeCO, LLCDelawareBHC-Talladega Pediatrics, LLCAlabamaBHS Accountable Care, LLCDelawareBHS Affinity, LLCDelawareBHS Integrated Physician Partners, LLCDelawareBHS Physicians Alliance for ACE, LLCDelawareBHS Physicians Network, Inc.TexasBHS Specialty Network, Inc.TexasBilling Center Doctors Hospital at White Rock Lake, L.L.C.TexasBluffton Okatie Primary Care, L.L.C.South CarolinaBroad River Primary Care, L.L.C.South CarolinaBrookwood Ancillary Holdings, Inc.DelawareBrookwood Baptist Health 1, LLCDelawareBrookwood Baptist Health 2, LLCDelawareBrookwood Baptist Imaging, LLCDelawareBrookwood Cardiovascular, LLCAlabamaBrookwood Center Development CorporationAlabamaBrookwood Development, Inc.AlabamaBrookwood Garages, L.L.C.Alabama2 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationBrookwood Health Services, Inc.AlabamaBrookwood Home Health, LLCAlabamaBrookwood - Maternal Fetal Medicine, L.L.C.AlabamaBrookwood Medical Partners - ENT, L.L.C.AlabamaBrookwood Occupational Health Clinic, L.L.C.AlabamaBrookwood Parking Associates, Ltd.AlabamaBrookwood Primary Care Cahaba Heights, L.L.C.AlabamaBrookwood Primary Care - Grand River, L.L.C.AlabamaBrookwood Primary Care - Homewood, L.L.C.AlabamaBrookwood Primary Care Hoover, L.L.C.AlabamaBrookwood Primary Care - Inverness, L.L.C.AlabamaBrookwood Primary Care - Mountain Brook, L.L.C.AlabamaBrookwood Primary Care Network - McCalla, L.L.C.AlabamaBrookwood Primary Care - Oak Mountain, L.L.C.AlabamaBrookwood Primary Care - Red Mountain, L.L.C.AlabamaBrookwood Primary Care The Narrows, L.L.C.AlabamaBrookwood Primary Care - Vestavia, L.L.C.AlabamaBrookwood Primary Network Care, Inc.AlabamaBrookwood Retail Pharmacy, L.L.C.AlabamaBrookwood Specialty Care - Endocrinology, L.L.C.AlabamaBrookwood Sports and Orthopedics, L.L.C.AlabamaBrookwood Women’s Care, L.L.C.AlabamaBT East Dallas JV, LLPTexasBuckhead Orthopedic Surgery Center, L.L.C.GeorgiaBurnt Church Primary and Urgent Care, L.L.C.South CarolinaBW Cardiology, LLCDelawareBW Cyberknife, LLCDelawareBW Hand Practice, LLCDelawareBW Office Buildings, LLCDelawareBW Parking Decks, LLCDelawareBW Physician Practices, LLCDelawareBW Retail Pharmacy, LLCDelawareBW Sports Practice, LLCDelawareBWP Associates, Ltd.AlabamaC7 Technologies, LLCDelawareCamp Creek Urgent Care, L.L.C.GeorgiaCancer Centre London LLPEngland and WalesCaptive Insurance Services, Inc.DelawareSubsidiaries of this entity, in which the Registrant indirectly holds a minority (non-controlling) interest, have been omitted.3 11 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationCardiology Physicians Associates, L.L.C.North CarolinaCardiology Physicians Corporation, L.L.C.North CarolinaCardiovascular & Thoracic Surgery Associates, L.L.C.South CarolinaCardiovascular Associates of the Southeast, L.L.C.AlabamaCardiovascular Care Network of Arizona, L.L.C.ArizonaCardiovascular Clinical Excellence at Desert Regional, LLCCaliforniaCardiovascular Clinical Excellence at Sierra Providence, LLCTexasCatawba-Piedmont Cardiothoracic Surgery, L.L.C.South CarolinaCedar Hill Primary Care, L.L.C.MissouriCenter for Advanced Research Excellence, L.L.C.FloridaCenter for the Urban Child, Inc.PennsylvaniaCentral Carolina Ambulatory Surgery Center, LLCNorth CarolinaCentral Carolina Hospital Pro Fee Billing, L.L.C.North CarolinaCentral Carolina-CIM, L.L.C.North CarolinaCentral Carolina-IMA, L.L.C.North CarolinaCentral Carolina Physicians - Sandhills, L.L.C.North CarolinaCentral Texas Corridor Hospital Company, LLCDelawareCGH Hospital, Ltd.FloridaChalon Living, Inc.ArizonaChicago Health System ACO, LLCIllinoisChildren’s Hospital of Michigan Premier Network, Inc.MichiganCHN Holdings, LLCDelawareCHVI Tucson Holdings, LLCDelawareC.K. of Birmingham, LLCAlabamaClaremont Hospital Holdings LimitedEngland and WalesClaremont Hospital LLPEngland and WalesCML-Chicago Market Labs, Inc.DelawareCoast Healthcare Management, LLCCaliforniaCoastal Carolina Medical Center, Inc.South CarolinaCoastal Carolina Physician Practices, LLCDelawareCoastal Carolina Pro Fee Billing, L.L.C.South CarolinaCommonwealth Continental Health Care, Inc.FloridaCommunity Connection Health Plan, Inc.ArizonaCommunity Hospital of Los Gatos, Inc.CaliforniaConifer Care Continuum Solutions, LLCMarylandConifer Ethics and Compliance, Inc.DelawareConifer Health Solutions, LLCDelawareConifer HIM & Revenue Integrity Services, LLCTexasConifer Holdings, Inc.DelawareConifer Patient Communications, LLCFlorida4 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationConifer Physician Services Holdings, Inc.DelawareConifer Physician Services, Inc.IllinoisConifer Revenue Cycle Solutions, LLCCaliforniaConifer Value-Based Care, LLCMarylandCoral Gables Hospital, Inc.FloridaCoral Gables Physician Services, L.L.C.FloridaCRNAs of MichiganMichiganCypress Fairbanks Medical Center Inc.TexasDelray Medical Center, Inc.FloridaDelray Medical Physician Services, L.L.C.FloridaDesert Regional Medical Center, Inc.CaliforniaDes Peres Hospital, Inc.MissouriDes Peres Physician Network, LLCMissouriDes Peres Urgent Care, L.L.C.MissouriDetroit Education & ResearchMichiganDigitalMed, Inc.DelawareDMC Detroit Receiving Hospital Premier Clinical Co-Management Services, LLCMichiganDMC Education & ResearchMichiganDMC Harper University Hospital Premier Clinical Co-Management Services, LLCMichiganDMC Huron Valley-Sinai Hospital Premier Clinical Management Services, LLCMichiganDMC Imaging, L.L.C.FloridaDMC Shared Savings ACO, LLCDelawareDoctors Hospital of Manteca, Inc.CaliforniaDoctors Medical Center Neurosciences Clinical Co-Management, LLCCaliforniaDoctors Medical Center of Modesto, Inc.CaliforniaDoctors Medical Center Orthopedics Clinical Co-Management, LLCCaliforniaEast Cobb Urgent Care, LLCGeorgiaEast Cooper Coastal Family Physicians, L.L.C.South CarolinaEast Cooper Community Hospital, Inc.South CarolinaEast Cooper Hyperbarics, L.L.C.DelawareEast Cooper OB/GYN, L.L.C.South CarolinaEast Cooper Physician Network, LLCSouth CarolinaEast Cooper Primary Care Physicians, L.L.C.South CarolinaEastern Professional Properties, Inc.DelawareEdinburgh Medical Services LimitedEngland and WalesEl Mirador ASC, Inc.CaliforniaEPHC, Inc.TexasEuropean Surgical Partners LimitedEngland and WalesEye-Docs LimitedEngland and WalesFirst Choice Physician PartnersCalifornia5 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationFlorida Regional Medical Center, Inc.FloridaFMCC Network Contracting, L.L.C.FloridaFMC Medical, Inc.FloridaFort Bend Clinical Services, Inc.TexasFountain Valley Regional Hospital and Medical CenterCaliforniaFountain Valley Surgery Center, LLCCaliforniaFREH Real Estate, L.L.C.FloridaFRS Imaging Services, L.L.C.FloridaFrye Physicians - Tenet NC, L.L.C.North CarolinaFrye Regional Medical Center, Inc.North CarolinaFryeCare Appalachian, L.L.C.North CarolinaFryeCare Boone, L.L.C.North CarolinaFryeCare Morganton, L.L.C.North CarolinaFryeCare Northwest Hickory, L.L.C.North CarolinaFryeCare Outpatient Imaging, L.L.C.North CarolinaFryeCare Physicians, L.L.C.North CarolinaFryeCare Specialty Center, L.L.C.North CarolinaFryeCare Valdese, L.L.C.North CarolinaFryeCare Watauga, L.L.C.North CarolinaFryeCare Women’s Services, L.L.C.North CarolinaG.S. North, Ltd.FloridaGardendale Surgical Associates, LLCAlabamaGarland MOB Properties, LLCTexasGastric Health Institute, L.L.C.GeorgiaGCPG, Inc.DelawareGeorgia Gifts From Grace, L.L.C.GeorgiaGeorgia North Fulton Healthcare Associates, L.L.C.GeorgiaGeorgia Northside Ear, Nose and Throat, L.L.C.GeorgiaGeorgia Physicians of Cardiology, L.L.C.GeorgiaGeorgia Spectrum Neurosurgical Specialists, L.L.C.GeorgiaGlobal Healthcare Partners LimitedEngland and WalesGolden State Medicare Health PlanCaliforniaGood Samaritan Cardiac & Vascular Management, LLCFloridaGood Samaritan Medical Center, Inc.FloridaGood Samaritan Surgery, L.L.C.FloridaGraystone Family Healthcare - Tenet North Carolina, L.L.C.North CarolinaGreater Dallas Healthcare EnterprisesTexasGreater Northwest Houston EnterprisesTexasGreystone Internal Medicine - Brookwood, L.L.C.AlabamaGulf Coast Community Health Care Systems, Inc.Mississippi6 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationGulf Coast Community Hospital, Inc.MississippiHallmark Family Physicians - Tenet North Carolina, L.L.C.North CarolinaHarbor Health Plan, Inc.MichiganHardeeville Hospitalists, L.L.C.South CarolinaHardeeville Medical Group, L.L.C.South CarolinaHardeeville Primary Care, L.L.C.South CarolinaHarlingen Physician Network, Inc.TexasHCH Tucson Holdings, LLCDelawareHCN Emerus Management Sub, LLCTexasHCN Emerus Texas, LLCTexasHCN European Surgery Center Holdings LimitedEngland and WalesHCN Laboratories, Inc.TexasHCN Physicians, Inc.TexasHCN Surgery Center Holdings, Inc.DelawareHDMC Holdings, L.L.C.DelawareHealth & Wellness Surgery Center, L.P.CaliforniaHealthcare Compliance, LLCDistrict of ColumbiaThe Healthcare Insurance CorporationCayman IslandsHealthcare Network Alabama, Inc.DelawareHealthcare Network CFMC, Inc.DelawareHealthcare Network Georgia, Inc.DelawareHealthcare Network Holdings, Inc.DelawareHealthcare Network Hospitals (Dallas), Inc.DelawareHealthcare Network Hospitals, Inc.DelawareHealthcare Network Louisiana, Inc.DelawareHealthcare Network Missouri, Inc.DelawareHealthcare Network North Carolina, Inc.DelawareHealthcare Network South Carolina, Inc.DelawareHealthcare Network Tennessee, Inc.DelawareHealthcare Network Texas, Inc.DelawareThe Healthcare Underwriting Company, a Risk Retention GroupVermontHealthCorp Network, Inc.DelawareHealthpoint of North Carolina, L.L.C.North CarolinaHealth Services Network Care, Inc.DelawareHealth Services Network Hospitals, Inc.DelawareHealth Services Network Texas, Inc.DelawareThe Heart and Vascular Clinic, L.L.C.FloridaHeart & Vascular Institute of Texas, Inc.TexasHeart and Vascular Institute of MichiganMichigan7 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationHeritage Medical Group of Hilton Head, L.L.C.South CarolinaHialeah Hospital, Inc.FloridaHialeah Real Properties, Inc.FloridaHickory Family Practice Associates - Tenet North Carolina, L.L.C.North CarolinaHighgate Hospital LLPEngland and WalesHilton Head Health System, L.P.South CarolinaHilton Head Occupational Medicine, L.L.C.South CarolinaHilton Head Regional Anesthesia Partners, L.L.C.South CarolinaHilton Head Regional Endocrinology Associates, L.L.C.South CarolinaHilton Head Regional Healthcare, L.L.C.South CarolinaHilton Head Regional OB/GYN Partners, L.L.C.South CarolinaHilton Head Regional Physician Network – Georgia, L.L.C.GeorgiaHilton Head Regional Physician Network, LLCSouth CarolinaHitchcock State Street Real Estate, Inc.CaliforniaHNMC, Inc.DelawareHNW GP, Inc.DelawareHNW LP, Inc.DelawareHollywood Medical Center, Inc.FloridaHoly Cross Hospital, Inc.ArizonaHome Health Partners of San Antonio, LLCTexasHoover Doctors Group, Inc.AlabamaHoover Land, LLCDelawareHospital Development of West Phoenix, Inc.DelawareHospital RCM Services, LLCTexasHospital Underwriting Group, Inc.TennesseeHouston Northwest Concessions, L.L.C.TexasHouston Northwest Medical Center, Inc.DelawareHouston Northwest Operating Company, L.L.C.TexasHouston Northwest Partners, Ltd.TexasHouston Specialty Hospital, Inc.TexasHouston Sunrise Investors, Inc.DelawareHPS of PA, L.L.C.PennsylvaniaHSRM International, Inc.CaliforniaHUG Services, Inc.DelawareThe Huron CorporationDistrict of ColumbiaImaging Center at Baxter Village, L.L.C.South CarolinaInforMed Insurance Services, LLCMarylandInternational Health and Wellness, Inc.FloridaJackson Medical Associates, LLCGeorgia8 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationJFK Memorial Hospital, Inc.CaliforniaJourney Home Healthcare of San Antonio, LLCTexasLaguna Medical Systems, Inc.CaliforniaLake Health Care Facilities Inc.DelawareLakeFront Medical Associates, LLCDelawareLakewood Regional Medical Center, Inc.CaliforniaLifemark Hospitals, Inc.DelawareLifemark Hospitals of Florida, Inc.FloridaLifemark Hospitals of Louisiana, Inc.LouisianaLos Alamitos Medical Center, Inc.CaliforniaLos Gatos Multi-Specialty Group, Inc.CaliforniaMacNeal Health Providers, Inc.IllinoisMacNeal Management Services, Inc.IllinoisMacNeal Medical Records, Inc.DelawareMacNeal Physicians Group, LLCDelawareMeadowcrest Hospital, LLCLouisianaMeadowcrest Multi-Specialty Clinic, L.L.C.LouisianaMedplex Outpatient Medical Centers, Inc.AlabamaMemphis Urgent Care #1, L.L.C.TennesseeMemphis Urgent Care #2, L.L.C.TennesseeMetroWest Accountable Health Care Organization, LLCMassachusettsMetroWest HomeCare & Hospice, LLCMassachusettsMichigan Pioneer ACO, LLCDelawareMichigan Regional Imaging, LLCMichiganMid-Island Primary and Urgent Care, L.L.C.South CarolinaMidwest Pharmacies, Inc.IllinoisMobile Technology Management, LLCMichiganNacogdoches ASC-LP, Inc.DelawareNational Ancillary, Inc.TexasNational ASC, Inc.DelawareNational Diagnostic Imaging Centers, Inc.TexasNational HHC, Inc.TexasNational Home Health Holdings, Inc.DelawareNational ICN, Inc.TexasNational Medical Services II, Inc.FloridaNational Medical Ventures, Inc.DelawareNational Outpatient Services Holdings, Inc.DelawareNational Urgent Care Holdings, Inc.DelawareNational Urgent Care, Inc.FloridaNephrology Associates of Hilton Head, L.L.C.South Carolina9 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationNetwork Management Associates, Inc.CaliforniaNew Dimensions, LLCIllinoisNew H Acute, Inc.DelawareNew Medical Horizons II, Ltd.TexasNMC Lessor, L.P.TexasNME Headquarters, Inc.CaliforniaN.M.E. International (Cayman) LimitedCayman IslandsNME Properties Corp.TennesseeNME Properties, Inc.DelawareNME Property Holding Co., Inc.DelawareNME Psychiatric Hospitals, Inc.DelawareNME Rehabilitation Properties, Inc.DelawareNorth Carolina Community Family Medicine, L.L.C.North CarolinaNorth Fulton Cardiovascular Medicine, L.L.C.GeorgiaNorth Fulton GI Center, L.L.C.GeorgiaNorth Fulton Hospitalist Group, L.L.C.GeorgiaNorth Fulton Medical Center, Inc.GeorgiaNorth Fulton MOB Ventures, Inc.GeorgiaNorth Fulton Primary Care Associates, L.L.C.GeorgiaNorth Fulton Primary Care - Willeo Rd., L.L.C.DelawareNorth Fulton Primary Care - Windward Parkway, L.L.C.GeorgiaNorth Fulton Primary Care - Wylie Bridge, L.L.C.GeorgiaNorth Fulton Pulmonary Specialists, L.L.C.GeorgiaNorth Fulton Regional Medical Center Pro Fee Billing, L.L.C.GeorgiaNorth Fulton Women’s Consultants, L.L.C.GeorgiaNorth Miami Medical Center, Ltd.FloridaNorthPoint Health System, Inc.GeorgiaNorth Shore Medical Billing Center, L.L.C.FloridaNorth Shore Medical Center, Inc.FloridaNorth Shore Physician Practices, L.L.C.FloridaNorthwest Houston Providers Alliance, Inc.TexasNorwood Clinic of Alabama, L.L.C.AlabamaNRMC Physician Services, L.L.C.FloridaNUCH of Connecticut, LLCConnecticutNUCH of Georgia, L.L.C.GeorgiaNUCH of Massachusetts, LLCMassachusettsNUCH of Michigan, Inc.MichiganNUCH of TexasTexasNWSC, L.L.C.TexasOHM Services, Inc.Massachusetts10 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationOkatie Surgical Partners, L.L.C.South CarolinaOlive Branch Urgent Care #1, LLCMississippiOncology Associates of the Low Country, L.L.C.South CarolinaOrNda Hospital CorporationCaliforniaOrthopedic Associates of the Lowcountry, L.L.C.South CarolinaPalm Beach Gardens Cardiac and Vascular Partners, LLCFloridaPalm Beach Gardens Community Hospital, Inc.FloridaPalm Valley Medical Center Campus AssociationArizonaPark Plaza Hospital Billing Center, L.L.C.TexasParkway Internal Medicine - Tenet North Carolina, L.L.C.North CarolinaPDN, L.L.C.TexasPhoenix Health Plans, Inc.ArizonaPHPS-CHM Acquisition, Inc.DelawarePhysician Performance Network, L.L.C.DelawarePhysician Performance Network of DetroitMichiganPhysician Performance Network of North Carolina, Inc.North CarolinaPhysician Performance Network of Philadelphia, L.L.C.PennsylvaniaPhysician Performance Network of Tucson, LLCArizonaPhysicians Performance Network of HoustonTexasPhysicians Performance Network of North TexasTexasPiedmont Behavioral Medicine Associates, LLCSouth CarolinaPiedmont Cardiovascular Physicians, L.L.C.South CarolinaPiedmont Carolina OB/GYN of York County, L.L.C.South CarolinaPiedmont Carolina Vascular Surgery, L.L.C.South CarolinaPiedmont/Carolinas Radiation Therapy, LLCSouth CarolinaPiedmont East Urgent Care Center, L.L.C.South CarolinaPiedmont Express Care at Sutton Road, L.L.C.South CarolinaPiedmont Family Practice at Baxter Village, L.L.C.South CarolinaPiedmont Family Practice at Rock Hill, L.L.C.South CarolinaPiedmont Family Practice at Tega Cay, L.L.C.South CarolinaPiedmont General Surgery Associates, L.L.C.South CarolinaPiedmont Health Alliance, Inc.North CarolinaPiedmont Internal Medicine at Baxter Village, L.L.C.South CarolinaPiedmont Medical Center Cardiovascular Clinical Co-Management, L.L.CSouth CarolinaPiedmont Physician Network, LLCSouth CarolinaPiedmont Pulmonology, L.L.C.South CarolinaPiedmont Surgical Specialists, L.L.C.South CarolinaPiedmont Urgent Care and Industrial Health Centers, Inc.South CarolinaPiedmont Urgent Care Center at Baxter Village, L.L.C.South CarolinaPiedmont West Urgent Care Center, L.L.C.South Carolina11 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationPlacentia-Linda Hospital, Inc.CaliforniaPMC Physician Network, L.L.C.South CarolinaPM CyFair Land Partners, LLCDelawarePractice Partners Management, L.P.TexasPremier ACO Physicians Network, LLCCaliforniaPremier Emergency Physicians, LLCMissouriPremier Health Plan Services, Inc.CaliforniaPremier Medical Specialists, L.L.C.MissouriPrimary Care Physicians Center, LLCIllinoisProfessional Healthcare Systems Licensing CorporationDelawareProfessional Liability Insurance CompanyTennesseePros Temporary Staffing, Inc.IllinoisRepublic Health Corporation of Rockwall CountyNevadaResolute Health Family Urgent Care, Inc.DelawareResolute Health Physicians Network, Inc.TexasResolute Hospital Company, LLCDelawareRHC Parkway, Inc.DelawareRheumatology Associates of Atlanta Medical Center, L.L.C.GeorgiaR.H.S.C. El Paso, Inc.TexasRio Grande Valley Indigent Health Care CorporationTexasRLC, LLCArizonaRock Bridge Surgical Institute, L.L.C.GeorgiaRoswell Georgia Surgery Center, L.L.C.GeorgiaRoswell Medical Ventures, Inc.GeorgiaSaint Francis-Arkansas Physician Network, LLCArkansasSaint Francis-Bartlett Physician Network, LLCTennesseeSaint Francis Behavioral Health Associates, L.L.C.TennesseeSaint Francis Cardiology Associates, L.L.C.TennesseeSaint Francis Cardiovascular Surgery, L.L.C.TennesseeSaint Francis Center for Surgical Weight Loss, L.L.C.TennesseeSaint Francis Hospital-Bartlett, Inc.TennesseeSaint Francis Hospital Billing Center, L.L.C.TennesseeSaint Francis Hospital Inpatient Physicians, L.L.C.TennesseeSaint Francis Hospital Pro Fee Billing, L.L.C.TennesseeSaint Francis Medical Partners, East, L.L.C.TennesseeSaint Francis Medical Partners, General Surgery, L.L.C.TennesseeSaint Francis Medical Specialists, L.L.C.TennesseeSaint Francis Physician Network, LLCTennesseeSaint Francis Surgical Associates, L.L.C.TennesseeSaint Vincent Healthcare System, Inc.Delaware12 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationSaint Vincent Physician Services, Inc.MassachusettsSan Ramon Ambulatory Care, LLCDelawareSan Ramon ASC, L. P.CaliforniaSan Ramon Regional Medical Center, LLCDelawareSan Ramon Surgery Center, L.L.C.CaliforniaSCHC Pediatric Anesthesia Associates, L.L.C.PennsylvaniaSCHC Pediatric Associates, L.L.C.PennsylvaniaSFMP, Inc.TennesseeSFMPE - Crittenden, L.L.C.ArkansasSheffield Educational Fund, Inc.GeorgiaShelby Baptist Affinity, LLCAlabamaShelby Baptist Ambulatory Surgery Center, LLCAlabamaSHL/O Corp.DelawareSierra Providence Healthcare EnterprisesTexasSierra Providence Health Network, Inc.TexasSierra Vista Hospital, Inc.CaliforniaSinai-Grace Premier Clinical Management Services LLCMichiganSL-HLC, Inc.MissouriSLH Physicians, L.L.C.MissouriSLH Vista, Inc.MissouriSLUH Anesthesia Physicians, L.L.C.MissouriSMSJ Tucson Holdings, LLCDelawareSouth Carolina East Cooper Surgical Specialists, L.L.C.South CarolinaSouth Carolina Health Services, Inc.South CarolinaSouth Carolina SeWee Family Medicine, L.L.C.South CarolinaSouth Fulton Health Care Centers, Inc.DelawareSouthCare Physicians Group Neurology, L.L.C.GeorgiaSouthCare Physicians Group Obstetrics & Gynecology, L.L.C.GeorgiaSoutheast Michigan Physicians’ Insurance CompanyMichiganSouthern Orthopedics and Sports Medicine, L.L.C.South CarolinaSouthern States Physician Operations, Inc.North CarolinaSouthwest Children’s Hospital, LLCDelawareSpalding GI, L.L.C.GeorgiaSpalding Regional Ambulatory Surgery Center, L.L.C.GeorgiaSpalding Regional Medical Center, Inc.GeorgiaSpalding Regional OB/GYN, L.L.C.GeorgiaSpalding Regional Physician Services, L.L.C.GeorgiaSpalding Regional Urgent Care Center at Heron Bay, L.L.C.GeorgiaSpringfield Service Holding CorporationDelawareSRRMC Management, Inc.Delaware13 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationSSC Holdings, L.L.C.CaliforniaStChris Care at Northeast Pediatrics, L.L.C.PennsylvaniaSt. Chris Onsite Pediatric Partners, L.L.CPennsylvaniaSt. Christopher’s Pediatric Urgent Care Center - Allentown, L.L.CPennsylvaniaSt. Christopher’s Pediatric Urgent Care Center, L.L.C.PennsylvaniaSt. Joseph’s Hospital Surgical Co-Management, LLC ArizonaSt. Louis University Hospital Ambulatory Surgery Center, L.L.C.MissouriSt. Louis Urgent Care #2, L.L.C.MissouriSt. Louis Urgent Care #3, L.L.C.MissouriSt. Mary’s Hospital Cardiovascular Co-Management LLCArizonaSt. Mary’s Hospital Surgical Co-Management LLCArizonaSt. Mary’s Levee Company, LLCArizonaSt. Mary’s Medical Center, Inc.FloridaSunrise Medical Group I, L.L.C.FloridaSunrise Medical Group II, L.L.C.FloridaSunrise Medical Group IV, L.L.C.FloridaSunrise Medical Group VI, L.L.C.FloridaSurgical & Bariatric Associates of Atlanta Medical Center, L.L.C.GeorgiaSurgical Clinical Excellence at Desert Regional, LLCCaliforniaSutton Road Pediatrics, L.L.C.South CarolinaSylvan Grove Hospital, Inc.GeorgiaSyndicated Office Systems, LLCCaliforniaTate Surgery Center, L.L.C.North CarolinaTenet Business Services CorporationTexasTenet California, Inc.DelawareTenetCare Frisco, Inc.TexasTenet Central Carolina Physicians, Inc.North CarolinaTenet Claremont Family Medicine, L.L.C.North CarolinaTenet DISC Imaging, Inc.South CarolinaTenet EKG, Inc.TexasTenet El Paso, Ltd.TexasTenet Employment, Inc.TexasTenet Finance Corp.DelawareTenet Florida, Inc.DelawareTenet Florida Physician Services II, L.L.C.FloridaTenet Florida Physician Services III, L.L.C.FloridaTenet Florida Physician Services, L.L.C.FloridaTenet Fort Mill, Inc.South CarolinaTenet Healthcare - Florida, Inc.FloridaTenet HealthSystem Bucks County, L.L.C.Pennsylvania14 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationTenet HealthSystem City Avenue, L.L.C.PennsylvaniaTenet HealthSystem Elkins Park, L.L.C.PennsylvaniaTenet HealthSystem Graduate, L.L.C.PennsylvaniaTenet HealthSystem Hahnemann, L.L.C.PennsylvaniaTenet HealthSystem Medical, Inc.DelawareTenet HealthSystem Nacogdoches ASC GP, Inc.TexasTenet HealthSystem Parkview, L.L.C.PennsylvaniaTenet HealthSystem Philadelphia, Inc.PennsylvaniaTenet HealthSystem Roxborough, LLCPennsylvaniaTenet HealthSystem Roxborough MOB, LLCPennsylvaniaTenet HealthSystem St. Christopher’s Hospital for Children, L.L.C.PennsylvaniaTenet Hilton Head Heart, L.L.C.South CarolinaTenet Home Services, L.L.C.PennsylvaniaTenet Hospitals LimitedTexasTenet Medical Equipment Services, L.L.C.PennsylvaniaTenet Network Management, Inc.FloridaTenet Physician Resources, LLCDelawareTenet Physician Services - Hilton Head, Inc.South CarolinaTenet Rehab Piedmont, Inc.South CarolinaTenet Relocation Services, L.L.C.TexasTenet SC East Cooper Hospitalists, L.L.C.South CarolinaTenet South Carolina Gastrointestinal Surgical Specialists, L.L.C.South CarolinaTenet South Carolina Island Medical, L.L.C.South CarolinaTenet South Carolina Lowcountry OB/GYN, L.L.C.South CarolinaTenet South Carolina Mt. Pleasant OB/GYN, L.L.C.South CarolinaTenet Unifour Urgent Care Center, L.L.C.North CarolinaTenet Ventures, Inc.DelawareTFPS IV, L.L.C.FloridaTFPS V, L.L.C.FloridaTH Healthcare, Ltd.TexasTotal Accountable Care Organization, LLCDelawareTPR Practice Management, LLCDelawareTPR - The Physician Recruiters, LLCDelawareTPS II of PA, L.L.C.PennsylvaniaTPS III of PA, L.L.C.PennsylvaniaTPS IV of PA, L.L.C.PennsylvaniaTPS of PA, L.L.C.PennsylvaniaTPS V of PA, L.L.C.PennsylvaniaTPS VI of PA, L.L.C.PennsylvaniaTucson Hospital Holdings, Inc.Delaware15 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationTucson Physician Group Holdings, LLCDelawareTurlock Imaging Services, LLCCaliforniaTurlock Land Company, LLCCaliforniaTwin Cities Community Hospital, Inc.CaliforniaUnifour Neurosurgery, L.L.C.North CarolinaUnited Patient Financing, Inc.DelawareUniversal Medical Care Center, L.L.C.FloridaUrgent Care Centers of Arizona, LLCArizonaUSPE Financing LimitedN/AUSPI Holding Company, Inc.DelawareUSVI Health and Wellness, Inc.St. CroixValley Baptist Lab Services, LLCTexasValley Baptist Physician Performance NetworkTexasValley Baptist Realty Company, LLCDelawareValley Baptist Wellness Center, LLCTexasValley Health Care NetworkTexasVanguard Health Financial Company, LLCDelawareVanguard Health Holding Company I, LLCDelawareVanguard Health Holding Company II, LLCDelawareVanguard Health Management, Inc.DelawareVanguard Health Systems, Inc.DelawareVanguard Holding Company I, Inc.DelawareVanguard Holding Company II, Inc.DelawareVanguard Home Care, LLCIllinoisVanguard Medical Specialists, LLCDelawareVanguard Physician Services, LLCDelawareVB Brownsville IMP ASC, LLCTexasVB Brownsville LTACH, LLCTexasVBOA ASC GP, LLCTexasVBOA ASC Partners, L.P.TexasVHM Services, Inc.MassachusettsVHS Acquisition CorporationDelawareVHS Acquisition Partnership Number 1, L.PDelawareVHS Acquisition Subsidiary Number 1, Inc.DelawareVHS Acquisition Subsidiary Number 2, Inc.DelawareVHS Acquisition Subsidiary Number 3, Inc.DelawareVHS Acquisition Subsidiary Number 4, Inc.DelawareVHS Acquisition Subsidiary Number 5, Inc.DelawareVHS Acquisition Subsidiary Number 6, Inc.Delaware Subsidiaries of this entity, in which the Registrant indirectly holds a 56.3% ownership interest, are set forth in the table below. 16 22Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationVHS Acquisition Subsidiary Number 7, Inc.DelawareVHS Acquisition Subsidiary Number 8, Inc.DelawareVHS Acquisition Subsidiary Number 9, Inc.DelawareVHS Acquisition Subsidiary Number 10, Inc.DelawareVHS Acquisition Subsidiary Number 11, Inc.DelawareVHS Acquisition Subsidiary Number 12, Inc.DelawareVHS Arizona Heart Institute, Inc.DelawareVHS Brownsville Hospital Company, LLCDelawareVHS Chicago Market Procurement, LLCDelawareVHS Children’s Hospital of Michigan, Inc.DelawareVHS Detroit Businesses, Inc.DelawareVHS Detroit Receiving Hospital, Inc.DelawareVHS Detroit Ventures, Inc.DelawareVHS Harlingen Hospital Company, LLCDelawareVHS Harper-Hutzel Hospital, Inc.DelawareVHS Holding Company, Inc.DelawareVHS Huron Valley-Sinai Hospital, Inc.DelawareVHS Imaging Centers, Inc.DelawareVHS New England Holding Company I, Inc.DelawareVHS of Anaheim, Inc.DelawareVHS of Arrowhead, Inc.DelawareVHS of Huntington Beach, Inc.DelawareVHS of Illinois, Inc.DelawareVHS of Michigan, Inc.DelawareVHS of Michigan Staffing, Inc.DelawareVHS of Orange County, Inc.DelawareVHS of Phoenix, Inc.DelawareVHS of South Phoenix, Inc.DelawareVHS Outpatient Clinics, Inc.DelawareVHS Phoenix Health Plan, Inc.DelawareVHS Physicians of MichiganMichiganVHS Rehabilitation Institute of Michigan, Inc.DelawareVHS San Antonio Partners, LLCDelawareVHS Sinai-Grace Hospital, Inc.DelawareVHS University Laboratories, Inc.DelawareVHS Valley Health System, LLCDelawareVHS Valley Holdings, LLCDelawareVHS Valley Management Company, Inc.DelawareVHS West Suburban Medical Center, Inc.Delaware17 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationVHS Westlake Hospital, Inc.DelawareViewmont Internal Medicine - Tenet North Carolina, L.L.C.North CarolinaV-II Acquisition Co., Inc.PennsylvaniaWalker Baptist Affinity, LLCAlabamaWatermark Physician Services, Inc.IllinoisWest Boca Health Services, L.L.C.FloridaWest Boca Medical Center, Inc.FloridaWest Boynton Urgent Care, L.L.C.FloridaWest Palm Healthcare Real Estate, Inc.FloridaWest Suburban Radiation Therapy Center, LLCDelawareWilshire Rental Corp.DelawareYosemite Medical Clinic, Inc.California Subsidiaries of USPI Holding Company, Inc. Name of Entity State or OtherJurisdiction ofFormation12 Avenue Real Estate, LPTexas25 East Same Day Surgery, L.L.C.IllinoisAdvanced Ambulatory Surgical Care, L.P.MissouriAdvanced Surgical Concepts, LLCLouisianaAdventist Midwest Health/USP Surgery Centers, L.L.C.IllinoisAIG Holdings, LLCTexasAIGB Austin, L.P.TexasAIGB Global, LLCTexasAIGB Group, Inc.DelawareAIGB Holdings, Inc.DelawareAIGB Management Services, LLCTexasAlabama Digestive Health Endoscopy Center, L.L.C.AlabamaAlamo Heights Surgicare, L.P.TexasAlliance Greenville Texas General Partner, LLCDelawareAlliance Sterling Ridge, L.P.DelawareAlliance Surgery Birmingham, LLCDelawareAlliance Surgery, Inc.DelawareAll Star MOB, LLCTexasAmbulatory Surgical Associates, LLCTennesseeAmbulatory Surgical Center of Somerville, LLCNew JerseyThe Ambulatory Surgical Center of St. Louis, L.P.Missouri18 thSource: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationAmerican Institute of Gastric Banding Phoenix, Limited PartnershipArizonaAmerican Institute of Gastric Banding, Ltd.TexasAnaheim Hills Medical Imaging, L.L.C.CaliforniaAnesthesia Partners of Gallatin, LLCTennesseeAnesthesia Partners of Oklahoma, LLCOklahomaAPNTexasARC Worcester Center L.P.TennesseeArlington Orthopedic and Spine Hospital, LLCTexasArlington Surgicare Partners, Ltd.TexasArrowhead Endoscopy and Pain Management Center, LLCDelawareASC Coalition, Inc.DelawareASJH Joint Venture, LLCArizonaAtlantic Health-USP Surgery Centers, L.L.C.New JerseyAvita/USP Surgery Centers, L.L.C.OhioBagley Holdings, LLCOhioBaptist Plaza Surgicare, L.P.TennesseeBaptist Surgery Center, L.P.TennesseeBaptist Women’s Health Center, LLCTennesseeBaptist/USP Surgery Centers, L.L.C.TexasBartlett ASC, LLCTennesseeBaylor Surgicare at Baylor Plano, LLCTexasBaylor Surgicare at Blue Star, LLCTexasBaylor Surgicare at Ennis, LLCTexasBaylor Surgicare at Granbury, LLCTexasBaylor Surgicare at Mansfield, LLCTexasBaylor Surgicare at North Dallas, LLCTexasBaylor Surgicare at Plano Parkway, LLCTexasBaylor Surgicare at Plano, LLCTexasBeaumont Surgical Affiliates, Ltd.TexasBellaire Outpatient Surgery Center, L.L.P.TexasBloomington ASC, LLCIndianaBlue Ridge/USP Surgery Centers, LLCTennesseeBluffton Okatie Surgery Center, L.L.C.South CarolinaBon Secours Surgery Center at Harbour View, LLCVirginiaBon Secours Surgery Center at Virginia Beach, LLCVirginiaBremner Duke/Mary Shiels Development, L.P.IndianaBriarcliff Ambulatory Surgery Center, L.P.MissouriBrookwood Baptist Health 3, LLCDelawareBrookwood Diagnostic Imaging Center, LLCDelawareBrookwood Women’s Diagnostic Center, LLCDelaware19 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationCamp Lowell Surgery Center, L.L.C.ArizonaCareSpot of Austin, LLCDelawareCareSpot of Memphis, LLCDelawareCarondelet St. Mary’s-Northwest, LLCArizonaCascade Spine Center, LLCDelawareCastle Rock Surgery Center, LLCColoradoCedar Park Surgery Center, L.L.P.TexasCentennial ASC, L.P.TexasThe Center for Ambulatory Surgical Treatment, L.P.CaliforniaCentral Jersey Surgery Center, LLCGeorgiaCentral Virginia Surgi-Center, L.P.VirginiaChandler Endoscopy Ambulatory Surgery Center, LLCArizonaCharlotte Endoscopic Surgery Center, LLCFloridaChattanooga Pain Management Center, LLCDelawareChesterfield Ambulatory Surgery Center, L.P.MissouriChesterfield Anesthesia Associates of Missouri, LLCMissouriChico Surgery Center, L.P.CaliforniaCHRISTUS Cabrini Surgery Center, L.L.C.LouisianaClarkston ASC Partners, LLCMichiganClarksville Surgery Center, LLCTennesseeCoast Surgery Center, L.P.CaliforniaConroe Surgery Center 2, LLCTexasCoral Ridge Outpatient Center, LLCFloridaCorpus Christi Surgicare, Ltd.TexasCovenant/USP Surgery Centers, LLCTennesseeCreekwood Investors, LLCMissouriCreekwood Surgery Center, L.P.MissouriCrown Point Surgery Center, LLCColoradoCS/USP General Partner, LLCTexasCS/USP Surgery Centers, LPTexasDallas Surgical Partners, LLCTexasDenton Surgicare Partners, Ltd.TexasDenton Surgicare Real Estate, Ltd.TexasDenville Surgery Center, LLCNew JerseyDesert Cove MOB, LLCArizonaDesert Ridge Outpatient Surgery, LLCArizonaDesoto Surgicare Partners, Ltd.TexasDestin Surgery Center, LLCFloridaDH/USP Sacramento Pain GP, LLCCaliforniaDH/USP SJOSC Investment Company, L.L.C.Arizona20 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationDignity/USP Folsom GP, LLCCaliforniaDignity/USP Grass Valley GP, LLCCaliforniaDignity/USP Las Vegas Surgery Centers, LLCNevadaDignity/USP Metro Surgery Center, LLCArizonaDignity/USP NorCal Surgery Centers, LLCCaliforniaDignity/USP Phoenix Surgery Centers II, LLCArizonaDignity/USP Phoenix Surgery Centers, LLCArizonaDignity/USP Redding GP, LLCCaliforniaDignity/USP Roseville GP, LLCCaliforniaDoctors Outpatient Surgery Center of Jupiter, L.L.C.FloridaDreamland UAP Anesthesia, LLCMissouriEast Portland Surgery Center, LLCOregonEast West Surgery Center, L.P.GeorgiaEastgate Building Center, L.L.C.OhioEffingham Surgical Partners, LLCIllinoisEinstein Montgomery Surgery Center, LLCPennsylvaniaEinstein/USP Surgery Centers, L.L.C.PennsylvaniaEl Mirador Surgery Center, L.L.C.CaliforniaEl Paso Center for Gastrointestinal Endoscopy, LLCTexasEl Paso Day Surgery, LLCTexasElite Anesthesia, LLCArizonaEmerson Surgery Center, LLCMissouriEncinitas Endoscopy Center, LLCCaliforniaEndoscopy Center of Hackensack, LLCNew JerseyEndoscopy Consultants, LLCGeorgiaEye Center of Nashville UAP, LLCTennesseeEye Surgery Center of Nashville, LLCTennesseeFlatirons Surgery Center, LLCColoradoFolsom Outpatient Surgery Center, L.P.CaliforniaFort Worth Hospital Real Estate, LPTexasFort Worth Surgicare Partners, Ltd.TexasFPN - Frisco Physicians NetworkTexasFranklin Endo UAP, LLCTennesseeFranklin Endoscopy Center, LLCTennesseeFrisco Medical Center, L.L.P.TexasFrontenac Ambulatory Surgery & Spine Care Center, L.P.MissouriGallatin Physician Realty Partners, LLCTennesseeGamma Surgery Center, LLCDelawareGarland Surgicare Partners, Ltd.TexasGateway Endoscopy Center, L.P.Missouri21 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationGCSA Ambulatory Surgery Center, LLCTexasGenesis ASC Partners, LLCMichiganGeorgia Endoscopy Center, LLCGeorgiaGeorgia Musculoskeletal Network, Inc.GeorgiaGeorgia Spine Surgery Center, LLCDelawareGLS UAP Sugarland, LLCTexasGrapevine Surgicare Partners, Ltd.TexasGrass Valley Outpatient Surgery Center, L.P.CaliforniaGreenville Physicians Surgery Center, LLPTexasGreenwood ASC, LLCDelawareHacienda Outpatient Surgery Center, LLCCaliforniaHarvard Park Surgery Center, LLCColoradoHazelwood Endoscopy Center, LLCMissouriHCH/USP Surgery Centers, LLCFloridaHCN Surgery Center Holdings, Inc. DelawareHealth Horizons of Kansas City, Inc.TennesseeHealth Horizons of Murfreesboro, Inc.TennesseeHealth Horizons/Piedmont Joint Venture, LLCTennesseeHealthmark Partners, Inc.DelawareHeritage Park Surgical Hospital, LLCTexasHershey Outpatient Surgery Center, L.P.PennsylvaniaHill Country ASC Partners, LLCTexasHinsdale Surgical Center, LLCIllinoisHMA/Solantic Joint Venture, LLCDelawareHMHP/USP Surgery Centers, LLCOhioHouston Ambulatory Surgical Associates, L.P.TexasHouston PSC, L.P.TexasHUMC/USP Surgery Centers, LLCNew JerseyHyde Park Surgery Center, LLCTexasICNU Rockford, LLCIllinoisIrving-Coppell Surgical Hospital, L.L.P.TexasJackson Surgical Center, LLCNew JerseyJacksonville Endoscopy Centers, LLCFloridaJFP UAP Sugarland, LLCTexasKHS Ambulatory Surgery Center LLCNew JerseyKHS/USP Surgery Centers, LLCNew JerseyLake Endoscopy Center, LLCFloridaLake Lansing ASC Partners, LLCMichiganLake Surgical Hospital Slidell, LLCLouisianaLakewood Surgery Center, LLCDelaware22 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationLansing ASC Partners, LLCMichiganLawrenceville Surgery Center, L.L.C.GeorgiaLebanon Endoscopy Center, LLCTennesseeLee’s Summit Endo UAP, LLCMissouriLegacy Warren Partners, L.P.TexasLegacy/USP Surgery Centers, L.L.C.OregonLewisville Surgicare Partners, Ltd.TexasLiberty Ambulatory Surgery Center, L.P.MissouriLiberty Ambulatory Surgery Center, LLCNew JerseyLiberty/USP Surgery Centers, L.L.C.New JerseyLone Star Endoscopy Center, LLCTexasLongmont-Mountain View Surgery Center, LLCColoradoMagnetic Resonance Imaging of San Luis Obispo, Inc.CaliforniaMagnolia Surgery Center Limited PartnershipDelawareManchester Ambulatory Surgery Center, LPMissouriMary Immaculate Ambulatory Surgery Center, LLCVirginiaMASC Partners, LLCMissouriMason Ridge Ambulatory Surgery Center, L.P.MissouriMayfield Spine Surgery Center, LLCOhioMcLaren ASC of Flint, LLCMichiganMCSH Real Estate Investors, Ltd.TexasMedical House Staffing, LLCTexasMedical Park Tower Surgery Center, LLCTexasMedplex Outpatient Surgery Center, Ltd.AlabamaMedstar Surgery Center at Brandywine, LLCMarylandMEDSTAR/USP Surgery Centers, L.L.C.MarylandMemorial Hermann Bay Area Endoscopy Center, LLCTexasMemorial Hermann Endoscopy & Surgery Center North Houston, L.L.C.TexasMemorial Hermann Endoscopy Center North Freeway, LLCTexasMemorial Hermann Specialty Hospital Kingwood, L.L.C.TexasMemorial Hermann Sugar Land Surgical Hospital, L.L.P.TexasMemorial Hermann Surgery Center - The Woodlands, LLPTexasMemorial Hermann Surgery Center Katy, LLPTexasMemorial Hermann Surgery Center Kingsland, L.L.C.TexasMemorial Hermann Surgery Center Kirby, LLCTexasMemorial Hermann Surgery Center Memorial City, L.L.C.TexasMemorial Hermann Surgery Center Northwest LLPTexasMemorial Hermann Surgery Center Pinecroft, LLCTexasMemorial Hermann Surgery Center Preston Road, Ltd.TexasMemorial Hermann Surgery Center Richmond, LLCTexas23 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationMemorial Hermann Surgery Center Southwest, L.L.P.TexasMemorial Hermann Surgery Center Sugar Land, LLPTexasMemorial Hermann Surgery Center Texas Medical Center, LLPTexasMemorial Hermann Surgery Center Woodlands Parkway, LLCTexasMemorial Hermann Texas International Endoscopy Center, LLCTexasMemorial Hermann West Houston Surgery Center, LLCTexasMemorial Hermann/USP Surgery Centers II, L.P.TexasMemorial Hermann/USP Surgery Centers III, LLPTexasMemorial Hermann/USP Surgery Centers IV, LLPTexasMemorial Hermann/USP Surgery Centers, LLPTexasMemorial Surgery Center, LLCOklahomaMercy/USP Health Ventures, L.L.C.IowaMetro Surgery Center, LLCDelawareMetrocrest Surgery Center, L.P.TexasMetroplex Surgicare Partners, Ltd.TexasMetropolitan New Jersey, LLCNew JerseyMH Memorial City Surgery, LLCTexasMH/USP Bay Area, LLCTexasMH/USP Kingsland, LLCTexasMH/USP Kingwood, LLCTexasMH/USP Kirby, LLCTexasMH/USP North Freeway, LLCTexasMH/USP North Houston, LLCTexasMH/USP Richmond, LLCTexasMH/USP Sugar Land, LLCTexasMH/USP TMC Endoscopy, LLCTexasMH/USP West Houston, L.L.C.TexasMH/USP Woodlands Parkway, LLCTexasMichigan ASC Partners, L.L.C.MichiganMid Rivers Ambulatory Surgery Center, L.P.MissouriMid State Endo UAP, LLCTennesseeMiddle Tennessee Ambulatory Surgery Center, L.P.DelawareMidland Memorial/USP Surgery Centers, LLCTexasMidland Texas Surgical Center, LLCTexasMid-State Endoscopy Center, LLCTennesseeMid-TSC Development, LPTexasMidwest Digestive Health Center, LLCMissouriMillennium Surgical Center, LLCNew JerseyModesto Radiology Imaging, Inc.CaliforniaMountain Empire Surgery Center, L.P.Georgia24 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationMSH Partners, LLCTexasMSV Health/USP Surgery Centers, LLCSouth CarolinaMurdock Ambulatory Surgery Center, LLCFloridaNational Imaging Center Holdings, Inc.DelawareNational Surgery Center Holdings, Inc.DelawareNatsurg JV, LLCMissouriNew Horizons Surgery Center, LLCOhioNew Mexico Orthopaedic Surgery Center, L.P.GeorgiaNewhope Imaging Center, Inc.CaliforniaNHSC Holdings, LLCOhioNICH GP Holdings, LLCDelawareNKCH/USP Briarcliff GP, LLCMissouriNKCH/USP Liberty GP, LLCMissouriNKCH/USP Surgery Centers II, L.L.C.MissouriNKCH/USP Surgery Centers, LLCMissouriNMC Surgery Center, L.P.TexasNorth Anaheim Surgery Center, LLCCaliforniaNorth Campus Surgery Center, LLCMissouriNorth Central Surgical Center, L.L.P.TexasNorth Garland Surgery Center, L.L.P. TexasNorth Haven Surgery Center, LLCConnecticutNorth Shore Same Day Surgery, L.L.C.IllinoisNorth State Surgery Centers, L.P.CaliforniaNorthern Monmouth Regional Surgery Center, L.L.C.New JerseyNorthridge Surgery Center, L.P.TennesseeNorthShore/USP Surgery Centers II, L.L.C.IllinoisNorthwest Ambulatory Surgery Center, LLCOregonNorthwest Georgia Orthopaedic Surgery Center, LLCGeorgiaNorthwest Regional ASC, LLCDelawareNorthwest Surgery Center, LLPTexasNorthwest Surgery Center, Ltd.TexasNSCH GP Holdings, LLCDelawareNSCH/USP Desert Surgery Centers, L.L.C.DelawareOCOMS Imaging, LLCOklahomaOCOMS Professional Services, LLCOklahomaOklahoma Center for Orthopedic and Multi-Specialty Surgery, LLCOklahomaOld Tesson Surgery Center, L.P.MissouriOlive Ambulatory Surgery Center, LLCMissouriOLOL Pontchartrain Surgery Center, LLCLouisianaOLOL/USP Surgery Centers, L.L.C.Texas25 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationOphthalmology Surgery Center of Orlando, LLCFloridaOrlando Health/USP Surgery Centers, L.L.C.FloridaOrthoLink ASC CorporationTennesseeOrthoLink Physicians CorporationDelawareOrthoLink Radiology Services CorporationTennesseeOrthoLink/ Georgia ASC, Inc.GeorgiaOrthoLink/Baptist ASC, LLCTennesseeOrthoLink/New Mexico ASC, Inc.GeorgiaOrthopedic and Surgical Specialty Company, LLCArizonaOrthopedic South Surgical Partners, LLCGeorgiaThe Outpatient Center, LLCFloridaPacific Endoscopy and Surgery Center, LLCCaliforniaPacific Endo-Surgical Center, L.P.CaliforniaPAHS/USP Surgery Centers, LLCColoradoPain Diagnostic and Treatment Center, L.P.CaliforniaPain Treatment Centers of Michigan, LLCDelawareParamus Endoscopy, LLCNew JerseyPark Cities Surgery Center, LLCTexasPark Place Investor Group, L.P.TexasParkway Recovery Care Center, LLCNevadaParkway Surgery Center, LLCNevadaParkwest Surgery Center, L.P.TennesseePatient Partners, LLCTennesseePediatric Surgery Center - Odessa, LLCFloridaPediatric Surgery Centers, LLCFloridaThe Physicians’ Center, L.P.TexasPhysicians Pavilion, L.P.DelawarePhysicians Surgery Center at Good Samaritan, LLCIllinoisPhysician’s Surgery Center of Chattanooga, L.L.C.TennesseePhysician’s Surgery Center of Knoxville, LLCTennesseePhysicians Surgery Center of Tempe, LLCOklahomaPhysicians Surgical Center of Ft. Worth, LLPTexasPleasanton Diagnostic Imaging, Inc.CaliforniaPPRE, LLCTexasProvidence/UCLA/USP Surgery Centers, LLCCaliforniaProvidence/USP Santa Clarita GP, LLCCaliforniaProvidence/USP South Bay Surgery Centers, L.L.C.CaliforniaProvidence/USP Surgery Centers, L.L.C.CaliforniaPure Reference Laboratory, LLCTexasRadsource, LLCDelaware26 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationRE Plano Med, Inc.TexasReading Ambulatory Surgery Center, L.P.PennsylvaniaReading Endoscopy Center, LLCDelawareReagan Street Surgery Center, LLCCaliforniaRedmond Surgery Center, LLCTennesseeResurgens East Surgery Center, LLCGeorgiaResurgens Fayette Surgery Center, LLCGeorgiaResurgens Surgery Center, LLCGeorgiaRichmond ASC Leasing Company, LLCVirginiaRiver North Same Day Surgery, L.L.C.IllinoisRiverside Ambulatory Surgery Center, LLCMissouriRock Hill Surgery Center, LLCSouth CarolinaRockwall Ambulatory Surgery Center, L.L.P.TexasRockwall/Heath Surgery Center, L.L.P.TexasRoseville Surgery Center, L.P.CaliforniaRoswell Surgery Center, L.L.C.GeorgiaSacramento Midtown Endoscopy Center, LLCCaliforniaSaint Francis Surgery Center, L.L.C.TennesseeSaint Thomas Campus Surgicare, L.P.TennesseeSaint Thomas/USP - Baptist Plaza, L.L.C.TennesseeSaint Thomas/USP Surgery Centers II, LLCTennesseeSaint Thomas/USP Surgery Centers, L.L.C.TennesseeSame Day Management, L.L.C.IllinoisSame Day Surgery, L.L.C.IllinoisSan Antonio Endoscopy, L.P.TexasSan Fernando Valley Surgery Center, L.P.CaliforniaSan Gabriel Valley Surgical Center, L.P.CaliforniaSan Martin Surgery Center, LLCNevadaSan Ramon Network Joint Venture, LLCDelawareSanta Barbara Outpatient Surgery Center, LLCCaliforniaSanta Clarita Surgery Center, L.P.CaliforniaScripps Encinitas Surgery Center, LLCCaliforniaScripps/USP Surgery Centers, L.L.C.CaliforniaShands/Solantic Joint Venture, LLCDelawareShore Outpatient Surgicenter, L.L.C.GeorgiaShoreline Real Estate Partnership, LLPTexasShoreline Surgery Center, LLPTexasShrewsbury Surgery Center, LLCNew JerseySilicon Valley Outpatient Surgery Centers, LLCCaliforniaSiouxland Surgery Center Limited Liability PartnershipIowa27 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationSKV UAP Sugarland, LLCTexasSLPA ACO, LLCMissouriSolantic CorporationDelawareSolantic Development, LLCDelawareSolantic Holdings CorporationDelawareSolantic of Jacksonville, LLCDelawareSolantic of Orlando, LLCDelawareSolantic/South Florida, LLCDelawareSouth County Outpatient Endoscopy Services, L.P.MissouriSouth Denver Musculoskeletal Surgical Partners, LLCColoradoThe Southeastern Spine Institute Ambulatory Surgery Center, L.L.C.South CarolinaSouth Florida Ambulatory Surgical Center, LLCFloridaSouthwest Ambulatory Surgery Center, L.L.C.OklahomaSouthwest Orthopedic and Spine Hospital Real Estate, LLCDelawareSouthwest Orthopedic and Spine Hospital, LLCArizonaSouthwestern Ambulatory Surgery Center, LLCPennsylvaniaSPC at the Star, LLCTexasSpecialty Surgery Center of Fort Worth, L.P.TexasSpecialty Surgicenters, Inc.GeorgiaSpinal Diagnostics and Treatment Centers, L.L.C.CaliforniaSSI Holdings, Inc.GeorgiaSt. Joseph’s Outpatient Surgery Center, LLCArizonaSt. Joseph’s Surgery Center, L.P.CaliforniaSt. Louis Physician Alliance, LLCMissouriSt. Louis Surgical Center, LLCMissouriSt. Louis Urology Center, LLC MissouriSt. Luke’s/USP Surgery Centers, LLCMissouriSt. Mary’s Ambulatory Surgery Center, LLCVirginiaSt. Mary’s/USP Surgery Centers, LLCMissouriSt. Vincent Health/USP, LLCIndianaSt. Vincent/USP Surgery Centers, LLCArkansasStockton Outpatient Surgery Center, LLCCaliforniaSuburban Endoscopy Center, LLCNew JerseySummit View Surgery Center, LLCColoradoSun View Imaging, L.L.C.New MexicoSurgery Affiliate of El Paso, LLCTexasSurgery Center at Mount Pleasant, LLCSouth CarolinaSurgery Center at University Park, LLCFloridaSurgery Center of Atlanta, LLCGeorgiaSurgery Center of Canfield, LLCOhio28 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationSurgery Center of Columbia, L.P.MissouriSurgery Center of Gilbert, L.L.C.ArizonaThe Surgery Center at Jensen Beach, LLCFloridaThe Surgery Center at Williamson, LLCTexasSurgery Center of Okeechobee, LLCFloridaSurgery Center of Pembroke Pines, L.L.C.FloridaSurgery Center of Peoria, L.L.C.OklahomaSurgery Center of Richardson Physician Partnership, L.P.TexasSurgery Center of Santa Barbara, LLCCaliforniaSurgery Center of Scottsdale, LLCOklahomaSurgery Center of Tempe Real Estate, L.L.C.ArizonaSurgery Center of Tempe Real Estate II, L.L.C.ArizonaSurgery Centers of America II, L.L.C.OklahomaSurgery Centre of SW Florida, LLCFloridaSurgical Elite of Avondale, L.L.C.ArizonaSurgical Health Partners, LLCTennesseeSurgical Institute Management, LLCPennsylvaniaSurgical Institute of Reading, LLCPennsylvaniaSurgical Institute of Viewmont, LLCNorth CarolinaSurgical Specialists at Princeton, LLCNew JerseySurgicare of Miramar, L.L.C.FloridaSurginet, Inc.TennesseeSurgis Management Services, Inc.TennesseeSurgis of Chico, Inc.TennesseeSurgis of Phoenix, Inc.TennesseeSurgis of Redding, Inc.TennesseeSurgis of Victoria, Inc.TennesseeSurgis, Inc.DelawareTamarac Surgery Center, LLCFloridaTCH/USP Surgery Centers, LLCOhioTempe New Day Surgery Center, L.P.TexasTempleton Imaging, Inc.CaliforniaTenet/Solantic Joint Venture, LLCDelawareTENN SM, LLCTennesseeTerre Haute Surgical Center, LLCIndianaTeton Outpatient Services, LLCWyomingTexan Ambulatory Surgery Center, L.P.TexasTexas Endoscopy Centers, LLCTexasTexas Health Venture Arlington Hospital, LLCTexasTexas Health Venture Baylor Plano, LLCTexas29 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationTexas Health Venture Carrollton, LLCTexasTexas Health Venture Ennis, LLCTexasTexas Health Venture Fort Worth, L.L.C.TexasTexas Health Venture Granbury, LLCTexasTexas Health Venture Heritage Park, LLCTexasTexas Health Venture Keller, LLCTexasTexas Health Venture Las Colinas, LLCTexasTexas Health Venture Mansfield, LLCTexasTexas Health Venture Plano Endo, LLCTexasTexas Health Venture Plano Parkway, LLCTexasTexas Health Venture Plano, LLCTexasTexas Health Venture Texas Spine, LLCTexasTexas Health Ventures Group L.L.C.TexasTexas Orthopedics Surgery Center, LLCTexasTheda Oaks Gastroenterology & Endoscopy Center, LLCTexasTHV Park Cities, LLCTexasTHVG Arlington GP, LLCDelawareTHVG Bariatric GP, LLCTexasTHVG Bariatric, L.L.C.TexasTHVG Bedford GP, LLCDelawareTHVG Bellaire GP, LLCDelawareTHVG Denton GP, LLCDelawareTHVG DeSoto GP, LLCDelawareTHVG DSP GP, LLCDelawareTHVG Fort Worth GP, LLCDelawareTHVG Frisco GP, LLCDelawareTHVG Garland GP, LLCDelawareTHVG Grapevine GP, LLCDelawareTHVG Heritage Park, LLCTexasTHVG Irving-Coppell GP, LLCDelawareTHVG Lewisville GP, LLCDelawareTHVG North Garland GP, LLCDelawareTHVG Park Cities/Trophy Club GP, LLCDelawareTHVG Rockwall 2 GP, LLCTexasTHVG Rockwall GP, LLCDelawareTHVG Valley View GP, LLCDelawareTitan Health CorporationDelawareTitan Health of Chattanooga, Inc.CaliforniaTitan Health of Hershey, Inc.CaliforniaTitan Health of Mount Laurel, LLCCalifornia30 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationTitan Health of North Haven, Inc.CaliforniaTitan Health of Pittsburgh, Inc.CaliforniaTitan Health of Pleasant Hills, Inc.CaliforniaTitan Health of Princeton, Inc.CaliforniaTitan Health of Sacramento, Inc.CaliforniaTitan Health of Saginaw, Inc.CaliforniaTitan Health of Titusville, Inc.CaliforniaTitan Health of West Penn, Inc.CaliforniaTitan Health of Westminster, Inc.CaliforniaTitan Management CorporationCaliforniaTitusville Center for Surgical Excellence, LLCDelawareTLC ASC, LLCFloridaTMC Holding Company, LLCTexasToms River Surgery Center, L.L.C.New JerseyTOPS Specialty Hospital, Ltd.TexasTotal Joint Center of St. Louis, LPMissouriTotal Joint Center of the Northland, LLCMissouriTower Road Real Estate, LLCTexasTP Specialty Surgery Center, L.P.TexasThe Tresanti Surgical Center, LLCCaliforniaTrophy Club Medical Center, L.P.TexasTrue Medical Weight Loss, L.P.TexasTrue Medical Wellness, LPTexasTrue Results Georgia, Inc.GeorgiaTrue Results HoldCo, LLCDelawareTrue Results Missouri, LLCMissouriTuscan Surgery Center at Las Colinas, LLCTexasTwin Cities Ambulatory Surgery Center, L.P.MissouriUAP Chattanooga Pain, LLCTennesseeUAP Keller Endo, LLCTexasUAP Las Colinas Endo, LLCTexasUAP Lebanon Endo, LLCTennesseeUAP Nashville Endoscopy, LLCTennesseeUAP of Arizona, Inc.ArizonaUAP of California, Inc.CaliforniaUAP of Missouri, Inc.MissouriUAP of New Jersey, Inc.New JerseyUAP of Oklahoma, Inc.OklahomaUAP of Tennessee, Inc.TennesseeUAP of Texas, Inc.Texas31 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationUAP of Wyoming, Inc.WyomingUAP Sacramento, PCCaliforniaUAP San Antonio Endo, LLCTexasUAP Scopes, LLCMissouriUlysses True Results NewCo, LLCDelawareUMC-USP Surgery Centers, LLCTexasUnited Anesthesia Partners, Inc.DelawareUnited Real Estate Development, Inc.TexasUnited Real Estate Holdings, Inc.TexasUnited Surgical Partners Holdings, Inc.DelawareUnited Surgical Partners International, Inc.DelawareUniversity Surgery Center, Ltd.FloridaUniversity Surgical Partners of Dallas, L.L.P.TexasUpper Cumberland Physicians’ Surgery Center, LLCTennesseeUSP 12th Ave Real Estate, Inc.TexasUSP Acquisition CorporationDelawareUSP Alexandria, Inc.LouisianaUSP Assurance CompanyVermontUSP Athens, Inc.GeorgiaUSP Atlanta, Inc.GeorgiaUSP Austin, Inc.TexasUSP Bariatric, LLCDelawareUSP Beaumont, Inc.TexasUSP Bergen, Inc.New JerseyUSP Bloomington, Inc.IndianaUSP Bridgeton, Inc.MissouriUSP Cedar Park, Inc.TexasUSP Chesterfield, Inc.MissouriUSP Chicago, Inc.IllinoisUSP Cincinnati, Inc.OhioUSP Coast, Inc.CaliforniaUSP Columbia, Inc.MissouriUSP Connecticut, Inc.ConnecticutUSP Corpus Christi, Inc.TexasUSP Creve Coeur, Inc.MissouriUSP Denver, Inc.ColoradoUSP Des Peres, Inc.MissouriUSP Destin, Inc.FloridaUSP Domestic Holdings, Inc.DelawareUSP Effingham, Inc.Illinois32 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationUSP Encinitas Endoscopy, Inc.CaliforniaUSP Fenton, Inc.MissouriUSP Festus, Inc.MissouriUSP Florissant, Inc.MissouriUSP Fort Lauderdale, Inc.FloridaUSP Fort Worth Hospital Real Estate, Inc.TexasUSP Fredericksburg, Inc.VirginiaUSP Frontenac, Inc.MissouriUSP Gateway, Inc.MissouriUSP Harbour View, Inc.VirginiaUSP Hazelwood, Inc.MissouriUSP Houston, Inc.TexasUSP Indiana, Inc.IndianaUSP International Holdings, Inc.DelawareUSP Jersey City, Inc.New JerseyUSP Kansas City, Inc.MissouriUSP Knoxville, Inc.TennesseeUSP Little Rock, Inc.ArkansasUSP Long Island, Inc.DelawareUSP Louisiana, Inc.LouisianaUSP Lubbock, Inc.TexasUSP Maryland, Inc.MarylandUSP Mason Ridge, Inc.MissouriUSP Mattis, Inc.MissouriUSP Michigan, Inc.MichiganUSP Midland Real Estate, Inc.TexasUSP Midland, Inc.TexasUSP Midwest, Inc.IllinoisUSP Mission Hills, Inc.CaliforniaUSP Morris, Inc.New JerseyUSP Mt. Vernon, Inc.IllinoisUSP Nevada Holdings, LLC NevadaUSP Nevada, Inc.NevadaUSP New Jersey, Inc.New JerseyUSP Newport News, Inc.VirginiaUSP North Kansas City, Inc.MissouriUSP North Texas, Inc.DelawareUSP Northwest Arkansas, Inc.ArkansasUSP Office Parkway, Inc.MissouriUSP Ohio RE, Inc.Ohio33 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name of Entity State or OtherJurisdiction ofFormationUSP Oklahoma, Inc.OklahomaUSP Olive, Inc.MissouriUSP Orlando, Inc.FloridaUSP Philadelphia, Inc.PennsylvaniaUSP Phoenix, Inc.ArizonaUSP Portland, Inc.OregonUSP Reading, Inc.PennsylvaniaUSP Richmond II, Inc.VirginiaUSP Richmond, Inc.VirginiaUSP Sacramento, Inc.CaliforniaUSP San Antonio, Inc.TexasUSP Santa Barbara Surgery Centers, Inc.CaliforniaUSP Securities Corporation TennesseeUSP Siouxland, Inc.IowaUSP Somerset, Inc.New JerseyUSP South Carolina, Inc.DelawareUSP Southlake RE, Inc.TexasUSP St. Louis, Inc.MissouriUSP St. Louis Urology, Inc.MissouriUSP St. Peters, Inc.MissouriUSP Sunset Hills, Inc.MissouriUSP Tennessee, Inc.TennesseeUSP Texas Air, L.L.C.TexasUSP Texas, L.P.TexasUSP TJ STL, Inc.MissouriUSP Torrance, Inc.CaliforniaUSP Tucson, Inc.ArizonaUSP Turnersville, Inc.New JerseyUSP Virginia Beach, Inc.VirginiaUSP Waxahachie Management, L.L.C.TexasUSP Webster Groves, Inc.MissouriUSP West Covina, Inc.CaliforniaUSP Westwood, Inc.CaliforniaUSP Winter Park, Inc.FloridaUSP/Carondelet Tucson Surgery Centers, LLCArizonaUSP/SOS Joint Venture, LLCOklahomaUSPI Group Holdings, Inc.DelawareUSPI Holdings, Inc.DelawareUSPI Physician Strategy Group, LLCTexasUSPI San Diego, Inc.California34 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. 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Name of Entity State or OtherJurisdiction ofFormationUSPI Stockton, Inc.CaliforniaUSPI Surgical Services, Inc.DelawareUtica ASC Partners, LLCMichiganUtica/USP Tulsa, L.L.C.OklahomaVentana Surgical Center, LLCCaliforniaVeroscan, Inc.DelawareVHS San Antonio Imaging Partners, L.P.DelawareVictoria Ambulatory Surgery Center, L.P.DelawareViewmont Surgery Center, L.L.C.North CarolinaVirtua-USP Princeton, LLCNew JerseyWalker Street Imaging Care, Inc.CaliforniaWarner Park Surgery Center, L.P.ArizonaWebster Ambulatory Surgery Center, L.P.MissouriWellstar/USP Joint Venture I, LLCGeorgiaWellstar/USP Joint Venture II, LLCGeorgiaWestlake Hospital, LLCTexasWHASA, L.C.TexasWillamette Spine Center Ambulatory Surgery, LLCDelawareWinter Haven Ambulatory Surgical Center, L.L.C.FloridaYNHHSC/USP Surgery Centers, LLCConnecticut 35Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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(a) CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement Nos. 033-57375, 333-00709, 333-01183, 333-38299,333-41903, 333-41476, 333-41478, 333-48482, 333-74216, 333-151884, 333-151887, 333-166767, 333-166768, 333-191614, 333-196262, 333-212844, and 333-212846 on Form S-8 of our reports dated February 27, 2017, relating to theconsolidated 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 thisAnnual Report on Form 10-K of Tenet Healthcare Corporation for the year ended December 31, 2016. /s/ Deloitte & Touche LLPDallas, TexasFebruary 27, 2017 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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(b) CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 033-57375, 333-00709, 333-01183,333-38299, 333-41903, 333-41476, 333-41478, 333-48482, 333-74216, 333-151884, 333-151887, 333-166767, 333-166768, 333-191614, 333-196262, 333-212844, and 333-212846) of Tenet Healthcare Corporation of our report dated November 7, 2016 relating tothe financial statements of Texas Health Ventures Group, L.L.C. and its subsidiaries, which appears in this Annual Report on Form 10-K ofTenet Healthcare Corporation./s/ PricewaterhouseCoopers LLP Dallas, TexasFebruary 27, 2017 Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial 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 (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-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 oursupervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known tous by others within those entities, 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external 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 aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and (d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’smost recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially 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 financialreporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing theequivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely 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’sinternal control over financial reporting. Date: February 27, 2017 /s/ TREVOR FETTER Trevor Fetter Chief Executive Officer and Chairman of the Board of Directors Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial 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 (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-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 oursupervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known tous by others within those entities, 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external 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 aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and (d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’smost recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially 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 financialreporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing theequivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely 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’sinternal control over financial reporting. Date: February 27, 2017 /s/ DANIEL J. CANCELMI Daniel J. Cancelmi Chief Financial Officer Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 Chief Executive Officer andChairman of the Board of Directors and the Chief Financial Officer of Tenet Healthcare Corporation (the “Registrant”), doeach hereby certify that (i) the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 (the“Form 10-K”), to be filed with the Securities and Exchange Commission on the date hereof, fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in theForm 10-K fairly presents, in all material respects, the financial condition and results of operations of the Registrant and itssubsidiaries. Date: February 27, 2017 /s/ TREVOR FETTER Trevor Fetter Chief Executive Officer and Chairman of the Board of Directors Date: February 27, 2017 /s/ DANIEL J. CANCELMI Daniel J. Cancelmi Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350; it is not being filed for purposesof Section 18 of the Securities Exchange 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 general incorporation language in such filing.Source: TENET HEALTHCARE CORP, 10-K, February 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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 27, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except 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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