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TENET HEALTHCARE CORPORATION

(THC)
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TENET HEALTHCARE CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/28/2022 | 04:05pm EST

INTRODUCTION TO MANAGEMENT'S DISCUSSION AND ANALYSIS


The purpose of this section, Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A"), is to provide a narrative
explanation of our financial statements that enables investors to better
understand our business, to enhance our overall financial disclosures, to
provide the context within which our financial information may be analyzed, and
to provide information about the quality of, and potential variability of, our
financial condition, results of operations and cash flows. MD&A, which should be
read in conjunction with the accompanying Condensed Consolidated Financial
Statements, includes the following sections:

•Management Overview
•Forward-Looking Statements
•Sources of Revenue for Our Hospital Operations Segment
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates

Our business consists of our Hospital Operations and other ("Hospital
Operations") segment, our Ambulatory Care segment and our Conifer segment. Our
Hospital Operations segment is comprised of acute care and specialty hospitals,
imaging centers, ancillary outpatient facilities, micro­hospitals and physician
practices. At September 30, 2022, our subsidiaries operated 61 hospitals serving
primarily urban and suburban communities in nine states, including the new acute
care hospital we opened in September 2022 in South Carolina. In April 2021, we
completed the sale of the majority of the urgent care centers then held by our
Hospital Operations segment to an unaffiliated urgent care provider. In
addition, we completed the sale of five Miami­area hospitals and certain related
operations (the "Miami Hospitals") in August 2021 and a micro-hospital located
in Arizona in April 2022, all of which were held in our Hospital Operations
segment.

Our Ambulatory Care segment is comprised of the operations of USPI Holding
Company, Inc. ("USPI"). USPI had ownership interests in 440 ambulatory surgery
centers (each, an "ASC") (292 consolidated) and 24 surgical hospitals (eight
consolidated) in 35 states at September 30, 2022. In April 2021, we completed
the sale of 40 urgent care centers then held by our Ambulatory Care segment to
an unaffiliated urgent care provider and transferred 24 imaging centers from our
Ambulatory Care segment to our Hospital Operations segment. Effective June 30,
2022, we purchased all of the shares previously held by Baylor University
Medical Center ("Baylor") in USPI for $406 million, which increased our
ownership interest in USPI's voting shares from 95% to 100%. See Note 13 to the
accompanying Condensed Consolidated Financial Statements and the "Liquidity and
Capital Resources" section of MD&A for additional information about this
transaction.

Our Conifer segment provides revenue cycle management and value­based care
services to hospitals, health systems, physician practices, employers and other
clients through our Conifer Holdings, Inc. subsidiary ("Conifer"). At
September 30, 2022, Conifer provided services to approximately 670 Tenet and
non­Tenet hospitals and other clients nationwide. Almost all of the services
comprising the operations of our Conifer segment are provided by Conifer Health
Solutions, LLC, in which we own an interest of approximately 76%, or by one of
its direct or indirect wholly owned subsidiaries.

Unless otherwise indicated, all financial and statistical information included
in MD&A relates to our continuing operations, with dollar amounts expressed in
millions (except per­adjusted­admission and per­adjusted­patient­day amounts).
Continuing operations information includes the results of our same 60 hospitals
operated throughout the nine months ended September 30, 2022 and 2021, as well
as the Miami Hospitals sold in August 2021, the Arizona micro­hospital sold in
April 2022 and the new South Carolina hospital we opened in September 2022.
Continuing operations information excludes the results of our hospitals and
other businesses that have been classified as discontinued operations for
accounting purposes. We believe this information is useful to investors because
it includes the operations of all facilities in continuing operations for the
period of time that we owned and operated them, and it reflects the recent
trends we are experiencing with respect to volumes, revenues and expenses. We
present certain metrics as a percentage of net operating revenues because a
significant portion of our operating expenses are variable. In addition, we
present certain metrics on a per­adjusted­admission and per­adjusted­patient­day
basis to show trends other than volume.

In certain cases, information presented in MD&A for our Hospital Operations
segment is described as presented on a same­hospital basis, which includes the
results of our same 60 hospitals operated throughout the nine months ended
September 30, 2022 and 2021, and excludes the results of the Miami Hospitals we
sold in August 2021, the Arizona micro­hospital sold in April 2022, the new
South Carolina hospital opened in September 2022 and the results of our
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discontinued operations. We present same­hospital data because we believe it
provides investors with useful information regarding the performance of our
current portfolio of hospitals and other operations that are comparable for the
periods presented, as well as reflects recent trends we are experiencing with
respect to volumes, revenues and expenses.

MANAGEMENT OVERVIEW

RECENT DEVELOPMENTS


In October 2022, our board of directors authorized a $1 billion share repurchase
program. Repurchases will be made in accordance with applicable securities laws
and may be made at management's discretion from time to time in open-market or
privately negotiated transactions, subject to market conditions and other
factors. The share repurchase program does not obligate us to acquire any
particular amount of common stock, and it may be suspended for periods or
discontinued at any time before its scheduled expiration date of
December 31, 2024.

IMPACT OF THE COVID-19 PANDEMIC


The COVID­19 pandemic continued to adversely impact all three segments of our
business, as well as our patients, communities and employees, in the nine months
ended September 30, 2022. Broad economic factors resulting from the pandemic
affected our patient volumes, service mix and revenue mix. In addition, the
pandemic continued to have an adverse impact on certain of our operating
expenses during the nine months ended September 30, 2022.

Various federal legislative actions, including additional funding for the Public
Health and Social Services Emergency Fund ("PRF"), have mitigated some of the
economic disruption caused by the COVID­19 pandemic on our business. In the nine
months ended September 30, 2022 and 2021, we received cash payments from the PRF
and state and local grant programs totaling $155 million and $65 million,
respectively, including $27 million received during the nine-month period in
2021 by our unconsolidated affiliates for whom we provide cash management
services. We recognized $154 million and $53 million from these funds as grant
income during the nine-month periods in 2022 and 2021, respectively. In
addition, we recognized $12 million in equity in earnings of unconsolidated
affiliates in the accompanying Condensed Consolidated Statement of Operations
during the nine months ended September 30, 2021.

Throughout MD&A, we have provided additional information on the impact of the
COVID­19 pandemic on our results of operations and the steps we have taken, and
are continuing to take, in response. The ultimate extent and scope of the
pandemic and its future impact on our business remain unknown. For information
about risks and uncertainties related to COVID­19 that could affect our results
of operations, financial condition and cash flows, see the Risk Factors section
in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021
("Annual Report") and in Part II of our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2022 ("Q1'22 Report").

CYBERSECURITY INCIDENT


In April 2022, we experienced a cybersecurity incident that temporarily
disrupted a subset of our acute care operations and involved the exfiltration of
certain confidential company and patient information (the "Cybersecurity
Incident"). During this time, our hospitals remained operational and continued
to deliver patient care safely and effectively, utilizing well­established
back­up processes. We immediately suspended user access to impacted information
technology applications, executed extensive cybersecurity protection protocols,
and took steps to restrict further unauthorized activity. We have restored
impacted information technology operations, and we have taken additional
measures to protect patient, employee and other data, as appropriate, in
response to the Cybersecurity Incident.

Disruption from the Cybersecurity Incident placed pressure on our Hospital
Operations segment's volumes and earnings, particularly in April and May 2022.
We currently estimate that the Cybersecurity Incident has had an adverse pre-tax
impact of approximately $100 million. This estimate includes the costs to
remediate the issues, lost revenues from the associated business interruption
and other related expenses. We have insurance coverage and have filed a claim
within our policy limits for these losses. We are unable to predict or control
the timing or amount of insurance recoveries.

TRENDS AND STRATEGIES


As described above and throughout MD&A, we continue to experience negative
impacts of the pandemic on our business in varying degrees. Throughout the
COVID­19 pandemic, we have taken, and we continue to take, various actions to
increase our liquidity and mitigate the impact of reductions in our patient
volumes and changes in our service mix and revenue mix. We issued new senior
unsecured notes and senior secured first lien notes, redeemed existing senior
unsecured notes and senior secured first lien notes, including those with the
highest interest rates of all of our long­term debt, and amended our senior
secured revolving credit facility (as amended to date, the "Credit Agreement").
We also decreased our employee
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headcount throughout the organization at the outset of the COVID-19 pandemic,
and we deferred certain operating expenses that were not expected to impact our
response to the pandemic. In addition, we reduced certain variable costs across
the enterprise. Together with government relief packages, we believe these
actions supported our ability to provide essential patient services during the
initial uncertainty caused by the COVID-19 pandemic and continue to do so. For
further information on our liquidity, see "Liquidity and Capital Resources"
below.

We have experienced, and continue to experience, increased competition with
other healthcare providers in recruiting and retaining qualified personnel
responsible for the operation of our facilities. There is a limited availability
of experienced medical support personnel nationwide, which drives up the wages
and benefits required to recruit and retain employees. In particular, like
others in the healthcare industry, we continue to experience a shortage of
critical­care nurses in certain disciplines and geographic areas. This shortage
has been exacerbated by the COVID­19 pandemic as more nurses choose to retire
early, leave the workforce or take travel assignments. In some areas, the
increased demand for care of COVID­19 patients in our hospitals, as well as the
direct impact of COVID­19 on physicians, employees and their families, have put
a strain on our resources and staff. Over the past two years, we have had to
rely more on higher-cost temporary contract labor, which we compete with other
healthcare providers to secure, and pay premiums above standard compensation for
essential workers. In addition, we have experienced significant price increases
in medical supplies, particularly for personal protective equipment ("PPE"), and
we have encountered supply­chain disruptions, including shortages and delays. In
recent months, our Ambulatory Care segment has been impacted by shipment delays
in connection with its de novo facility development efforts, which are a key
part of our portfolio expansion strategy.

We believe that several key trends are also continuing to shape the demand for
healthcare services: (i) consumers, employers and insurers are actively seeking
lower­cost solutions and better value as they focus more on healthcare spending;
(ii) patient volumes are shifting from inpatient to outpatient settings due to
technological advancements and demand for care that is more convenient,
affordable and accessible; (iii) the growing aging population requires greater
chronic disease management and higher­acuity treatment; and (iv) consolidation
continues across the entire healthcare sector. In addition, the healthcare
industry, in general, and the acute care hospital business, in particular, have
experienced significant regulatory uncertainty based, in large part, on
administrative, legislative and judicial efforts to limit, alter or repeal the
Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act of 2010 ("Affordable Care Act"). It is difficult to
predict the full impact of regulatory uncertainty on our future revenues and
operations.

Expansion of Our Ambulatory Care Segment-In response to these trends, we
continue to focus on opportunities to expand our Ambulatory Care segment through
acquisitions, organic growth, construction of new outpatient centers and
strategic partnerships. During the years ended December 31, 2021 and 2020, we
invested $1.315 billion and $1.200 billion, respectively, to acquire ownership
interests in new ASCs, increase our ownership interests in existing facilities
and invest in de novo facilities. This activity included the acquisition of
ownership interests in 86 ASCs and related ambulatory support services
(collectively, the "SCD Centers") from Surgical Center Development #3 LLC and
Surgical Center Development #4, LLC ("SCD") in December 2021. USPI and SCD's
principals have also entered into a joint venture and development agreement
under which USPI will have the exclusive option to partner with affiliates of
SCD on the future development of a minimum target of 50 de novo ASCs over a
period of five years. In addition, USPI formed a joint venture with United
Urology Group and acquired ownership interests in 20 new and established ASCs
and two still in development in July 2022. The ASCs, which are now managed and
consolidated by USPI, are located in Arizona, Colorado and Maryland.

Also during the nine months ended September 30, 2022, we acquired controlling
interests in 11 ASCs, four of which are located in Florida, two in Tennessee and
one in each of five other states, and we acquired noncontrolling interests in an
ASC in each of New Jersey and Texas. During the same period, we acquired
controlling ownership interests in 14 previously unconsolidated ASCs in ten
geographically diverse states. In addition, we opened 12 ASCs in various states
during the nine months ended September 30, 2022. We believe USPI's ASCs and
surgical hospitals offer many advantages to patients and physicians, including
greater affordability, predictability, flexibility and convenience. Moreover,
due in part to advancements in medical technology and due to the lower cost
structure and greater efficiencies that are attainable at a specialized
outpatient site, we believe the volume and complexity of surgical cases
performed in an outpatient setting will continue to increase. Historically, our
outpatient services have generated significantly higher margins for us than
inpatient services.

Driving Growth in Our Hospital Systems-We remain committed to better positioning
our hospital systems and competing more effectively in the ever­evolving
healthcare environment by focusing on driving performance through operational
effectiveness, increasing capital efficiency and margins, investing in our
physician enterprise, particularly our specialist network, enhancing patient and
physician satisfaction, growing our higher­demand and higher­acuity clinical
service lines (including outpatient lines), expanding patient and physician
access, and optimizing our portfolio of assets. Over the past several years, we
have undertaken enterprise­wide cost­efficiency measures, and we continue to
transition certain support
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operations offshore to our Global Business Center ("GBC") in the Philippines. We
incurred restructuring charges in conjunction with these initiatives in the nine
months ended September 30, 2022, and we could incur additional such charges in
the future.

We regularly review the marginal costs of providing certain services, and we
manage our operations and make staffing decisions based on those analyses. We
also continue to exit service lines, businesses and markets that we believe are
no longer a core part of our long­term growth strategy. In April 2021, we
divested the majority of our urgent care centers operated under the MedPost and
CareSpot brands by our Hospital Operations and Ambulatory Care segments. In
addition, we completed the sale of the Miami Hospitals in August 2021 and the
sale of an Arizona micro-hospital in April 2022. We intend to further refine our
portfolio of hospitals and other healthcare facilities when we believe such
refinements will help us improve profitability, allocate capital more
effectively in areas where we have a stronger presence, deploy proceeds on
higher­return investments across our business, enhance cash flow generation,
reduce our debt and lower our ratio of debt­to­Adjusted EBITDA.

We also seek advantageous opportunities to grow our portfolio of hospitals and
other healthcare facilities. In September 2022, we opened a new acute care
hospital, Piedmont Medical Center - Fort Mill, in South Carolina. This 100­bed
facility includes an emergency department, multi­specialty operating rooms, an
intensive care unit, and labor and delivery rooms.

Improving the Customer Care Experience-As consumers continue to become more
engaged in managing their health, we recognize that understanding what matters
most to them and earning their loyalty is imperative to our success. As such, we
have enhanced our focus on treating our patients as traditional customers by:
(i) establishing networks of physicians and facilities that provide convenient
access to services across the care continuum; (ii) expanding service lines
aligned with growing community demand, including a focus on aging and chronic
disease patients; (iii) offering greater affordability and predictability,
including simplified registration and discharge procedures, particularly in our
outpatient centers; (iv) improving our culture of service; and (v) creating
health and benefit programs, patient education and health literacy materials
that are customized to the needs of the communities we serve. Through these
efforts, we intend to improve the customer care experience in every part of our
operations.

Driving Conifer's Growth-Conifer serves approximately 670 Tenet and non­Tenet
hospitals and other clients nationwide. In addition to providing revenue cycle
management services to health systems and physicians, Conifer provides support
to both providers and self­insured employers seeking assistance with clinical
integration, financial risk management and population health management. We
believe that our success in growing Conifer and increasing its profitability
depends in part on our success in executing the following strategies:
(i) attracting hospitals and other healthcare providers that currently handle
their revenue cycle management processes internally as new clients;
(ii) generating new client relationships through opportunities from USPI and
Tenet's acute care hospital acquisition and divestiture activities;
(iii) expanding revenue cycle management and value­based care service offerings
through organic development and small acquisitions; (iv) leveraging data from
tens of millions of patient interactions for continued enhancement of the
value­based care environment to drive competitive differentiation; and
(v) maximizing opportunities through automation and offshoring to improve the
effectiveness and efficiency of Conifer's services.

Improving Profitability-We continue to focus on growing patient volumes and
effective cost management as a means to improve profitability. Our inpatient
admissions have been constrained in recent years by the COVID­19 pandemic,
increased competition, utilization pressure by managed care organizations, new
delivery models that are designed to lower the utilization of acute care
hospital services, the effects of higher patient co­pays, co­insurance amounts
and deductibles, changing consumer behavior, and adverse economic conditions and
demographic trends in certain of our markets. Our business has also been
impacted by the rise in inflation and its effects on elective procedures, wages
and costs. However, we also believe that emphasis on higher­demand clinical
service lines (including outpatient services), focus on expanding our ambulatory
care business, cultivation of our culture of service, participation in Medicare
Advantage health plans that have been experiencing higher growth rates than
traditional Medicare, and contracting strategies that create shared value with
payers should help us grow our patient volumes over time. We are also continuing
to explore new opportunities to enhance efficiency, including further
integration of enterprise­wide centralized support functions, outsourcing
additional functions unrelated to direct patient care, and reducing clinical and
vendor contract variation.

Reducing Our Leverage Over Time-All of our long­term debt has a fixed rate of
interest, except for outstanding borrowings, if any, under our Credit Agreement,
and the maturity dates of our notes are staggered from 2024 through 2031. We
believe that our capital structure minimizes the near­term impact of increased
interest rates, and the staggered maturities of our debt allow us to retire or
refinance our debt over time. It remains our long­term objective to reduce our
debt and lower our ratio of debt­to­Adjusted EBITDA, primarily through more
efficient capital allocation and Adjusted EBITDA growth, which should lower our
refinancing risk.

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During the nine months ended September 30, 2022, we redeemed or repurchased
$2.572 billion aggregate principal amount of our senior secured first lien and
senior unsecured notes in advance of their maturity dates. We financed these
transactions using a substantial portion of the proceeds from our issuance of
$2.000 billion aggregate principal amount of 6.125% senior secured first lien
notes due 2030 (the "2030 Senior Secured First Lien Notes") and cash on hand.

Our ability to execute on our strategies and respond to the aforementioned
trends is subject to the extent and scope of the impact on our operations of the
COVID­19 pandemic, as well as a number of other risks and uncertainties, all of
which may cause actual results to be materially different from expectations. For
information about risks and uncertainties that could affect our results of
operations, see the Risk Factors section in Part II of our Q1'22 Report and the
Forward­Looking Statements and Risk Factors sections in Part I of our Annual
Report.

RESULTS OF OPERATIONS-OVERVIEW

The following table presents selected operating statistics for our Hospital Operations and Ambulatory Care segments on a continuing operations basis:


                                                                   Three Months Ended September 30,                        Increase
                                                                  2022                          2021                      (Decrease)
Hospital Operations - hospitals and related
outpatient facilities:
Number of hospitals (at end of period)                                     61                           60                       1    (1)
Total admissions                                                      133,125                      145,412                    (8.4) %
Adjusted admissions(2)                                                247,394                      256,250                    (3.5) %
Paying admissions (excludes charity and uninsured)                    126,603                      136,932                    (7.5) %
Charity and uninsured admissions                                        6,522                        8,480                   (23.1) %
Admissions through emergency department                               100,181                      110,675                    (9.5) %
Emergency department visits, outpatient                               546,474                      578,734                    (5.6) %
Total emergency department visits                                     646,655                      689,409                    (6.2) %
Total surgeries                                                        86,502                       91,707                    (5.7) %
Patient days - total                                                  681,964                      770,175                   (11.5) %
Adjusted patient days(2)                                            1,221,812                    1,335,610                    (8.5) %
Average length of stay (days)                                            5.12                         5.30                    (3.4) %
Average licensed beds                                                  15,443                       15,987                    (3.4) %
Utilization of licensed beds(3)                                          48.0  %                      52.4  %                 (4.4) % (1)
Total visits                                                        1,398,610                    1,523,726                    (8.2) %
Paying visits (excludes charity and uninsured)                      1,317,103                    1,423,068                    (7.4) %
Charity and uninsured visits                                           81,507                      100,658                   (19.0) %
Ambulatory Care:
Total consolidated facilities (at end of period)                          300                          232                      68    (1)
Total consolidated cases                                              332,507                      295,026                    12.7  %

(1) The change is the difference between the 2022 and 2021 amounts shown. (2) Adjusted admissions/patient days represents actual admissions/patient days adjusted to

include outpatient services provided by facilities in our Hospital Operations segment by

multiplying actual admissions/patient days by the sum of gross inpatient revenues and

outpatient revenues and dividing the results by gross inpatient revenues. (3) Utilization of licensed beds represents patient days divided by the number of days in the

period divided by average licensed beds.




Total admissions decreased by 12,287, or 8.4%, and total surgeries decreased by
5,205, or 5.7%, in the three months ended September 30, 2022 compared to the
three months ended September 30, 2021. Total emergency department visits
decreased by 6.2% during the three­month period in 2022 compared to the same
period in 2021. These decreases in our patient volumes were primarily
attributable to the sale of the Miami Hospitals in August 2021 and lower
COVID­related volumes during the three months ended September 30, 2022 as
compared to the same period in the prior year. The increase in Ambulatory Care
total consolidated cases of 12.7% in the three months ended September 30, 2022,
as compared to the same period in 2021, is primarily attributable to incremental
case volume from our recently acquired facilities, partially offset by the
closure of two ASCs, the impact of the COVID­19 pandemic, and the adverse impact
of Hurricane Ian on certain of our facilities located in Florida and South
Carolina.

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The following table presents net operating revenues by segment on a continuing
operations basis:

                                                             Three Months Ended September 30,                Increase
Revenues                                                         2022                   2021                (Decrease)
Net operating revenues:
Hospital Operations prior to inter-segment
eliminations                                             $           3,778          $    4,030                      (6.3) %
Ambulatory Care                                                        806                 666                      21.0  %
Conifer                                                                333                 314                       6.1  %
Inter-segment eliminations                                            (116)               (116)                        -  %
Total                                                    $           4,801          $    4,894                      (1.9) %



Consolidated net operating revenues decreased by $93 million, or 1.9%, in the
three months ended September 30, 2022 compared to the same period in 2021. The
decrease of $252 million, or 6.3%, in our Hospital Operations segment's net
operating revenues prior to inter­segment eliminations for the three­month
period in 2022 compared to the same period in 2021 was primarily due to the sale
of the Miami Hospitals in August 2021, lower overall patient volumes and
decreased COVID­related patient acuity, partially offset by negotiated
commercial rate increases. Net operating revenues in our Ambulatory Care segment
increased $140 million, or 21.0%, in the three months ended September 30, 2022
compared to the three months ended September 30, 2021. This increase was mainly
driven by our recently acquired ASCs and negotiated commercial rate increases,
partially offset by the closure of two ASCs and the adverse impacts of the
COVID-19 pandemic and Hurricane Ian on case volumes. Conifer's revenues, net of
inter­segment eliminations, increased $19 million, or 9.6%, during the three
months ended September 30, 2022 compared to the same period in 2021, primarily
due to contractual rate increases and new business expansion. During the three
months ended September 30, 2022 and 2021, we recognized net grant income of
$54 million and $3 million, respectively, which amounts are not included in net
operating revenues.

Our accounts receivable days outstanding ("AR Days") from continuing operations
were 58.0 days at September 30, 2022 and 57.0 days at December 31, 2021. Our
AR Days target is less than 55 days. AR Days are calculated as our accounts
receivable from continuing operations on the last date in the quarter divided by
our net operating revenues from continuing operations for the quarter ended on
that date divided by the number of days in the quarter. This calculation
includes our Hospital Operations segment's contract assets. The AR Days
calculation excludes (i) urgent care centers operated under the MedPost and
CareSpot brands, which we divested in April 2021, (ii) the Miami Hospitals,
which we sold in August 2021, and (iii) our California provider fee revenues.

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The following table provides information about selected operating expenses by
segment on a continuing operations basis:

                                                                 Three Months Ended September 30,                Increase
                                                                     2022                   2021                (Decrease)
Hospital Operations:
Salaries, wages and benefits                                 $           1,847          $    1,872                      (1.3) %
Supplies                                                                   598                 656                      (8.8) %
Other operating expenses                                                   841                 894                      (5.9) %
Total                                                        $           3,286          $    3,422                      (4.0) %
Ambulatory Care:
Salaries, wages and benefits                                 $             208          $      169                      23.1  %
Supplies                                                                   218                 170                      28.2  %
Other operating expenses                                                   110                  97                      13.4  %
Total                                                        $             536          $      436                      22.9  %
Conifer:
Salaries, wages and benefits                                 $             175          $      168                       4.2  %
Supplies                                                                     1                   1                         -  %
Other operating expenses                                                    67                  60                      11.7  %
Total                                                        $             243          $      229                       6.1  %
Total:
Salaries, wages and benefits                                 $           2,230          $    2,209                       1.0  %
Supplies                                                                   817                 827                      (1.2) %
Other operating expenses                                                 1,018               1,051                      (3.1) %
Total                                                        $           4,065          $    4,087                      (0.5) %
Rent/lease expense(1):
Hospital Operations                                          $              73          $       73                         -  %
Ambulatory Care                                                             29                  24                      20.8  %
Conifer                                                                      2                   2                         -  %
Total                                                        $             104          $       99                       5.1  %


(1)    Included in other operating expenses.



The following table provides information about our Hospital Operations segment's
selected operating expenses per adjusted admission on a continuing operations
basis:

                                                                 Three Months Ended September 30,                Increase
                                                                     2022                   2021                (Decrease)

Hospital Operations: Salaries, wages and benefits per adjusted admission(1) $ 7,464 $ 7,308

                       2.1  %
Supplies per adjusted admission(1)                                       2,418               2,563                      (5.7) %
Other operating expenses per adjusted admission(1)                       3,396               3,488                      (2.6) %
Total per adjusted admission                                  $         13,278          $   13,359                      (0.6) %

(1) Adjusted admissions represents actual admissions adjusted to include outpatient

services provided by facilities in our Hospital Operations segment by multiplying

actual admissions by the sum of gross inpatient revenues and outpatient revenues and

dividing the results by gross inpatient revenues.




Salaries, wages and benefits expense for our Hospital Operations segment
decreased $25 million, or 1.3%, in the three months ended September 30, 2022
compared to the same period in 2021. This change was primarily attributable to
the sale of the Miami Hospitals in August 2021, lower employee benefits costs,
and our continued focus on cost-efficiency measures, partially offset by
increased contract labor expense and annual merit increases for certain of our
employees. On a per­adjusted­admission basis, salaries, wages and benefits
increased 2.1% in the three months ended September 30, 2022 compared to the
three months ended September 30, 2021.

Supplies expense for our Hospital Operations segment decreased $58 million, or
8.8%, during the three months ended September 30, 2022 compared to the three
months ended September 30, 2021. This decrease was primarily attributable to the
sale of the Miami Hospitals, lower patient volumes and COVID-related patient
acuity during the 2022 period, and our cost­efficiency measures. These factors
were partially offset by increased costs for certain supplies due to COVID-19,
the impact of general market conditions and inflation. On a
per­adjusted­admission basis, supplies expense decreased by 5.7% in
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the three months ended September 30, 2022 compared to the three months ended
September 30, 2021 due to the aforementioned factors.

Other operating expenses for our Hospital Operations segment decreased $53
million, or 5.9%, in the three months ended September 30, 2022 compared to the
same period in 2021. The decrease was primarily attributable to the sale of the
Miami Hospitals in August 2021, a gain recognized on the sale of a portion of an
interest in certain assets of $45 million during the 2022 period and our
continued focus on cost-efficiency measures. On a per­adjusted­admission basis,
other operating expenses in the three months ended September 30, 2022 decreased
by 2.6% compared to the same period in 2021.

LIQUIDITY AND CAPITAL RESOURCES OVERVIEW

Cash and cash equivalents were $1.208 billion at September 30, 2022 compared to $1.351 billion at June 30, 2022.

Significant cash flow items in the three months ended September 30, 2022 included:


•Net cash provided by operating activities before interest, taxes, discontinued
operations, and restructuring charges, acquisition­related costs, and litigation
costs and settlements of $568 million (including $51 million from federal and
state grants);

•Proceeds from sales of marketable securities, long-term investments and other assets of $52 million;

•Purchases of marketable securities and equity investments of $27 million;

•Interest payments of $185 million;

•Capital expenditures of $165 million;

•$122 million of distributions paid to noncontrolling interests;

•Payments totaling $59 million for restructuring charges, acquisition­related costs, and litigation costs and settlements; and

•$158 million of payments for purchases of businesses or joint venture interests.


Net cash provided by operating activities was $662 million in the nine months
ended September 30, 2022 compared to $1.211 billion in the nine months ended
September 30, 2021. Key factors contributing to the change between the 2022 and
2021 periods include the following:

•$880 million of Medicare advances recouped or repaid in the nine months ended
September 30, 2022 compared to $326 million recouped during the same period in
2021;

•$155 million of cash received from grants in the nine months ended September 30, 2022 compared to $38 million received in the nine months ended September 30, 2021;

•Lower interest payments of $63 million in the 2022 period;

•Higher income tax payments of $94 million in the 2022 period;

•Decreased net cash receipts of $94 million related to supplemental Medicaid programs in California and Texas; and

•The timing of other working capital items.

FORWARD-LOOKING STATEMENTS


This report includes "forward­looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, 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, target, estimate or anticipate (and other
similar expressions) will, should or may occur in the future are forward­looking
statements, including (but not limited to) disclosure regarding (i) the impact
of the
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COVID-19 pandemic, (ii) our future earnings, financial position, and operational
and strategic initiatives, and (iii) developments in the healthcare industry.
Forward­looking statements represent management's expectations, based on
currently available information, as to the outcome and timing of future events,
but, by their nature, address matters that are indeterminate. 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 to be materially different from those expressed or implied by
forward­looking statements. Such factors include, but are not limited to, the
risks described in the Forward­Looking Statements and Risk Factors sections in
Part I of our Annual Report and the Risk Factors section in Part II of our
Q1'22 Report.

When considering forward­looking statements, you should keep in mind the risk
factors and other cautionary statements in our Annual Report and in this report.
Should one or more of the risks and uncertainties described in these reports
occur, or should underlying assumptions prove incorrect, our actual results and
plans could differ materially from those expressed in any forward­looking
statement. We specifically disclaim any obligation to update any information
contained in a forward­looking statement or any forward­looking statement in its
entirety except as required by law.

All forward­looking statements attributable to us are expressly qualified in their entirety by this cautionary information.

SOURCES OF REVENUE FOR OUR HOSPITAL OPERATIONS SEGMENT


We earn revenues for patient services from a variety of sources, primarily
managed care payers and the federal Medicare program, as well as state Medicaid
programs, indemnity­based health insurance companies and uninsured patients
(that is, patients who do not have health insurance and are not covered by some
other form of third­party arrangement).

The following table presents the sources of net patient service revenues less
implicit price concessions for our hospitals and related outpatient facilities,
expressed as percentages of net patient service revenues less implicit price
concessions from all sources:

                                                         Three Months Ended                                                            Nine Months Ended
                                                           September 30,                             Increase                            September 30,                            Increase
                                                      2022                     2021               (Decrease)(1)                    2022                     2021               (Decrease)(1)
Medicare                                                     16.6  %             16.6  %                       -  %                       17.2  %             18.0  %                    (0.8) %
Medicaid                                                      7.4  %              9.0  %                    (1.6) %                        6.7  %              7.9  %                    (1.2) %
Managed care(2)                                              69.7  %             69.2  %                     0.5  %                       70.1  %             68.1  %                     2.0  %
Uninsured                                                     1.0  %              0.9  %                     0.1  %                        1.1  %              1.3  %                    (0.2) %
Indemnity and other                                           5.3  %              4.3  %                     1.0  %                        4.9  %              4.7  %                     0.2  %

(1) The change is the difference between the 2022 and 2021 percentages presented. (2) Includes Medicare and Medicaid managed care programs.

Our payer mix on an admissions basis for our hospitals, expressed as a percentage of total admissions from all sources, is presented below:

                                                                   Three Months Ended                                                            Nine Months Ended
                                                                     September 30,                             Increase                            September 30,                            Increase
Admissions from:                                                2022                     2021               (Decrease)(1)                    2022                     2021               (Decrease)(1)
Admissions from:
Medicare                                                               20.2  %             19.6  %                     0.6  %                       20.8  %             20.6  %                     0.2  %
Medicaid                                                                5.5  %              6.1  %                    (0.6) %                        5.6  %              5.8  %                    (0.2) %
Managed care(2)                                                        66.4  %             65.2  %                     1.2  %                       65.7  %             64.4  %                     1.3  %
Charity and uninsured                                                   4.9  %              5.8  %                    (0.9) %                        4.8  %              6.0  %                    (1.2) %
Indemnity and other                                                     3.0  %              3.3  %                    (0.3) %                        3.1  %              3.2  %                    (0.1) %

(1) The change is the difference between the 2022 and 2021 percentages presented. (2) Includes Medicare and Medicaid managed care programs.

GOVERNMENT PROGRAMS


The Centers for Medicare & Medicaid Services ("CMS") is an agency of the U.S.
Department of Health and Human Services ("HHS") that administers a number of
government programs authorized by federal law; it is the single largest payer of
healthcare services in the United States. Medicare is a federally funded health
insurance program primarily for individuals 65 years of age and older, as well
as some younger people with certain disabilities and conditions, and is provided
without
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regard to income or assets. Medicaid is co­administered by the states and is
jointly funded by the federal government and state governments. Medicaid is the
nation's main public health insurance program for people with low incomes and is
the largest source of health coverage in the United States. The Children's
Health Insurance Program ("CHIP"), which is also co­administered 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 private
coverage. Unlike Medicaid, the CHIP is limited in duration and requires the
enactment of reauthorizing legislation. Funding for the CHIP has been
reauthorized through federal fiscal year ("FFY") 2027.

Medicare


Medicare offers its beneficiaries different ways to obtain their medical
benefits. One option, the Original Medicare Plan (which includes "Part A" and
"Part B"), is a fee­for­service ("FFS") payment system. The other option, called
Medicare Advantage (sometimes called "Part C" or "MA Plans"), includes health
maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"),
private FFS Medicare special needs plans and Medicare medical savings account
plans. Our total net patient service revenues from continuing operations of the
hospitals and related outpatient facilities in our Hospital Operations segment
for services provided to patients enrolled in the Original Medicare Plan were
$575 million and $616 million for the three months ended September 30, 2022 and
2021, respectively, and $1.773 billion and $2.001 billion for the nine months
ended September 30, 2022 and 2021, respectively.

A general description of the types of payments we receive for services provided
to patients enrolled in the Original Medicare Plan is provided in our Annual
Report. Recent regulatory and legislative updates to the terms of these payment
systems and their estimated effect on our revenues can be found under
"Regulatory and Legislative Changes" below.

Medicaid


Medicaid programs and the corresponding reimbursement methodologies vary from
state­to­state and from year­to­year. Even prior to the COVID­19 pandemic,
several states in which we operate faced budgetary challenges that resulted in
reduced Medicaid funding levels to hospitals and other providers. Because most
states must operate with balanced budgets, and the Medicaid program is generally
a significant portion of a state's budget, states can be expected to adopt or
consider adopting future legislation designed to reduce or not increase their
Medicaid expenditures. In addition, some states delay issuing Medicaid payments
to providers to manage state expenditures. As an alternative means of funding
provider payments, many of the states in which we operate have adopted
supplemental payment programs authorized under the Social Security Act.
Continuing pressure on state budgets and other factors, including legislative
and regulatory changes, could result in future reductions to Medicaid payments,
payment delays or changes to Medicaid supplemental payment programs. Federal
government denials or delayed approvals of waiver applications or extension
requests by the states in which we operate could materially impact our Medicaid
funding levels.

Estimated revenues under various state Medicaid programs, including state­funded
Medicaid managed care programs, constituted approximately 19.4% and 18.2% of
total net patient service revenues less implicit price concessions of our acute
care hospitals and related outpatient facilities for the nine months ended
September 30, 2022 and 2021, respectively. We also receive disproportionate
share hospital ("DSH") and other supplemental revenues under various state
Medicaid programs. For the nine months ended September 30, 2022 and 2021, our
total Medicaid revenues attributable to DSH and other supplemental revenues were
approximately $467 million and $631 million, respectively. The decrease between
the two nine­month periods was primarily attributable to $101 million of
assessments we recognized related to the Texas Comprehensive Hospital Increase
Reimbursement Program ("CHIRP") following its approval in 2022. During the nine
months ended September 30, 2022, we also recognized $203 million of revenue
related to CHIRP that is included in Managed Medicaid revenue rather than the
DSH and other supplemental revenues classification due to the structure of the
program.

Total Medicaid and Managed Medicaid net patient service revenues from continuing
operations recognized by the hospitals and related outpatient facilities in our
Hospital Operations segment for the nine months ended September 30, 2022 and
2021 were $1.996 billion and $2.023 billion, respectively. During the nine
months ended September 30, 2022, Medicaid and Managed Medicaid revenues
comprised 35% and 65%, respectively, of our Medicaid­related net patient service
revenues from continuing operations recognized by the hospitals and related
outpatient facilities in our Hospital Operations segment. All Medicaid and
Managed Medicaid patient service revenues are presented net of provider taxes or
assessments paid by our hospitals, which are reported as an offset reduction to
FFS Medicaid revenue.

Because we cannot predict what actions the federal government or the states may
take under existing or future legislation and/or regulatory changes to address
budget gaps, deficits, Medicaid expansion, provider fee programs or Medicaid
Section 1115 waivers, we are unable to assess the effect that any such
legislation or regulatory action might have on our business; however, the impact
on our future financial position, results of operations or cash flows could be
material.

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Regulatory and Legislative Changes

Material updates to the information set forth in our Annual Report about the Medicare and Medicaid payment systems, as well as other government programs impacting our business, are provided below.


Payment and Policy Changes to the Medicare Inpatient Prospective Payment
Systems-Section 1886(d) of the Social Security Act requires CMS to update
Medicare inpatient FFS payment rates for hospitals reimbursed under the
inpatient prospective payment systems ("IPPS") annually. The updates generally
become effective October 1, the beginning of the FFY. In August 2022, CMS issued
final changes to the Hospital Inpatient Prospective Payment Systems for Acute
Care Hospitals and Fiscal Year 2023 Rates ("Final IPPS Rule"). The Final IPPS
Rule includes the following payment and policy changes:

•A market basket increase of 4.1% for Medicare severity­adjusted
diagnosis­related group ("MS­DRG") operating payments for hospitals reporting
specified quality measure data and that are meaningful users of electronic
health record technology; CMS also finalized a 0.3% multifactor productivity
reduction required by the Affordable Care Act and a 0.5% increase required by
the Medicare Access and CHIP Reauthorization Act that together result in a net
operating payment update of 4.3% before budget neutrality adjustments;

•Changes to the hospital Value­Based Purchasing ("VBP") and Hospital-Acquired
Condition ("HAC") programs for FFY 2023 due to the impact of the COVID-19 Public
Health Emergency, including the implementation of a special scoring methodology
for the VBP program that results in each hospital receiving a value­based
incentive payment amount equal to its 2% reduction to the operating standardized
amount; and suppression of all measures in the HAC reduction program resulting
in no hospitals being penalized for FFY 2023;

•An increase in the cost outlier threshold from $30,988 to $38,859;

•A 2.36% net increase in the capital federal MS­DRG rate; and

•Updates to the three factors used to determine the amount and distribution of Medicare uncompensated care disproportionate share hospital ("UC­DSH") payments.


According to CMS, the combined impact of the payment and policy changes in the
Final IPPS Rule for operating costs will yield an average 2.6% increase in
Medicare operating MS­DRG FFS payments for hospitals in urban areas and an
average 3.3% increase in such payments for proprietary hospitals in FFY 2023. We
estimate that all of the final payment and policy changes affecting operating
MS­DRG and UC­DSH payments will result in an estimated 3.7% increase in our
annual Medicare FFS IPPS payments, which yields an estimated increase of
approximately $55 million. Because of the uncertainty associated with various
factors that may influence our future IPPS payments by individual hospital,
including legislative, regulatory or legal actions, admission volumes, length of
stay and case mix, we cannot provide any assurances regarding our estimate of
the impact of the payment and policy changes.

Proposed Payment and Policy Changes to the Medicare Outpatient Prospective
Payment and Ambulatory Surgery Center Payment Systems-In July 2022, CMS released
proposed policy changes and payment rates for the Hospital Outpatient
Prospective Payment System ("OPPS") and Ambulatory Surgical Center Payment
System for calendar year ("CY") 2023 ("Proposed OPPS/ASC Rule"). The Proposed
OPPS/ASC Rule includes the following proposed payment and policy changes:

•An estimated net increase of 2.7% for the OPPS rates based on an estimated
market basket increase of 3.1%, reduced by a multifactor productivity adjustment
required by the Affordable Care Act of 0.4%;

•Removal of 10 services from the Inpatient Only List (which is the list of
procedures that must be performed on an inpatient basis) after determining such
services meet established criteria for removal;

•Establishment of an exemption for rural Sole Community Hospitals from the
site-neutral Medicare reduced payment rate for clinic visits furnished in exempt
off-campus, provider-based departments and payment for such visits at the full
OPPS rate; and

•A 2.7% increase to the Ambulatory Surgical Center payment rates.


In addition, the Proposed OPPS/ASC Rule acknowledges that additional changes
would be forthcoming with respect to CMS' 340B program, which allows certain
hospitals (i.e., only nonprofit organizations with specific federal designations
and/or funding) ("340B Hospitals") to purchase drugs at discounted rates from
drug manufacturers ("340B Drugs"). In the CY 2018
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final rule regarding OPPS payment and policy changes, CMS reduced the payment
for 340B Drugs from the average sales price ("ASP") plus 6% to the ASP minus
22.5% and made a corresponding budget­neutral increase to payments to all
hospitals for other drugs and services reimbursed under the OPPS (the
"340B Payment Adjustment"). CMS retained the same 340B Payment Adjustment in the
final rules regarding OPPS payment and policy changes for CYs 2019 through 2022.
Certain hospital associations and hospitals commenced litigation challenging
CMS' authority to impose the 340B Payment Adjustment for CYs 2018, 2019 and
2020. Following the initial court decisions and a series of appeals, the U.S.
Supreme Court (the "Supreme Court") unanimously ruled in June 2022 that the
decision to impose the 340B Payment Adjustment in CYs 2018 and 2019 was
unlawful. The case was remanded to the lower courts to determine the appropriate
remedy, and it is expected that 340B Hospitals will be permitted to reclaim at
least some portion of the 340B payments that were previously withheld. The
Proposed OPPS/ASC Rule states that CMS did not have sufficient time to account
for the Supreme Court decision in the CY 2023 proposed rates and budget
neutrality calculations; however, CMS has indicated that it does anticipate
applying the ASP plus 6% for 340B Drugs in the CY 2023 final rule, in lieu of
the current payment policy of ASP minus 22.5%. CMS is still evaluating how to
apply the Supreme Court ruling to the prior cost years.

CMS projects that the combined impact of the proposed payment and policy changes
in the Proposed OPPS/ASC Rule under the current 340B payment policy (of ASP
minus 22.5%) will yield an average 2.9% increase in Medicare FFS OPPS payments
for hospitals in urban areas and an average 3.5% increase in Medicare FFS OPPS
payments for proprietary hospitals. Based on CMS' estimates under the current
340B payment policy, the projected annual impact of the payment and policy
changes in the Proposed OPPS/ASC Rule on our hospitals is an increase to
Medicare FFS hospital outpatient revenues of approximately $21 million, which
represents an increase of approximately 3.7%.

However, CMS projects that the combined impact of the proposed payment and
policy changes in the Proposed OPPS/ASC Rule under the anticipated final 340B
payment policy (of ASP plus 6%) will yield an average 4% increase in Medicare
FFS OPPS payments for hospitals in urban areas and an average 0.5% increase in
Medicare FFS OPPS payments for proprietary hospitals. Based on CMS' estimates
under the anticipated final 340B payment policy, the projected annual impact of
the payment and policy changes in the Proposed OPPS/ASC Rule on our hospitals is
an increase to Medicare FFS hospital outpatient revenues of approximately
$3 million, which represents an increase of approximately 0.5%.

Because of the uncertainty associated with various factors that may influence
our future OPPS payments, including legislative or legal actions, volumes and
case mix, as well as potential changes to the proposed rule, we cannot provide
any assurances regarding our estimate of the impact of the proposed payment and
policy changes. In addition, it remains unclear at this time how CMS will
finance any retroactive payments for 340B payments that were previously withheld
given that the original policy was budget­neutral and HHS already redistributed
the savings. We cannot predict the remedy that will be imposed, the timing
thereof, or what further actions CMS or Congress might take with respect to the
340B program; however, it is possible that reversal of the 340B Payment
Adjustments could have an adverse effect on our future net operating revenues
and cash flows.

Proposed Payment and Policy Changes to the Medicare Physician Fee Schedule-In
July 2022, CMS released the CY 2023 Medicare Physician Fee Schedule ("MPFS")
Proposed Rule ("MPFS Proposed Rule"). The MPFS Proposed Rule includes updates to
payment policies, payment rates and other provisions for services reimbursed
under the MPFS from January 1 through December 31, 2023. Under the MPFS Proposed
Rule, the CY 2023 conversion factor, which is the base rate that is used to
convert relative units into payment rates, would be reduced from $34.61 to
$33.08, due in part to the expiration of the one-time 3% payment increase
provided for in CY 2022 by the Protecting Medicare and American Farmers from
Sequester Cuts Act (the "Sequester Cuts Act"), as well as budget neutrality
rules. This change would result in an annual reduction of approximately
$8 million to our FFS MPFS revenues. Because of the uncertainty associated with
various factors that may influence our future MPFS payments, including
legislative, regulatory or legal actions, volumes and case mix, as well as
potential changes to the MPFS Proposed Rule, we cannot provide any assurances
regarding our estimate of the impact of the proposed payment and policy changes.

Public Health and Social Services Emergency Fund-During the nine months ended
September 30, 2022 and 2021, our Hospital Operations and Ambulatory Care
segments together recognized a total of $138 million and $40 million,
respectively, of PRF grant income associated with lost revenues and
COVID­related costs. Our Hospital Operations segment also recognized $16 million
and $13 million of grant income from state and local grant programs during the
same nine­month periods in 2022 and 2021, respectively. In addition, we
recognized $12 million of grant income through our unconsolidated affiliates
during the nine months ended September 30, 2021. Grant income recognized by our
Hospital Operations and Ambulatory Care segments is presented in grant income,
and grant income recognized through our unconsolidated affiliates is presented
in equity in earnings of unconsolidated affiliates, in each case in our
condensed consolidated statements of operations. We cannot predict whether
additional distributions of grant funds will be authorized, and we cannot
provide assurances regarding the amount of grant income, if any, to be
recognized in the future.
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Medicare and Medicaid Payment Policy Changes-The federally mandated 2%
sequestration reduction on Medicare FFS and Medicare Advantage payments to
hospitals, physicians and other providers was suspended effective May 1, 2020
through December 31, 2021. The Sequester Cuts Act, which was signed into law in
December 2021, extended the 2% Medicare sequestration moratorium through
March 31, 2022, and adjusted the sequestration to 1% for the period
April 1, 2022 through June 30, 2022. Because further legislation was not passed,
the full 2% reduction was restored effective July 1, 2022. The impact of the
Sequester Cuts Act on our operations was an increase of approximately
$39 million of revenues in the six months ended June 30, 2022, after which the
sequestration was fully reinstated. Because of the uncertainty associated with
various factors that may influence our future Medicare and Medicaid payments,
including future legislative, legal or regulatory actions, or changes in volumes
and case mix, there is a risk that actual payments received under, or the
ultimate impact of, these programs will differ materially from our expectations.

PRIVATE INSURANCE

Managed Care

We currently have thousands of managed care contracts with various HMOs and
PPOs. HMOs generally maintain a full­service healthcare delivery network
comprised of physician, hospital, pharmacy and ancillary service providers that
HMO members must access through an assigned "primary care" physician. The
member's care is then managed by his or her primary care physician and other
network providers in accordance with the HMO's quality assurance and utilization
review guidelines so that appropriate healthcare can be efficiently delivered in
the most cost­effective manner. HMOs typically provide reduced benefits or
reimbursement (or none at all) to their members who use non­contracted
healthcare providers for non­emergency care.

PPOs generally offer limited benefits to members who use non­contracted
healthcare providers. PPO members who use contracted healthcare providers
receive a preferred benefit, typically in the form of lower co­pays,
co­insurance or deductibles. As employers and employees have demanded more
choice, managed care plans have developed hybrid products that combine elements
of both HMO and PPO plans, including high­deductible healthcare plans that may
have limited benefits, but cost the employee less in premiums.

The amount of our managed care net patient service revenues, including Medicare
and Medicaid managed care programs, from our hospitals and related outpatient
facilities during the nine months ended September 30, 2022 and 2021 was
$7.227 billion and $7.592 billion, respectively. Our top 10 managed care payers
generated 62% of our managed care net patient service revenues for the nine
months ended September 30, 2022. During the same period, national payers
generated 43% of our managed care net patient service revenues; the remainder
came from regional or local payers. At both September 30, 2022 and
December 31, 2021, 67% of our net accounts receivable for our Hospital
Operations segment were due from managed care payers.

Revenues under managed care plans are based primarily on payment terms involving
predetermined rates per diagnosis, per­diem rates, discounted FFS rates and/or
other similar contractual arrangements. These revenues are also subject to
review and possible audit by the payers, which can take several years before
they are completely resolved. The payers are billed for patient services on an
individual patient basis. An individual patient's bill is subject to adjustment
on a patient­by­patient basis in the ordinary course of business by the payers
following their review and adjudication of each particular bill. We estimate the
discounts for contractual allowances at the individual hospital level utilizing
billing data on an individual patient basis. At the end of each month, on an
individual hospital basis, we estimate our expected reimbursement for patients
of managed care plans based on the applicable contract terms. We believe it is
reasonably likely for there to be an approximately 3% increase or decrease in
the estimated contractual allowances related to managed care plans. Based on
reserves at September 30, 2022, a 3% increase or decrease in the estimated
contractual allowance would impact the estimated reserves by approximately $19
million. Some of the factors that can contribute to changes in the contractual
allowance estimates include: (i) changes in reimbursement levels for procedures,
supplies and drugs when threshold levels are triggered; (ii) changes in
reimbursement levels when stop­loss or outlier limits are reached; (iii) changes
in the admission status of a patient due to physician orders subsequent to
initial diagnosis or testing; (iv) final coding of in­house and
discharged­not­final­billed patients that change reimbursement levels;
(v) secondary benefits determined after primary insurance payments; and
(vi) reclassification of patients among insurance plans with different coverage
and payment levels. Contractual allowance estimates are periodically reviewed
for accuracy by taking into consideration known contract terms, as well as
payment history. We believe our estimation and review process enables us to
identify instances on a timely basis where such estimates need to be revised. We
do not believe there were any adjustments to estimates of patient bills that
were material to our revenues. In addition, on a corporate­wide basis, we do not
record any general provision for adjustments to estimated contractual allowances
for managed care plans. Managed care accounts, net of contractual allowances
recorded, are further
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reduced to their net realizable value through implicit price concessions based
on historical collection trends for these payers and other factors that affect
the estimation process.

We expect managed care governmental admissions to continue to increase as a
percentage of total managed care admissions over the near term. However, the
managed Medicare and Medicaid insurance plans typically generate lower yields
than commercial managed care plans, which have been experiencing an improved
pricing trend. Although we have benefited from solid year­over­year aggregate
managed care pricing improvements for some time, we have seen these improvements
moderate in recent years, and we believe this moderation could continue into the
future. In the nine months ended September 30, 2022, our commercial managed care
net inpatient revenue per admission from the hospitals in our Hospital
Operations segment was approximately 81% higher than our aggregate yield on a
per­admission basis from government payers, including managed Medicare and
Medicaid insurance plans.

Indemnity


An indemnity­based agreement generally requires the insurer to reimburse an
insured patient for healthcare expenses after 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.

Legislative Changes


As more fully described in Item 1, Business - Healthcare Regulation and
Licensing, of Part I of our Annual Report, the No Surprises Act ("NSA") and the
rules promulgated thereunder went into effect on January 1, 2022. The NSA is
intended to address unexpected gaps in insurance coverage that result in
"surprise medical bills" when patients unknowingly obtain medical services from
physicians and other providers outside their health insurance network, including
certain emergency services, anesthesiology services and air ambulance
transportation. At this time, we are unable to assess the effect that the NSA or
regulations relating to the NSA might have on our business, financial position,
results of operations or cash flows.

UNINSURED PATIENTS

Uninsured 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 of our uninsured patients are admitted through our hospitals' emergency departments and often require high­acuity treatment that is more costly to provide and, therefore, results in higher billings, which are the least collectible of all accounts.


Self­pay accounts receivable, which include amounts due from uninsured patients,
as well as co­pays, co­insurance amounts and deductibles owed to us by patients
with insurance, pose significant collectability problems. At September 30, 2022
and December 31, 2021, 5% and 4%, respectively, of our net accounts receivable
for our Hospital Operations segment was self­pay. Further, a significant portion
of our implicit price concessions relates to self­pay amounts. We provide
revenue cycle management services through Conifer, 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 Affecting Conifer's Operations,
of Part I of our Annual Report.

Conifer has performed systematic analyses to focus our attention on the drivers
of bad debt expense for each hospital. While emergency department use is the
primary contributor to our implicit price concessions 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 non­emergency department patients as
well. These initiatives are intended to promote process efficiencies in
collecting self­pay accounts, as well as co­pay, co­insurance and deductible
amounts owed to us by patients with insurance, that we deem highly collectible.
We leverage a statistical­based collections model that aligns our operational
capacity to maximize our collections performance. We are dedicated to modifying
and refining our processes as needed, enhancing our technology and improving
staff 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 the challenges associated with serving uninsured
patients. For example, our Compact with Uninsured Patients ("Compact") is
designed to offer managed care­style discounts to certain uninsured patients,
which enables us to offer lower rates to those patients who historically had
been charged standard gross charges. Under the Compact, the discount offered to
uninsured patients is recognized as a contractual allowance, which reduces net
operating revenues at the time the self­pay accounts are recorded. The uninsured
patient accounts, net of contractual allowances recorded, are further reduced to
their net realizable value through implicit price concessions based on
historical collection trends for self­pay accounts and other factors that affect
the estimation process.

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We also provide financial assistance through our charity and uninsured discount
programs to uninsured patients who are unable to pay for the healthcare services
they receive. Our policy is not to pursue collection of amounts determined to
qualify for financial assistance; therefore, we do not report these amounts in
net operating revenues. Most states include an estimate of the cost of charity
care in the determination of a hospital's eligibility for Medicaid DSH payments.
These payments are intended to mitigate our cost of uncompensated care. Some
states have also developed provider fee or other supplemental payment programs
to mitigate the shortfall of Medicaid reimbursement compared to the cost of
caring for Medicaid patients.

The initial expansion of health insurance coverage under the Affordable Care Act
resulted in an increase in the number of patients using our facilities with
either health insurance exchange or government healthcare insurance program
coverage. However, we continue to have to provide uninsured discounts and
charity care due to the failure of certain states to expand Medicaid coverage
and for persons living in the country who are not permitted to enroll in a
health insurance exchange or government healthcare insurance program.

The following table presents our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity patients:

                                 Three Months Ended                 Nine Months Ended
                                    September 30,                     September 30,
Estimated costs for:               2022             2021             2022            2021

Uninsured patients         $      131              $ 181      $     389             $ 507
Charity care patients              22                 25             62                74
Total                      $      153              $ 206      $     451             $ 581



RESULTS OF OPERATIONS

The following tables present our consolidated net operating revenues, operating
expenses and operating income, both in dollar amounts and as percentages of net
operating revenues, on a continuing operations basis:

                                                                    Three Months Ended                     Nine Months Ended
                                                                       September 30,                         September 30,
                                                                   2022                2021              2022              2021
Net operating revenues:
Hospital Operations                                          $    3,778             $ 4,030          $  11,221          $ 12,072
Ambulatory Care                                                     806                 666              2,315             1,976
Conifer                                                             333                 314                990               943
Inter-segment eliminations                                         (116)               (116)              (342)             (362)
Net operating revenues                                            4,801               4,894             14,184            14,629
Grant income                                                         54                   3                154                53
Equity in earnings of unconsolidated affiliates                      51                  45                151               141
Operating expenses:
Salaries, wages and benefits                                      2,230               2,209              6,538             6,690
Supplies                                                            817                 827              2,413             2,490
Other operating expenses, net                                     1,018               1,051              2,966             3,177
Depreciation and amortization                                       209                 209                628               654
Impairment and restructuring charges, and
acquisition-related costs                                            24                  15                 97                55
Litigation and investigation costs                                   12                  29                 50                64
Net gains on sales, consolidation and deconsolidation of              -                (412)                 -              (427)
facilities
Operating income                                             $      596             $ 1,014          $   1,797          $  2,120



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                                                                           Three Months Ended                                    Nine Months Ended
                                                                              September 30,                                        September 30,
                                                                       2022                       2021                       2022                      2021

Net operating revenues                                                        100.0  %              100.0  %                       100.0  %              100.0  %
Grant income                                                                    1.1  %                0.1  %                         1.1  %                0.4  %
Equity in earnings of unconsolidated affiliates                                 1.1  %                0.9  %                         1.1  %                1.0  %
Operating expenses:
Salaries, wages and benefits                                                   46.4  %               45.1  %                        46.1  %               45.8  %
Supplies                                                                       17.0  %               16.9  %                        17.0  %               17.0  %
Other operating expenses, net                                                  21.3  %               21.5  %                        20.9  %               21.7  %
Depreciation and amortization                                                   4.4  %                4.3  %                         4.4  %                4.5  %
Impairment and restructuring charges, and
acquisition-related costs                                                       0.5  %                0.3  %                         0.7  %                0.4  %
Litigation and investigation costs                                              0.2  %                0.6  %                         0.4  %                0.4  %
Net gains on sales, consolidation and deconsolidation of                          -  %               (8.4) %                           -  %               (2.9) %
facilities
Operating income                                                               12.4  %               20.7  %                        12.7  %               14.5  %



The following tables present our net operating revenues, operating expenses and
operating income, both in dollar amounts and as percentages of net operating
revenues, by operating segment on a continuing operations basis:

                                                         Three Months Ended September 30, 2022                          Nine Months Ended September 30, 2022
                                                  Hospital                                                        Hospital
                                                 Operations           Ambulatory Care          Conifer           Operations          Ambulatory Care         Conifer

Net operating revenues                         $     3,662           $     
   806            $   333          $   10,879           $        2,315          $   990
Grant income                                            54                       -                  -                 150                        4                -
Equity in earnings of unconsolidated
affiliates                                               2                      49                  -                   8                      143                -
Operating expenses:
Salaries, wages and benefits                         1,847                     208                175               5,419                      603              516
Supplies                                               598                     218                  1               1,786                      624                3
Other operating expenses, net                          841                     110                 67               2,455                      315              196
Depreciation and amortization                          172                      28                  9                 518                       83               27
Impairment and restructuring charges, and
acquisition-related costs                               14                       5                  5                  68                       13     

16

Litigation and investigation costs                       7                       3                  2                  33                        3               14

Operating income                               $       239           $         283            $    74          $      758           $          821          $   218

Net operating revenues                               100.0   %               100.0    %         100.0  %            100.0   %                100.0  %         100.0  %
Grant income                                           1.5   %                   -    %             -  %              1.4   %                  0.2  %             -  %
Equity in earnings of unconsolidated
affiliates                                             0.1   %                 6.1    %             -  %              0.1   %                  6.2  %             -  %
Operating expenses:
Salaries, wages and benefits                          50.4   %                25.8    %          52.6  %             49.8   %                 26.0  %          52.1  %
Supplies                                              16.3   %                27.0    %           0.3  %             16.4   %                 27.0  %           0.3  %
Other operating expenses, net                         23.1   %                13.7    %          20.1  %             22.6   %                 13.6  %          19.9  %
Depreciation and amortization                          4.7   %                 3.5    %           2.7  %              4.8   %                  3.6  %           2.7  %
Impairment and restructuring charges, and
acquisition-related costs                              0.4   %                 0.6    %           1.5  %              0.6   %                  0.6  %           1.6  %
Litigation and investigation costs                     0.2   %                 0.4    %           0.6  %              0.3   %                  0.1  %           1.4  %

Operating income                                       6.5   %                35.1    %          22.2  %              7.0   %                 35.5  %          22.0  %



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                                                   Three Months Ended September 30, 2021                          Nine Months Ended September 30, 2021
                                            Hospital                                                        Hospital
                                           Operations           Ambulatory Care          Conifer           Operations          Ambulatory Care         Conifer

Net operating revenues                   $     3,914           $         666            $   314          $   11,710           $        1,976          $   943
Grant income                                       2                       1                  -                  30                       23                -
Equity in earnings of unconsolidated
affiliates                                         2                      43                  -                  11                      130                -
Operating expenses:
Salaries, wages and benefits                   1,872                     169                168               5,670                      512              508
Supplies                                         656                     170                  1               1,991                      496                3
Other operating expenses, net                    894                      97                 60               2,711                      295              171
Depreciation and amortization                    177                      23                  9                 555                       71               28
Impairment and restructuring charges,
and acquisition-related costs                     11                       1                  3                  31                        9           

15

Litigation and investigation costs                26                       3                  -                  54                        9           

1

Net losses (gains) on sales,
consolidation and deconsolidation of
facilities                                      (413)                      1                  -                (415)                     (12)               -
Operating income                         $       695           $         246            $    73          $    1,154           $          749          $   217

Net operating revenues                         100.0   %               100.0    %         100.0  %            100.0   %                100.0  %         100.0  %
Grant income                                     0.1   %                 0.2    %             -  %              0.3   %                  1.2  %             -  %
Equity in earnings of unconsolidated
affiliates                                       0.1   %                 6.5    %             -  %              0.1   %                  6.6  %             -  %
Operating expenses:
Salaries, wages and benefits                    47.8   %                25.4    %          53.5  %             48.4   %                 25.9  %          53.9  %
Supplies                                        16.8   %                25.5    %           0.3  %             17.0   %                 25.1  %           0.3  %
Other operating expenses, net                   22.9   %                14.5    %          19.1  %             23.1   %                 14.9  %          18.1  %
Depreciation and amortization                    4.5   %                 3.5    %           2.9  %              4.7   %                  3.6  %           3.0  %
Impairment and restructuring charges,
and acquisition-related costs                    0.3   %                 0.2    %           1.0  %              0.3   %                  0.5  %           1.6  %
Litigation and investigation costs               0.7   %                 0.5    %             -  %              0.5   %                  0.5  %           0.1  %
Net losses (gains) on sales,
consolidation and deconsolidation of
facilities                                     (10.6)  %                 0.2    %             -  %             (3.5)  %                 (0.6) %             -  %
Operating income                                17.8   %                36.9    %          23.2  %              9.9   %                 37.9  %          23.0  %



Consolidated net operating revenues decreased by $93 million and $445 million,
or 1.9% and 3.0%, for the three and nine months ended September 30, 2022,
respectively, compared to the three and nine months ended September 30, 2021,
respectively. Hospital Operations net operating revenues net of inter­segment
eliminations decreased by $252 million and $831 million, or 6.4% and 7.1%, for
the three and nine months ended September 30, 2022, respectively, compared to
the same three and nine­month periods in 2021, respectively. These decreases
were primarily due to the loss of revenues in our Hospital Operations segment
from the Miami Hospitals we sold in August 2021, lower overall patient volumes
and decreased COVID­related patient acuity during the 2022 period, partially
offset by negotiated commercial rate increases. Our Hospital Operations segment
also recognized grant income from federal and state grants totaling $54 million
and $150 million during the three and nine months ended September 30, 2022,
respectively, which is not included in net operating revenues.

Ambulatory Care net operating revenues increased by $140 million and
$339 million, or 21.0% and 17.2%, for the three and nine months ended
September 30, 2022, respectively, compared to the three and nine months ended
September 30, 2021, respectively. The change in 2022 revenues for the
three­month period was driven by an increase from acquisitions of $124 million,
as well as an increase in same­facility net operating revenues of $19 million
due primarily to higher net revenue per case. These increases were partially
offset by a decrease of $3 million due to the closure of two ASCs, as well as
the adverse impacts of the COVID-19 pandemic and Hurricane Ian on case volumes.
The change in 2022 revenues for the nine­month period was driven by an increase
from acquisitions of $298 million, as well as an increase in same­facility net
operating revenues of $103 million due primarily to higher surgical patient
volume and higher net revenue per case. These increases were partially offset by
a decrease of $62 million due mainly to the sale of urgent care centers and the
transfer of imaging centers to the Hospital Operations segment in April 2021.
Our Ambulatory Care segment recognized income from federal grants totaling
$4 million during the six months ended June 30, 2022, which is not included in
net operating revenues. Our Ambulatory Care segment did not recognize any grant
income in the three months ended September 30, 2022.
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Conifer's net operating revenues increased by $19 million and $47 million, or
6.1% and 5.0%, for the three and nine months ended September 30, 2022,
respectively, compared to the three and nine months ended September 30, 2021,
respectively. Conifer's revenues from third­party clients, which revenues are
not eliminated in consolidation, increased $19 million and $67 million, or 9.6%
and 11.5%, for the three and nine months ended September 30, 2022, respectively,
compared to the same three and nine­month periods in 2021, respectively. These
increases were primarily due to contractual rate increases and new business
expansion.

The following table presents selected operating expenses of our three operating
segments. Information for our Hospital Operations segment is presented on a
same­hospital basis, whereas information presented for our Ambulatory Care and
Conifer segments is presented on a continuing operations basis.

                                                                   Three Months Ended                                             Nine Months Ended
                                                                      September 30,                     Increase                    September 30,                    Increase
Selected Operating Expenses                                       2022                2021             (Decrease)               2022               2021             (Decrease)
Hospital Operations - Same-Hospital:
Salaries, wages and benefits                                $    1,833             $ 1,827                     0.3  %       $    5,386          $ 5,397                    (0.2) %
Supplies                                                           595                 638                    (6.7) %            1,779            1,885                    (5.6) %
Other operating expenses                                           824                 850                    (3.1) %            2,410            2,513                    (4.1) %
Total                                                       $    3,252             $ 3,315                    (1.9) %       $    9,575          $ 9,795                    (2.2) %
Ambulatory Care:
Salaries, wages and benefits                                $      208             $   169                    23.1  %       $      603          $   512                    17.8  %
Supplies                                                           218                 170                    28.2  %              624              496                    25.8  %
Other operating expenses                                           110                  97                    13.4  %              315              295                     6.8  %
Total                                                       $      536             $   436                    22.9  %       $    1,542          $ 1,303                    18.3  %
Conifer:
Salaries, wages and benefits                                $      175             $   168                     4.2  %       $      516          $   508                     1.6  %
Supplies                                                             1                   1                       -  %                3                3                       -  %
Other operating expenses                                            67                  60                    11.7  %              196              171                    14.6  %
Total                                                       $      243             $   229                     6.1  %       $      715          $   682                     4.8  %

Rent/lease expense(1):
Hospital Operations                                         $       71             $    69                     2.9  %       $      205          $   210                    (2.4) %
Ambulatory Care                                                     29                  24                    20.8  %               84               75                    12.0  %
Conifer                                                              2                   2                       -  %                8                8                       -  %
Total                                                       $      102             $    95                     7.4  %       $      297          $   293                     1.4  %


(1)    Included in other operating expenses.


RESULTS OF OPERATIONS BY SEGMENT

Our operations are reported in three segments:


•Hospital Operations, which is comprised of acute care and specialty hospitals,
imaging centers, ancillary outpatient facilities, micro­hospitals and physician
practices;

•Ambulatory Care, which is comprised of USPI's ASCs and surgical hospitals; and

•Conifer, which provides revenue cycle management and value­based care services to hospitals, health systems, physician practices, employers and other clients.

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Hospital Operations Segment

The following tables present operating statistics, revenues and expenses of our
hospitals and related outpatient facilities on a same­hospital basis, unless
otherwise indicated:

                                                                                                      Same-Hospital                                                                               Same-Hospital
                                                                                                   Three Months Ended                                                                           Nine Months Ended
                                                                                                      September 30,                                    Increase                                   September 30,                                    Increase
Admissions, Patient Days and Surgeries                                                      2022                           2021                       (Decrease)                         2022                          2021                       (Decrease)
Number of hospitals (at end of period)                                                                 60                          60                       -    (1)                               60                          60                       -    (1)
Total admissions                                                                                  132,975                     140,491                    (5.3) %                              388,825                     413,942                    (6.1) %
Adjusted admissions(2)                                                                            247,060                     248,798                    (0.7) %                              714,024                     732,540                    (2.5) %
Paying admissions (excludes charity and uninsured)                                                126,470                     132,614                    (4.6) %                              370,090                     391,432                    (5.5) %
Charity and uninsured admissions                                                                    6,505                       7,877                   (17.4) %                               18,735                      22,510                   (16.8) %
Admissions through emergency department                                                           100,024                     106,217                    (5.8) %                              293,844                     309,681                    (5.1) %
Paying admissions as a percentage of total admissions                                                95.1  %                     94.4  %                  0.7  % (1)                             95.2  %                     94.6  %                  0.6  % (1)

Charity and uninsured admissions as a percentage of total admissions

                           4.9  %                      5.6  %                 (0.7) % (1)                              4.8  %                      5.4  %                 (0.6) % (1)

Emergency department admissions as a percentage of total admissions

                         75.2  %                     75.6  %                 (0.4) % (1)                             75.6  %                     74.8  %                  0.8  % (1)
Surgeries - inpatient                                                                              34,180                      35,535                    (3.8) %                              100,837                     106,994                    (5.8) %
Surgeries - outpatient                                                                             52,273                      54,119                    (3.4) %                              157,169                     161,982                    (3.0) %
Total surgeries                                                                                    86,453                      89,654                    (3.6) %                              258,006                     268,976                    (4.1) %
Patient days - total                                                                              681,537                     748,012                    (8.9) %                            2,046,155                   2,174,982                    (5.9) %
Adjusted patient days(2)                                                                        1,220,864                   1,301,989                    (6.2) %                            3,638,687                   3,762,149                    (3.3) %
Average length of stay (days)                                                                        5.13                        5.32                    (3.6) %                                 5.26                        5.25                     0.2  %
Licensed beds (at end of period)                                                                   15,369                      15,399                    (0.2) %                               15,369                      15,399                    (0.2) %
Average licensed beds                                                                              15,376                      15,399                    (0.1) %                               15,384                      15,401                    (0.1) %
Utilization of licensed beds(3)                                                                      48.2  %                     52.8  %                 (4.6) % (1)                             48.7  %                     51.7  %                 (3.0) % (1)

(1) The change is the difference between the 2022 and 2021 amounts presented. (2) Adjusted admissions/patient days represents actual admissions/patient days adjusted to

include outpatient services provided by facilities in our Hospital Operations segment by

multiplying actual admissions/patient days by the sum of gross inpatient revenues and

outpatient 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                                                                          Same-Hospital
                                                                     Three Months Ended                                                                      Nine Months Ended
                                                                        September 30,                                 Increase                                 September 30,                                 Increase
Outpatient Visits                                              2022                         2021                     (Decrease)                        2022                        2021                     (Decrease)
Total visits                                                      1,266,760                 1,360,953                   (6.9) %                          3,788,402                 4,008,056                   (5.5) %
Paying visits (excludes charity and uninsured)                    1,190,461                 1,265,603                   (5.9) %                          3,557,929                 3,736,175                   (4.8) %
Charity and uninsured visits                                         76,299                    95,350                  (20.0) %                            230,473                   271,881                  (15.2) %
Emergency department visits                                         545,766                   567,260                   (3.8) %                          1,587,529                 1,502,651                    5.6  %
Surgery visits                                                       52,273                    54,119                   (3.4) %                            157,169                   161,982                   (3.0) %
Paying visits as a percentage of total visits                          94.0  %                   93.0  %                 1.0  % (1)                           93.9  %                   93.2  %                 0.7  % (1)
Charity and uninsured visits as a percentage
of total visits                                                         6.0  %                    7.0  %                (1.0) % (1)                            6.1  %                    6.8  %                (0.7) % (1)

(1) The change is the difference between the 2022 and 2021 amounts presented.

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                                                         Same-Hospital                                                Same-Hospital
                                                      Three Months Ended                                            Nine Months Ended
                                                         September 30,                    Increase                    September 30,                    Increase
Revenues                                            2022               2021              (Decrease)               2022              2021              (Decrease)

Total segment net operating revenues(1) $ 3,629 $ 3,799

                    (4.5) %       $  10,779          $ 11,050                    (2.5) %
Selected revenue data - hospitals and
related outpatient facilities:
Net patient service revenues(1)(2)              $    3,425          $  3,599                    (4.8) %       $  10,217          $ 10,498                    (2.7) %
Net patient service revenue per adjusted
admission(1)(2)                                 $   13,863          $ 14,466                    (4.2) %       $  14,309          $ 14,331                    (0.2) %
Net patient service revenue per adjusted
patient day(1)(2)                               $    2,805          $  2,764                     1.5  %       $   2,808          $  2,790                     0.6  %

(1) Revenues are net of implicit price concessions. (2) Adjusted admissions/patient days represents actual admissions/patient days adjusted to

include outpatient services provided by facilities in our Hospital Operations segment by

multiplying actual admissions/patient days by the sum of gross inpatient revenues and

       outpatient revenues and dividing the results by gross inpatient revenues.


                                                                               Same-Hospital                                                                    Same-Hospital
                                                                             Three Months Ended                                                               Nine Months Ended
                                                                               September 30,                              Increase                              September 30,                             Increase
Total Segment Selected Operating Expenses                                2022                       2021                (Decrease)(1)                     2022                      2021                (Decrease)(1)

Salaries, wages and benefits as a percentage of net operating revenues

     50.5  %              48.1  %                      2.4  %                        50.0  %              48.8  %                      1.2  %
Supplies as a percentage of net operating revenues                               16.4  %              16.8  %                     (0.4) %                        16.5  %              17.1  %                     (0.6) %
Other operating expenses as a percentage of net
operating revenues                                                               22.7  %              22.4  %                      0.3  %                        22.4  %              22.7  %                     (0.3) %

(1) The change is the difference between the 2022 and 2021 amounts presented.




Revenues

Same­hospital net operating revenues decreased $170 million, or 4.5%, during the
three months ended September 30, 2022 compared to the three months ended
September 30, 2021, primarily due to lower overall patient volumes and decreased
COVID­related patient acuity during the 2022 period, partially offset by
negotiated commercial rate increases. Our Hospital Operations segment also
recognized grant income totaling $54 million and $2 million from federal and
state grants in the three months ended September 30, 2022 and 2021,
respectively, which is not included in net operating revenues. Same­hospital
admissions and outpatient visits decreased 5.3% and 6.9%, respectively, in the
three months ended September 30, 2022 compared to the same period in 2021,
primarily driven by the COVID­related patient acuity and volume changes noted
above.

Same­hospital net operating revenues decreased $271 million, or 2.5%, during the
nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021, due in part to lower patient volumes, decreased
COVID­related patient acuity and the adverse impact of the Cybersecurity
Incident on patient volumes. These factors were partially offset by negotiated
commercial rate increases. Our Hospital Operations segment also recognized grant
income from federal, state and local grants totaling $150 million and
$30 million in the nine months ended September 30, 2022 and 2021, respectively,
which is not included in net operating revenues. Same­hospital admissions and
outpatient visits decreased by 6.1% and 5.5%, respectively, in the nine months
ended September 30, 2022 compared to the same period in 2021, primarily due to
the factors described above.

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The following table presents our consolidated net accounts receivable by payer:

                                                                        September 30,         December 31,
                                                                            2022                  2021
Medicare                                                               $        151          $        155
Medicaid                                                                         44                    47
Net cost report settlements receivable and valuation allowances                  44                    33
Managed care                                                                  1,643                 1,602
Self-pay uninsured                                                               37                    21
Self-pay balance after insurance                                                 82                    70
Estimated future recoveries                                                     144                   137
Other payers                                                                    304                   331
Total Hospital Operations                                                     2,449                 2,396
Ambulatory Care                                                                 377                   374

Accounts receivable, net                                               $      2,826          $      2,770



The collection of accounts receivable has been a key area of focus, particularly
over the past several years. At September 30, 2022, our Hospital Operations
segment collection rate on self­pay accounts was approximately 28.9%. Our
self­pay collection rate includes payments made by patients, including co­pays,
co­insurance amounts and deductibles paid by patients with insurance. Based on
our accounts receivable from uninsured patients and co­pays, co­insurance
amounts and deductibles owed to us by patients with insurance at
September 30, 2022, a 10% decrease or increase in our self­pay collection rate,
or approximately 3%, which we believe could be a reasonably likely change, would
result in an unfavorable or favorable adjustment to patient accounts receivable
of approximately $10 million. There are various factors that can impact
collection trends, such as changes in the economy and inflation, which in turn
have an impact on unemployment rates and the number of uninsured and
underinsured patients, the volume of patients through our emergency departments,
the increased burden of co­pays and deductibles to be made by patients with
insurance, and business practices related to collection efforts. These factors,
many of which have been affected by the COVID­19 pandemic, continuously change
and can have an impact on collection trends and our estimation process.

We also typically experience ongoing managed care payment delays and disputes;
however, we continue to work with these payers to obtain adequate and timely
reimbursement for our services. Our estimated Hospital Operations segment
collection rate from managed care payers was approximately 95.9% at
September 30, 2022.

We manage our implicit price concessions using hospital­specific goals and
benchmarks such as (i) total cash collections, (ii) point­of­service cash
collections, (iii) AR Days and (iv) accounts receivable by aging category. The
following tables present the approximate aging by payer of our net accounts
receivable from the continuing operations of our Hospital Operations segment of
$2.405 billion and $2.363 billion at September 30, 2022 and December 31, 2021,
respectively, excluding cost report settlements receivable and valuation
allowances of $44 million and $33 million, respectively, at September 30, 2022
and December 31, 2021:

                                                                      Indemnity,
                                                         Managed       Self-Pay
                             Medicare      Medicaid       Care        and Other       Total
At September 30, 2022:
0-60 days                        91  %         31  %        56  %           22  %      50  %
61-120 days                       5  %         28  %        16  %           13  %      15  %
121-180 days                      2  %         16  %         9  %            9  %       9  %
Over 180 days                     2  %         25  %        19  %           56  %      26  %
Total                           100  %        100  %       100  %          100  %     100  %

At December 31, 2021:
0-60 days                        93  %         35  %        57  %           22  %      52  %
61-120 days                       4  %         31  %        18  %           14  %      16  %
121-180 days                      1  %         14  %        10  %            9  %       9  %
Over 180 days                     2  %         20  %        15  %           55  %      23  %
Total                           100  %        100  %       100  %          100  %     100  %



Conifer continues to implement revenue cycle initiatives to improve our cash
flow. These initiatives are focused on standardizing and improving patient
access processes, including pre­registration, registration, verification of
eligibility and benefits, liability identification and collections at
point­of­service, and financial counseling. These initiatives are intended to
reduce denials, improve service levels to patients and increase the quality of
accounts that end up in accounts receivable.
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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
accounts receivable.

At September 30, 2022, we had a cumulative total of patient account assignments
to Conifer of $1.880 billion related to our continuing operations. These
accounts have already been written off and are not included in our receivables;
however, an estimate of future recoveries from all the accounts assigned to
Conifer is determined based on our historical experience and recorded in
accounts receivable.

Patient advocates from Conifer's Eligibility and Enrollment Services program
("EES") screen patients in the hospital to determine whether those patients meet
eligibility requirements for financial assistance programs. They also expedite
the process of applying for these government programs. Receivables from patients
who are potentially eligible for Medicaid are classified as Medicaid pending,
under the EES, net of appropriate implicit price concessions. Based on recent
trends, approximately 97% of all accounts in the EES are ultimately approved for
benefits under a government program, such as Medicaid.

The following table presents the approximate amount of accounts receivable in
the EES still awaiting determination of eligibility under a government program
at September 30, 2022 and December 31, 2021 by aging category:

                    September 30, 2022       December 31, 2021
0-60 days          $                69      $               87
61-120 days                         16                      17
121-180 days                         6                       4
Over 180 days                        8                       7
Total              $                99      $              115


Salaries, Wages and Benefits


Same­hospital salaries, wages and benefits increased $6 million, or 0.3%, in the
three months ended September 30, 2022 compared to the same period in 2021. This
increase was primarily attributable to higher contract labor costs and annual
merit increases for certain of our employees, partially offset by lower employee
benefit costs and our continued focus on cost­efficiency measures. Same­hospital
salaries, wages and benefits as a percentage of net operating revenues increased
by 240 basis points to 50.5% in the three months ended September 30, 2022
compared to the three months ended September 30, 2021, due to the factors noted
above and the impact of lower patient volumes on our patient revenues during the
period. Salaries, wages and benefits expense for the three months ended
September 30, 2022 and 2021 included stock­based compensation expense of
$10 million and $9 million, respectively.

Same­hospital salaries, wages and benefits decreased $11 million, or 0.2%, in
the nine months ended September 30, 2022 compared to the same period in 2021.
This decrease was primarily attributable to reduced patient volumes, lower
incentive compensation and employee benefit costs, and our continued focus on
cost­efficiency measures. These factors were partially offset by higher premium
pay and contract labor costs, as well as annual merit increases for certain of
our employees. Same­hospital salaries, wages and benefits as a percentage of net
operating revenues increased by 120 basis points to 50.0% in the nine months
ended September 30, 2022 compared to the nine months ended September 30, 2021,
due to the factors noted above and the impact of the Cybersecurity Incident on
our patient revenues during the 2022 period. Salaries, wages and benefits
expense for the nine months ended September 30, 2022 and 2021 included
stock­based compensation expense of $36 million and $31 million, respectively.

Supplies


Same­hospital supplies expense decreased $43 million, or 6.7%, in the three
months ended September 30, 2022 compared to the same period in 2021. The
decrease was primarily due to decreased patient volumes, lower COVID-related
patient acuity and our cost-efficiency measures, including those described
below. These decreases were partially offset by the increased cost of certain
supplies as a result of the COVID­19 pandemic, the impact of general market
conditions and inflation. Same­hospital supplies expense as a percentage of net
operating revenues decreased by 40 basis points to 16.4% in the three months
ended September 30, 2022 compared to the three months ended September 30, 2021,
primarily due to the factors described above. We strive to control supplies
expense through product standardization, consistent contract terms and
end­to­end contract management, improved utilization, bulk purchases, focused
spending with a smaller number of vendors and operational improvements.

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Same­hospital supplies expense decreased $106 million, or 5.6%, in the nine
months ended September 30, 2022 compared to the same period in 2021. The
decrease was primarily due to lower patient volumes and our cost-efficiency
measures. The increased cost of certain supplies as a result of the COVID­19
pandemic, the impact of general market conditions and inflation, as well as the
growth in our higher-acuity supply-intensive surgical services, partially offset
the decrease in supplies expense between the two nine-month periods.
Same­hospital supplies expense as a percentage of net operating revenues
decreased by 60 basis points to 16.5% in the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021,
primarily due to the factors noted above.

Other Operating Expenses, Net


Same­hospital other operating expenses decreased by $26 million, or 3.1%, in the
three months ended September 30, 2022 compared to the same period in 2021.
Same­hospital other operating expenses as a percentage of net operating revenues
increased by 30 basis points to 22.7% for the three months ended September 30,
2022 compared to 22.4% for the three months ended September 30, 2021, primarily
due to the decrease in our patient volumes and the proportionally higher level
of fixed costs (e.g., rent expense) in other operating expenses. The changes in
other operating expenses included:

•a gain from the sale of a portion of an interest in certain assets of $45 million, which is classified as a reduction of other operating expenses, net;

•decreased malpractice expense of $25 million; and

•increased indigent care expense of $26 million.


Same­hospital other operating expenses decreased by $103 million, or 4.1%, in
the nine months ended September 30, 2022 compared to the same period in 2021.
Same­hospital other operating expenses as a percentage of net operating revenues
decreased by 30 basis points to 22.4% in the nine months ended September 30,
2022 compared to 22.7% for the nine months ended September 30, 2021, primarily
due to the net gains from the sale of assets noted below. The changes in other
operating expenses included:

•net gains from the sale of assets of $115 million, which are classified as a reduction of other operating expenses, net;

•decreased malpractice expense of $43 million;

•decreased contract services expense of $11 million; and

•increased indigent care expense of $26 million.

Ambulatory Care Segment


Our Ambulatory Care segment is comprised of USPI's ASCs and surgical hospitals.
USPI operates its surgical facilities in partnership with local physicians and,
in many of these facilities, a health system partner. We hold an ownership
interest in each facility, with each being operated through a separate legal
entity in most cases. USPI operates facilities on a day­to­day basis through
management services contracts. Our sources of earnings from each facility
consist of:

•management and administrative services revenues, computed as a percentage of each facility's net revenues (often net of implicit price concessions); 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 USPI.


Our role as an owner and day­to­day manager provides us with significant
influence over the operations of each facility. For many of the facilities our
Ambulatory Care segment holds an ownership interest in (164 of 464 facilities at
September 30, 2022), this influence does not represent control of the facility,
so we account for our investment in the facility under the equity method for an
unconsolidated affiliate. USPI controls 300 of the facilities our Ambulatory
Care segment operates, and we account for these investments as consolidated
subsidiaries. Our net earnings from a facility are the same under either method,
but the classification of those earnings differs. For consolidated subsidiaries,
our financial statements reflect 100% of the revenues and expenses of the
subsidiaries, after the elimination of intercompany amounts. The net profit
attributable to owners other than USPI is classified within net income available
to noncontrolling interests.

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For unconsolidated affiliates, our statements of operations reflect our earnings
in two line items:

•equity in earnings of unconsolidated affiliates-our share of the net income
(loss) of each facility, which is based on the facility's net income (loss) and
the percentage of the facility's outstanding equity interests owned by USPI; and

•management and administrative services revenues, which is included in our net operating revenues-income we earn in exchange for managing the day­to­day operations of each facility, usually quantified as a percentage of each facility's net revenues less implicit price concessions.


Our Ambulatory Care segment operating income is driven by the performance of all
facilities USPI operates and by USPI's ownership interests in those facilities,
but our individual revenue and expense line items contain only consolidated
businesses, which represent 65% of those facilities. This translates to trends
in consolidated operating income that often do not correspond with changes in
consolidated revenues and expenses, which is why we disclose certain statistical
and financial data on a pro forma systemwide basis that includes both
consolidated and unconsolidated (equity method) facilities.

Our unconsolidated facilities received cash payments from the PRF during 2021
and 2020. During the three and nine months ended September 30, 2021, we
recognized grant income of $1 million and $12 million, respectively, from these
funds, which income is included in equity in earnings of unconsolidated
affiliates in the accompanying Condensed Consolidated Statement of Operations.
No additional grant income was recognized from our unconsolidated facilities
during the three­ and nine­month periods ended September 30, 2022.

Results of Operations

The following table summarizes certain statement of operations items:

                                                    Three Months Ended                                           Nine Months Ended
                                                       September 30,                   Increase                    September 30,                    Increase
                                                   2022              2021             (Decrease)               2022               2021             (Decrease)
Net operating revenues                         $      806          $  666                    21.0  %       $    2,315          $ 1,976                    17.2  %
Grant income                                   $        -          $    1                  (100.0) %       $        4          $    23                   (82.6) %
Equity in earnings of unconsolidated
affiliates                                     $       49          $   43                    14.0  %       $      143          $   130                    10.0  %
Salaries, wages and benefits                   $      208          $  169                    23.1  %       $      603          $   512                    17.8  %
Supplies                                       $      218          $  170                    28.2  %       $      624          $   496                    25.8  %
Other operating expenses, net                  $      110          $   97                    13.4  %       $      315          $   295                     6.8  %



Revenues

Ambulatory Care net operating revenues increased by $140 million, or 21.0%,
during the three months ended September 30, 2022 compared to the same period in
2021. The change was driven by an increase from acquisitions of $124 million, as
well as an increase in same­facility net operating revenues of $19 million due
primarily to higher net revenue per case. These increases were partially offset
by a decrease of $3 million, due to the closure of two ASCs, as well as the
adverse impacts of the COVID-19 pandemic and Hurricane Ian on case volumes. Our
Ambulatory Care segment recognized grant income from federal grants totaling
$1 million during the three months ended September 30, 2021, which is not
included in net operating revenues. Our Ambulatory Care segment did not
recognize any grant income in the three months ended September 30, 2022.

Ambulatory Care net operating revenues increased by $339 million, or 17.2%,
during the nine months ended September 30, 2022 compared to the same period in
2021. The change was driven by an increase from acquisitions of $298 million, as
well as an increase in same­facility net operating revenues of $103 million due
primarily to higher surgical patient volume and higher net revenue per case.
These increases were partially offset by a decrease of $62 million due primarily
to the sale of urgent care centers to an unaffiliated urgent care provider and
the transfer of imaging centers to the Hospital Operations segment, both in
April 2021, as well as the adverse impacts of COVID-19 and Hurricane Ian noted
above. Our Ambulatory Care segment also recognized grant income from federal
grants totaling $4 million and $23 million during the nine months ended
September 30, 2022 and 2021, respectively, which is not included in net
operating revenues.

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Salaries, Wages and Benefits

Salaries, wages and benefits expense increased by $39 million, or 23.1%, during
the three months ended September 30, 2022 compared to the same period in 2021.
Salaries, wages and benefits expense was impacted by an increase from
acquisitions of $31 million, as well as an increase in same­facility salaries,
wages and benefits expense of $8 million. Salaries, wages and benefits expense
included $3 million of stock­based compensation in each of the three­month
periods ended September 30, 2022 and 2021.

Salaries, wages and benefits expense increased by $91 million, or 17.8%, during
the nine months ended September 30, 2022 compared to the same period in 2021.
Salaries, wages and benefits expense was impacted by an increase from
acquisitions of $84 million and an increase in same­facility salaries, wages and
benefits expense of $35 million due primarily to higher surgical patient
volumes, partially offset by a decrease of $28 million due to the aforementioned
sale of urgent care centers and the transfer of imaging centers to the Hospital
Operations segment. Salaries, wages and benefits expense included $9 million of
stock­based compensation expense in each of the nine­month periods ended
September 30, 2022 and 2021.

Supplies


Supplies expense increased by $48 million, or 28.2%, during the three months
ended September 30, 2022 compared to the same period in 2021. The change was
driven by an increase from acquisitions of $44 million, as well as an increase
in same­facility supplies expense of $5 million due primarily to additional
costs driven by the higher level of patient acuity, mainly due to a greater
number of implant cases, and higher pricing of certain supplies as a result of
the COVID­19 pandemic.

Supplies expense increased by $128 million, or 25.8%, during the nine months
ended September 30, 2022 compared to the same period in 2021. The change was
driven by an increase from acquisitions of $107 million, as well as an increase
in same­facility supplies expense of $25 million due primarily to higher
surgical patient volume, additional costs driven by the higher level of patient
acuity, and higher pricing of certain supplies as a result of the COVID­19
pandemic, partially offset by a decrease of $4 million due to the aforementioned
sale of urgent care centers and the transfer of imaging centers to the Hospital
Operations segment.

Other Operating Expenses, Net

Other operating expenses increased by $13 million, or 13.4%, during the three
months ended September 30, 2022 compared to the same period in 2021. The change
was driven by an increase from acquisitions of $17 million, partially offset by
a decrease in same­facility other operating expenses of $4 million.

Other operating expenses increased by $20 million, or 6.8%, during the nine
months ended September 30, 2022 compared to the same period in 2021. The change
was driven by an increase from acquisitions of $37 million, partially offset by
a decrease of $17 million due to the aforementioned sale of urgent care centers
and the transfer of imaging centers to the Hospital Operations segment.

Facility Growth


The following table summarizes the year­over­year changes in our same­facility
revenue and cases on a pro forma systemwide basis, which includes both
consolidated and unconsolidated (equity method) facilities. While we do not
record the revenues of unconsolidated facilities, we believe this information is
important in understanding the financial performance of our Ambulatory 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 unconsolidated
affiliates.

                                           Three Months Ended      Nine Months Ended
Ambulatory Care Facility Growth            September 30, 2022      September 30, 2022
Net revenues                                            3.0  %                  4.9  %
Cases                                                     -  %                  2.4  %
Net revenue per case                                    3.0  %                  2.5  %


Joint Ventures with Health System Partners

USPI's business model is to jointly own its facilities with local physicians and, in many of these facilities, a not­for­profit health system partner. Accordingly, as of September 30, 2022, the majority of facilities in our Ambulatory Care segment were operated in this model.

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Table of Contents The table below summarizes the amounts we paid to acquire various ownership interests in ambulatory care facilities:

Nine Months Ended

                                                                             September 30,                       Increase
Type of Ownership Interests Acquired                                   2022                    2021             (Decrease)
Controlling interests                                          $       224                 $       63          $      161
Noncontrolling interests                                                           -                   1                 (1)
Equity investment in unconsolidated affiliates and
consolidated facilities                                                           18                  13                   5
Total                                                          $       242                 $       77          $      165


The table below provides information about the ownership structure of the facilities operated by our Ambulatory Care segment:


Ownership Structure of Ambulatory Care Facilities            September 30, 

2022

Owned with a health system partner                                   203
Owned without a health system partner                                261
Total                                                                464



The table below reflects the change in the number of facilities operated by our Ambulatory Care segment since December 31, 2021:

                                                          Nine Months Ended
                                                          September 30, 2022

Acquisitions                                                       33
De novo                                                            12
Dispositions/Mergers                                               (4)
Total increase in number of facilities operated                    41



During the nine months ended September 30, 2022, we acquired controlling
interests in 31 ASCs, 16 of which are located in Maryland, four in Florida,
three in Arizona, two in each of Colorado and Tennessee, and four ASCs each
located in other states. We paid cash totaling $169 million for these
acquisitions. All of these facilities are jointly owned with physicians, except
one that is jointly owned with a health system partner and physicians. During
the same period in 2022, we acquired a noncontrolling interest in one ASC
located in each of New Jersey and Texas.

Also during the nine months ended September 30, 2022, we acquired controlling
ownership interests in 14 previously unconsolidated ASCs (including 12
SCD Centers) located in ten geographically diverse states. We paid an aggregate
of $55 million to acquire controlling ownership interests in these facilities.
Following our acquisition of a controlling interest in one of these ASCs, we
contributed our ownership interest in it to a joint venture in which we have a
noncontrolling ownership interest.

We also regularly engage in the purchase of equity interests with respect to our
investments in unconsolidated affiliates and consolidated facilities that do not
result in a change in control. These transactions are primarily the acquisitions
of equity interests in ASCs and the investment of additional cash in facilities
that need capital for new acquisitions, new construction or other business
growth opportunities. During the nine months ended September 30, 2022, we
invested approximately $18 million in such transactions.

Conifer Segment

Revenues


Our Conifer segment generated net operating revenues of $333 million and
$314 million during the three months ended September 30, 2022 and 2021,
respectively, a portion of which was eliminated in consolidation as described in
Note 18 to the accompanying Condensed Consolidated Financial Statements.
Conifer's revenues from third­party clients, which revenues are not eliminated
in consolidation, increased $19 million, or 9.6%, for the three months ended
September 30, 2022 compared to the same period in 2021. The increase was
primarily attributable to contractual rate increases and new business expansion.

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Our Conifer segment generated net operating revenues of $990 million and
$943 million during the nine months ended September 30, 2022 and 2021,
respectively. Conifer revenues from third­party clients, which revenues are not
eliminated in consolidation, increased $67 million, or 11.5%, for the nine
months ended September 30, 2022 compared to the same period in 2021. The
increase was primarily driven by the same factors that impacted the three-month
period described above.

Salaries, Wages and Benefits


Salaries, wages and benefits expense for Conifer increased $7 million, or 4.2%,
in the three months ended September 30, 2022 compared to the same period in
2021, and increased $8 million, or 1.6%, in the nine months ended
September 30, 2022 compared to the same period in 2021. The increase in both
periods was primarily due to new business expansion, planned staffing increases
and annual merit increases for certain of our employees.

Other Operating Expenses, Net

Other operating expenses for Conifer increased $7 million, or 11.7%, in the three months ended September 30, 2022 compared to the same period in 2021. Other operating expenses for Conifer increased $25 million, or 14.6%, in the nine months ended September 30, 2022 compared to the same period in 2021. The increase in each period was primarily due to new business expansion, higher vendor utilization and increased recruiting expenses in 2022.

Consolidated

Impairment and Restructuring Charges, and Acquisition-Related Costs

The following table presents information about our impairment and restructuring charges, and acquisition­related costs:

                                                                    Three Months Ended                            Nine Months Ended
                                                                       September 30,                                September 30,
                                                                   2022                   2021                  2022                   2021
Consolidated:
Impairment charges                                        $        3                   $     -          $        9                  $     1
Restructuring charges                                             17                        14                  78                       48
Acquisition-related costs                                          4                         1                  10                        6
Total impairment and restructuring charges, and
acquisition-related costs                                 $       24                   $    15          $       97                  $    55

By segment:
Hospital Operations                                       $       14                   $    11          $       68                  $    31
Ambulatory Care                                                    5                         1                  13                        9
Conifer                                                            5                         3                  16                       15
Total impairment and restructuring charges, and
acquisition-related costs                                 $       24                   $    15          $       97                  $    55



During the three months ended September 30, 2022, restructuring charges included
$3 million of employee severance costs, $5 million related to the transition of
various administrative functions to our GBC, $3 million related to contract and
lease termination fees, and $6 million of other restructuring costs. Impairment
charges recognized during the three months ended September 30, 2022 were
comprised of $3 million from our Hospital Operations segment.
Acquisition­related costs during the three­month period consisted entirely of
transaction costs.

Restructuring charges for the three months ended September 30, 2021 consisted of
employee severance costs of $3 million, $4 million related to the transition of
various administrative functions to our GBC and $7 million of other
restructuring costs. Acquisition­related costs incurred during this period
consisted entirely of transaction costs.

During the nine months ended September 30, 2022, restructuring charges included
$24 million of employee severance cost, $10 million related to the transition of
various administrative functions to our GBC, $25 million related to contract and
lease termination fees, and $19 million of other restructuring costs. Impairment
charges for the nine months ended September 30, 2022 were comprised of
$5 million from our Hospital Operations segment and $2 million from each of our
Ambulatory Care and Conifer segments. Acquisition­related costs for the nine
months ended September 30, 2022 consisted entirely of transaction costs.

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Restructuring charges for the nine months ended September 30, 2021 consisted of
employee severance costs of $13 million, costs related to the transition of
various administrative functions to our GBC totaling $16 million and $19 million
of other restructuring costs. Impairment charges for the nine months ended
September 30, 2021 were comprised of $1 million from our Ambulatory Care
segment. Acquisition­related costs during the nine­month period consisted
entirely of transaction costs.

Litigation and Investigation Costs


Litigation and investigation costs during the three months ended
September 30, 2022 and 2021 were $12 million and $29 million, respectively, and
$50 million and $64 million during the nine months ended September 30, 2022 and
2021, respectively.

Net Gains on Sales, Consolidation and Deconsolidation of Facilities

During the three months ended September 30, 2021, we recorded net gains on sales, consolidation and deconsolidation of facilities of approximately $412 million, primarily comprised of a gain of $409 million related to our sale of the Miami Hospitals in August 2021.


During the nine months ended September 30, 2021, we recorded net gains on sales,
consolidation and deconsolidation of facilities of approximately $427 million,
primarily comprised of a gain of $409 million related to the sale of the Miami
Hospitals in August 2021, a gain of $14 million related to the sale of the
majority of our urgent care centers in April 2021 and net gains of $4 million
related to other activity.

Interest Expense

Interest expense for the three and nine months ended September 30, 2022 was $222 million and $671 million, respectively, compared to $227 million and $702 million for the same periods in 2021.

Loss from Early Extinguishment of Debt


During the nine months ended September 30, 2022, we incurred aggregate losses
from early extinguishment of debt of $109 million. These losses related to the
redemption of our 7.500% senior secured first lien notes due 2025 ("2025 Senior
Secured First Lien Notes") in February 2022, open market purchases of our 6.750%
senior unsecured notes due 2023 (the "2023 Senior Unsecured Notes") during the
six-month period ended June 30, 2022 and the redemption in full of the
2023 Senior Unsecured Notes in June 2022, in all cases in advance of the notes'
maturity date.

Loss from early extinguishment of debt was $20 million and $74 million for the
three and nine months ended September 30, 2021, respectively. The loss in the
three months ended September 30, 2021 related to the redemption of our 4.625%
senior secured first lien notes due 2024 ("2024 Senior Secured First Lien
Notes") in advance of their maturity date. The loss in the nine­month period
included the loss from the redemption of our 2024 Senior Secured First Lien
Notes, as well as losses incurred from the redemption of our 5.125% senior
secured second lien notes due 2025 in June 2021 and the retirement of our 7.000%
senior unsecured notes due 2025 in March 2021, both in advance of their
respective maturity dates.

In all of the 2022 and 2021 periods, the losses from early extinguishment of
debt primarily related to the difference between the purchase prices and the par
value of the notes, as well as the write­off of associated unamortized issuance
costs.

Income Tax Expense

During the three months ended September 30, 2022, we recorded income tax expense
of $112 million in continuing operations on pre-tax income of $380 million
compared to $197 million on pre-tax income of $774 million during the prior­year
period. During the nine months ended September 30, 2022, we recorded income tax
expense of $297 million in continuing operations on pre­tax income of
$1.023 billion compared to $303 million on pre-tax income of $1.360 billion
during the nine months ended September 30, 2021. During the nine months ended
September 30, 2022, we recorded income tax expense of $113 million to increase
the valuation allowance for interest expense carryforwards as a result of the
limitation on business interest expense. We did not have any interest expense
limited during 2021.

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A reconciliation between the amount of reported income tax expense and the
amount computed by multiplying income from continuing operations before income
taxes by the statutory federal tax rate is presented below:

                                                              Three Months Ended                   Nine Months Ended
                                                                September 30,                        September 30,
                                                            2022               2021              2022              2021
Tax expense at statutory federal rate of 21%            $       80          $   163          $     215          $   286
State income taxes, net of federal income tax                   15               29                 40               56

benefit

Tax benefit attributable to noncontrolling                     (29)             (26)               (86)             (79)
interests
Nondeductible goodwill                                           -               28                  1               35

Stock-based compensation tax benefit                            (1)              (1)                (4)              (4)
Changes in valuation allowance                                  36                -                113                -

Other items                                                     11                4                 18                9
Income tax expense                                      $      112          $   197          $     297          $   303


Net Income Available to Noncontrolling Interests


Net income available to noncontrolling interests was $137 million for the three
months ended September 30, 2022 compared to $129 million for the three months
ended September 30, 2021. Net income available to noncontrolling interests for
the 2022 period was comprised of $111 million related to our Ambulatory Care
segment, $5 million related to our Hospital Operations segment and $21 million
related to our Conifer segment.

Net income available to noncontrolling interests was $418 million for the nine
months ended September 30, 2022 compared to $392 million for the nine months
ended September 30, 2021. Net income available to noncontrolling interests for
the nine months ended September 30, 2022 was comprised of $324 million related
to our Ambulatory Care segment, $38 million related to our Hospital Operations
segment and $56 million related to our Conifer segment. Of the portion related
to our Ambulatory Care segment, $9 million related to the minority interest
Baylor held in USPI until June 30, 2022.

ADDITIONAL SUPPLEMENTAL NON-GAAP DISCLOSURES


The financial information provided throughout this report, including our
Condensed Consolidated Financial Statements and the notes thereto, has been
prepared in conformity with accounting principles generally accepted in the
United States of America ("GAAP"). However, we use certain non­GAAP 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 financial statements, some of which are recurring or
involve cash payments. We use this information in our analysis of the
performance of our business, excluding items we do not consider relevant to the
performance of our continuing operations. In addition, we use these measures to
define certain performance targets under our compensation programs.

"Adjusted EBITDA" is a non­GAAP measure we define as net income available (loss
attributable) to Tenet Healthcare Corporation common shareholders before (1) the
cumulative effect of changes in accounting principle, (2) net loss attributable
(income available) to noncontrolling interests, (3) income (loss) from
discontinued operations, net of tax, (4) income tax benefit (expense), (5) gain
(loss) from early extinguishment of debt, (6) other non­operating income
(expense), net, (7) interest expense, (8) litigation and investigation (costs)
benefit, net of insurance recoveries, (9) net gains (losses) on sales,
consolidation and deconsolidation of facilities, (10) impairment and
restructuring charges and acquisition­related costs, (11) depreciation and
amortization, and (12) income (loss) from divested and closed businesses (i.e.,
health plan businesses). Litigation and investigation costs do not include
ordinary course of business malpractice and other litigation and related
expense.

We believe the foregoing non­GAAP measure is useful to investors and analysts
because it presents additional information about our financial performance.
Investors, analysts, company management and our board of directors utilize this
non­GAAP measure, in addition to GAAP measures, to track our financial and
operating performance and compare that performance to peer companies, which
utilize similar non­GAAP measures in their presentations. The human resources
committee of our board of directors also uses certain non­GAAP measures to
evaluate management's performance for the purpose of determining incentive
compensation. We believe that Adjusted EBITDA is a useful measure, in part,
because certain investors and analysts use both historical and projected
Adjusted EBITDA, in addition to GAAP and other non­GAAP measures, as factors in
determining the estimated fair value of shares of our common stock. Company
management also regularly reviews the Adjusted EBITDA performance for each
operating segment. We do not use Adjusted EBITDA to measure liquidity, but
instead to measure operating performance. The non­GAAP Adjusted EBITDA
measure we utilize may not be comparable to similarly titled measures reported
by other companies. Because this measure excludes many items that are included
in our financial statements, it does not provide a complete measure of our
operating performance. Accordingly, investors are encouraged to use GAAP
measures when evaluating our financial performance.
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The following table presents the reconciliation of Adjusted EBITDA to net income
available to Tenet Healthcare Corporation common shareholders (the most
comparable GAAP term) for the three and nine months ended September 30, 2022 and
2021:

                                                                                Three Months Ended                   Nine Months Ended
                                                                                   September 30,                       September 30,
                                                                               2022              2021             2022              2021

Net income available to Tenet Healthcare Corporation common shareholders

$ 131 $ 449 $ 309 $ 665 Less: Net income available to noncontrolling interests

                          (137)            (129)             (418)             (392)
Income from discontinued operations, net of tax                                    -                1                 1                 -
Income from continuing operations                                                268              577               726             1,057
Income tax expense                                                              (112)            (197)             (297)             (303)
Loss from early extinguishment of debt                                             -              (20)             (109)              (74)
Other non-operating income, net                                                    6                7                 6                16
Interest expense                                                                (222)            (227)             (671)             (702)
Operating income                                                                 596            1,014             1,797             2,120
Litigation and investigation costs                                               (12)             (29)              (50)              (64)

Net gains on sales, consolidation and deconsolidation of facilities

        -              412                 -               427

Impairment and restructuring charges, and acquisition-related costs

      (24)             (15)              (97)              (55)
Depreciation and amortization                                                   (209)            (209)             (628)             (654)

Adjusted EBITDA                                                            $     841          $   855          $  2,572          $  2,466

Net operating revenues                                                     $   4,801          $ 4,894          $ 14,184          $ 14,629

Net income available to Tenet Healthcare Corporation common shareholders as a % of net operating revenues

                                    2.7  %           9.2  %            2.2  %            4.5  %

Adjusted EBITDA as a % of net operating revenues                                17.5  %          17.5  %           18.1  %           16.9  %

(Adjusted EBITDA margin)

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS


There have been no material changes to our obligations to make future cash
payments under scheduled contractual obligations, such as debt and lease
agreements, and under contingent commitments, such as standby letters of credit
and minimum revenue guarantees, as disclosed in our Annual Report, except for
the matters set forth below under "Other Contractual Obligations" and the
additional lease obligations and the long­term debt transactions disclosed in
Notes 1 and 6, respectively, to our accompanying Condensed Consolidated
Financial Statements.

Long-Term Debt


At September 30, 2022, using the last 12 months of Adjusted EBITDA, our ratio of
total long­term debt, net of cash and cash equivalent balances, to Adjusted
EBITDA was 3.87x. We anticipate this ratio will fluctuate from quarter to
quarter based on earnings performance and other factors, including the use of
our Credit Agreement as a source of liquidity and acquisitions that involve the
assumption of long­term debt. We seek to manage this ratio and increase the
efficiency of our balance sheet by following our business plan and managing our
cost structure, including through possible asset divestitures, and through other
changes in our capital structure. As part of our long­term objective to manage
our capital structure, we continue to evaluate opportunities to retire,
purchase, redeem and refinance outstanding debt subject to prevailing market
conditions, our liquidity requirements, operating results, contractual
restrictions and other factors. Our ability to achieve our leverage and capital
structure objectives is subject to numerous risks and uncertainties, many of
which are described in the Forward­Looking Statements and Risk Factors sections
in Part I of our Annual Report and the Risk Factors section in Part II of our
Q1'22 Report.

Interest payments, net of capitalized interest, were $601 million and $664 million in the nine months ended September 30, 2022 and 2021, respectively.

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Share Repurchase Program

In October 2022, our board of directors authorized a $1 billion share repurchase
program. The timing and amounts of repurchases will be based on management's
discretion, subject to market conditions and other factors. The share repurchase
program does not obligate us to acquire any particular amount of common stock,
and it may be suspended for periods or discontinued at any time before its
scheduled expiration.

Other Contractual Obligations


Baylor Put/Call Agreement-As previously discussed in our Annual Report, our
put/call agreement (the "Baylor Put/Call Agreement") with Baylor contained put
and call options with respect to the 5% ownership interest Baylor held in USPI.
The Baylor Put/Call Agreement gave Baylor the option to annually put up to
one-third of its total shares in USPI (the "Baylor Shares") over a period of
three years beginning in 2021. We had the right to call the difference between
the number of shares Baylor put each year and the maximum number of shares it
could have put.

In each of 2021 and 2022, we notified Baylor of our intention to exercise our
call option to purchase 33.3% of the Baylor Shares for that year (66.6% in
total). In June 2022, we entered into an agreement with Baylor (the "Share
Purchase Agreement") to complete the purchase of the Baylor Shares we called in
2021 and 2022 and to accelerate the acquisition of the remaining Baylor Shares
eligible to be put/called in 2023. Under the terms of the Share Purchase
Agreement, we agreed to pay Baylor $406 million to buy its entire 5% voting
ownership interest in USPI. We paid $11 million upon execution of the Share
Purchase Agreement and will make 35 additional non-interest bearing monthly
payments of approximately $11 million, which payments commenced in August 2022.
At September 30, 2022, we had liabilities of $135 million recorded in other
current liabilities and $222 million in other long-term liabilities in the
accompanying Condensed Consolidated Balance Sheet for the purchase of these
shares.

Investment in the SCD Centers-USPI continues to make offers in an ongoing
process to acquire a portion of the equity interests in certain of the
SCD Centers from the physician owners for consideration of up to approximately
$250 million. During the nine months ended September 30, 2022, we made aggregate
payments of $51 million to acquire controlling interests in 12 SCD Centers. We
cannot reasonably predict how many additional physician owners will accept our
offers to acquire a portion of their equity, nor the timing or amount of any
remaining payments.

We have no off-balance sheet arrangements that may have a current or future
material effect on our financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources, except for
$219 million of standby letters of credit outstanding and guarantees at
September 30, 2022.

Other Cash Requirements


Our capital expenditures primarily relate to the expansion and renovation of
existing facilities (including amounts to comply with applicable laws and
regulations), surgical hospital expansion focused on higher acuity services,
equipment and information systems additions and replacements, introduction of
new medical technologies (including robotics), design and construction of new
buildings or hospitals, and various other capital improvements. We continue to
implement our portfolio diversification strategy into ambulatory surgery and
have a baseline intention to invest $250 million annually in ambulatory business
acquisitions and de novo facilities. Capital expenditures were $472 million and
$354 million in the nine months ended September 30, 2022 and 2021, respectively.
We anticipate that our capital expenditures for continuing operations for the
year ending December 31, 2022 will total approximately $725 million to
$775 million, including $95 million that was accrued as a liability at
December 31, 2021.

USPI maintains a separate management equity plan (the "USPI Management Equity
Plan") under which it grants restricted stock units ("RSUs") representing a
contractual right to receive one share of USPI's non­voting common stock in the
future. The vesting of RSUs granted under the plan varies based on the terms of
the underlying award agreement. Once the requisite holding period is met, during
specified times, the participant can sell the underlying shares to USPI at their
estimated fair market value. At our sole discretion, the purchase of any
non­voting common shares can be made in cash or in shares of Tenet's common
stock. At September 30, 2022, there were 175,036 outstanding vested shares of
non-voting common stock eligible to be sold to USPI.

Income tax payments, net of tax refunds, were $148 million in the nine months ended September 30, 2022 compared to $54 million in the nine months ended September 30, 2021.

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SOURCES AND USES OF CASH

Our liquidity for the nine months ended September 30, 2022 was primarily derived
from net cash provided by operating activities and cash on hand. During the nine
months ended September 30, 2022, we also received supplemental funds from
federal and state grants provided under COVID­19 relief legislation. We had
$1.208 billion of cash and cash equivalents on hand at September 30, 2022 to
fund our operations and capital expenditures, and our borrowing availability
under our credit facility was $1.500 billion based on our borrowing base
calculation at September 30, 2022.

Our primary source of operating cash is the collection of accounts receivable.
As such, our operating cash flow is impacted by levels of cash collections, as
well as levels of implicit price concessions, due to shifts in payer mix and
other factors. Our Credit Agreement provides additional liquidity to manage
fluctuations in operating cash caused by these factors.

Net cash provided by operating activities was $662 million in the nine months
ended September 30, 2022 compared to $1.211 billion in the nine months ended
September 30, 2021. Key factors contributing to the change between the 2022 and
2021 periods include the following:

•$880 million of Medicare advances recouped or repaid in the nine months ended
September 30, 2022 compared to $326 million recouped during the same period in
2021;

•$155 million of cash received from grants in the nine months ended September 30, 2022 compared to $38 million received in the nine months ended September 30, 2021;

•Lower interest payments of $63 million in 2022 period;

•Higher income tax payments of $94 million in the 2022 period;

•Decreased net cash receipts of $94 million related to supplemental Medicaid programs in California and Texas; and

•The timing of other working capital items.


Net cash used in investing activities was $502 million for the nine months ended
September 30, 2022 compared to net cash provided by investing activities of
$802 million for the nine months ended September 30, 2021. Proceeds from the
sale of facilities and other assets were $1.026 billion lower during the 2022
period, primarily due to the sale of the majority of our urgent care centers in
April 2021 and the sale of the Miami Hospitals in August 2021. Additionally,
cash used for the purchase of businesses increased $160 million and capital
expenditures increased $118 million in the nine months ended September 30, 2022
compared to the same period in 2021.

We used net cash of $1.316 billion and $2.167 billion for financing activities
during the nine months ended September 30, 2022 and 2021, respectively.
Financing activity during the nine months ended September 30, 2022 included
payments against our borrowings of $2.786 billion, including $1.933 billion paid
to redeem all $1.872 billion of aggregate principal amount outstanding of our
2023 Senior Unsecured Notes and $730 million paid to redeem all $700 million
aggregate principal amount outstanding of our 2025 Senior Secured First Lien
Notes. In addition, distributions to noncontrolling interest holders increased
$116 million, including distributions of the proceeds from the sale of several
medical office buildings to minority interest holders totaling $61 million.
These factors were partially offset by proceeds of $2.000 billion from the
issuance of our 2030 Senior Secured First Lien Notes during the nine months
ended September 30, 2022.

We record our equity securities and our debt securities classified as
available­for­sale at fair market value. 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 will materially impact our financial condition,
results of operations or cash flows.

DEBT INSTRUMENTS, GUARANTEES AND RELATED COVENANTS


Credit Agreement-At September 30, 2022, our Credit Agreement provided for
revolving loans in an aggregate principal amount of up to $1.500 billion with a
$200 million subfacility for standby letters of credit. In March 2022, we
amended the revolving credit facility to, among other things, (i) decrease the
previous maximum aggregate revolving credit commitments from $1.900 billion to
$1.500 billion, subject to borrowing availability, (ii) extend the scheduled
maturity date from September 2024 to March 2027, and (iii) replace the London
Interbank Offered Rate (LIBOR) with the Term Secured Overnight Financing Rate
("SOFR") and Daily Simple SOFR (each, as defined in the Credit Agreement) as the
reference
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interest rate. At September 30, 2022, we had no cash borrowings outstanding
under the Credit Agreement, and we had less than $1 million of standby letters
of credit outstanding. Based on our eligible receivables, $1.500 billion was
available for borrowing under the Credit Agreement at September 30, 2022. We
were in compliance with all covenants and conditions in our Credit Agreement at
September 30, 2022.

Letter of Credit Facility-We have a letter of credit facility (as amended to
date, the "LC Facility") that provides for the issuance, from time to time, of
standby and documentary letters of credit in an aggregate principal amount of up
to $200 million. The scheduled maturity date of the LC Facility is
September 12, 2024. The LC Facility is subject to an effective maximum secured
debt covenant of 4.25 to 1.00. At September 30, 2022, we were in compliance with
all covenants and conditions in the LC Facility, and we had $116 million of
standby letters of credit outstanding thereunder.

Senior Unsecured Notes and Senior Secured Notes-On June 15, 2022, we issued
$2.000 billion aggregate principal amount of our 2030 Senior Secured First Lien
Notes. We will pay interest on the 2030 Senior Secured First Lien Notes
semi­annually in arrears on June 15 and December 15 of each year, commencing on
December 15, 2022. As further discussed below, we used a substantial portion of
the proceeds from the issuance of the 2030 Senior Secured First Lien Notes,
after payment of fees and expenses, to finance the redemption of our 2023 Senior
Unsecured Notes.

Through a series of open­market transactions during the six months ended
June 30, 2022, we repurchased $124 million aggregate principal amount
outstanding of our 2023 Senior Unsecured Notes using cash on hand. Following the
issuance of our 2030 Senior Secured First Lien Notes, we used a substantial
portion of the proceeds to redeem the then-remaining $1.748 billion aggregate
principal outstanding of the 2023 Senior Unsecured Notes in advance of their
maturity date. In total, we paid $1.933 billion during the six months ended
June 30, 2022 to retire our 2023 Senior Unsecured Notes in full and recorded
aggregate losses from early extinguishment of debt of $71 million, primarily
related to the difference between the purchase prices and the par value of the
notes, as well as the write­off of associated unamortized issuance costs.

On February 23, 2022, we redeemed all $700 million aggregate principal amount
outstanding of our 2025 Senior Secured First Lien Notes in advance of their
maturity date. We paid $730 million from cash on hand to redeem the notes. In
connection with the redemption, we recorded a loss from early extinguishment of
debt of $38 million in the three months ended March 31, 2022, primarily related
to the difference between the purchase price and the par value of the notes, as
well as the write­off of associated unamortized issuance costs.

For additional information regarding our long-term debt, see Note 6 to the accompanying Condensed Consolidated Financial Statements and Note 8 to the Consolidated Financial Statements included in our Annual Report.

LIQUIDITY


We continue to experience negative impacts of the COVID­19 pandemic on our
business in varying degrees. In various periods during the nine months ended
September 30, 2022, we were affected by a significant acceleration in COVID­19
cases associated with the Omicron variant and subvariants. Future variants could
similarly emerge and cause surges in COVID­19 cases, which may adversely impact
the local economies of areas we serve. Any increase in the amount of or
deterioration in the collectability of patient accounts receivable could
adversely affect our cash flows and results of operations. If general economic
conditions deteriorate or remain uncertain for an extended period of time, our
liquidity and ability to repay our outstanding debt may be impacted.

We have taken, and continue to take, various actions to increase our liquidity
and mitigate the impact of reductions in our patient volumes and changes in our
service mix and revenue mix. These actions included the sale and redemption of
various senior unsecured notes and senior secured notes, which eliminated any
significant debt maturities until July 2024 and will reduce our future annual
cash interest expense payments. In addition, we have continued cost-efficiency
measures, as well as necessary cost reductions, to substantially offset
incremental costs, including temporary staffing and premium pay, as well as
higher supply costs for PPE. We have also sought to compensate for the COVID­19
pandemic's disruption of our patient volumes and service mix by growing our
services for which demand has been more resilient, including our higher­acuity
service lines. While the length of time that will be required for our patient
volumes and mix to return to pre-pandemic levels is unknown, especially demand
for lower­acuity services, we believe demand for our higher­acuity service lines
will continue to grow. We believe these actions, together with government relief
packages, supported our ability to provide essential patient services during the
initial uncertainty caused by the COVID­19 pandemic and continue to do so.

From time to time, we expect to engage in additional capital markets, bank credit and other financing activities depending on our needs and financing alternatives available at that time. We believe our existing debt agreements provide flexibility for future secured or unsecured borrowings.

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Our cash on hand fluctuates day­to­day throughout the year based on the timing
and levels of routine cash receipts and disbursements, including our book
overdrafts, and required cash disbursements, such as interest payments and
income tax payments, as well as cash disbursements required to respond to the
COVID­19 pandemic. These fluctuations result in material intra-quarter net
operating and investing uses of cash that have caused, and in the future may
cause, us to use our Credit Agreement as a source of liquidity. We believe that
existing cash and cash equivalents on hand, borrowing availability under our
Credit Agreement and anticipated future cash provided by our operating
activities should be adequate to meet our current cash needs. These sources of
liquidity, in combination with any potential future debt incurrence, should also
be adequate to finance planned capital expenditures, payments on the current
portion of our long-term debt, payments to current and former joint venture
partners, including those related to our Share Purchase Agreement with Baylor,
and other presently known operating needs.

Long-term liquidity for debt service and other purposes will be dependent on the
amount of cash provided by operating activities and, subject to favorable market
and other conditions, the successful completion of future borrowings and
potential refinancings. However, our cash requirements could be materially
affected by the use of cash in acquisitions of businesses, repurchases of
securities, the exercise of put rights or other exit options by our joint
venture partners, and contractual 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 sufficient cash from operations, as well as by the
various risks and uncertainties discussed in this section, other sections of
this report and in our Annual Report and our Q1'22 Report, including any costs
associated with legal proceedings and government investigations.

We do not rely on commercial paper or other short-term financing arrangements
nor do we enter into repurchase agreements or other short-term financing
arrangements not otherwise reported in our balance sheet. In addition, we do not
have significant exposure to floating interest rates given that all of our
current long-term indebtedness has fixed rates of interest except for borrowings
under our Credit Agreement.

CRITICAL ACCOUNTING ESTIMATES


In preparing our Condensed Consolidated Financial Statements in conformity with
GAAP, we must use estimates and assumptions that affect the amounts reported in
our Condensed Consolidated Financial Statements and accompanying notes. We
regularly evaluate the accounting policies and estimates we use. In general, we
base the estimates on historical experience and on assumptions that we believe
to be reasonable, given the particular circumstances in which we operate. Actual
results may vary from those estimates.

We consider our critical accounting estimates to be those that (i) involve significant judgments and uncertainties, (ii) require estimates that are more difficult for management to determine, and (iii) may produce materially different outcomes under different conditions or when using different assumptions.

Our critical accounting estimates have not changed from the description provided in our Annual Report.

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