TENET HEALTHCARE CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Insurance News

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 June 30, 2022, our subsidiaries operated 60 hospitals serving
primarily urban and suburban communities in nine states. 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, in August 2021, we completed the sale of five Miamiarea hospitals and
certain related operations (the "Miami Hospitals") then held by our Hospital
Operations segment. In April 2022, we completed the sale of a Hospital
Operations segment microhospital.

Our Ambulatory Care segment is comprised of the operations of USPI Holding
Company, Inc. ("USPI"). USPI had indirect ownership interests in 410 ambulatory
surgery centers (each, an "ASC") (261 consolidated) and 24 surgical hospitals
(eight consolidated) in 34 states at June 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
June 30, 2022, Conifer provided services to approximately 660 Tenet and
nonTenet hospitals and other clients nationwide. Nearly 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 peradjustedpatientadmission and peradjustedpatientday
amounts). Continuing operations information includes the results of our same 60
hospitals operated throughout the six months ended June 30, 2022 and 2021, as
well as the Miami Hospitals sold in August 2021 and the Arizona microhospital
sold in April 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 peradjusted-patientadmission 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 six months ended
June 30, 2022 and 2021, and excludes the results of the Miami Hospitals we sold
in August 2021, the results of the Arizona microhospital sold in April 2022 and
the results of our 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
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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

Formation of New Joint Venture-On July 15, 2022, USPI completed the previously
announced formation of a new joint venture with United Urology Group ("UUG"),
including the purchase of ownership interests in 22 new and established ASCs
located in Maryland, Colorado and Arizona, which USPI will manage and
consolidate. USPI paid $105 million in connection with this transaction.

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 six months
ended June 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 six months ended June 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 six
months ended June 30, 2022 and 2021, we received cash payments from the PRF and
state and local grant programs totaling $104 million and $63 million,
respectively, including $27 million received during the six-month period in 2021
by our unconsolidated affiliates for whom we provide cash management services.
We recognized $100 million and $50 million, respectively, from these funds as
grant income during the six-month periods in 2022 and 2021, respectively. In
addition, we recognized $11 million in equity in earnings of unconsolidated
affiliates in the accompanying Condensed Consolidated Statement of Operations
during the six months ended June 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 in April and May 2022. We believe a
significant portion of the 5.3% decline in our adjusted patient admissions on a
same-hospital basis in the three months ended June 30, 2022 as compared to the
same period in 2021 is due to business interruption from the incident. In
addition, we estimate that the Cybersecurity Incident had an adverse pre-tax
impact of approximately $100 million during the three months ended
June 30, 2022. 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 have 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
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senior secured revolving credit facility (as amended to date, the "Credit
Agreement"). We also decreased our employee 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 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.

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. During the six months ended June 30, 2022, we opened three
new ASCs in partnership with the affiliates of SCD. In addition, USPI formed a
new joint venture with UUG and acquired ownership interests in 22 new and
established ASCs in July 2022. The ASCs, which will be managed and consolidated
by USPI, are located in Arizona, Colorado and Maryland.

Also during the six months ended June 30, 2022, we acquired controlling
interests in three ASCs in Florida and one in each of Arizona and New Hampshire,
and we acquired noncontrolling interests in an ASC in each of New Jersey and
Texas. During the same period, we also acquired controlling ownership interests
in nine previously unconsolidated ASCs in seven geographically diverse states.
In addition, we opened six ASCs in various states in the first half of 2022,
including the ASCs opened in partnership with affiliates of SCD as noted above.
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 six
months ended June 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.

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 660 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. Conifer
remains focused on driving growth by continuing to market and expand its revenue
cycle management and valuebased care solutions businesses. 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; and
(iv) leveraging data from tens of millions of patient interactions for continued
enhancement of the valuebased care environment to drive competitive
differentiation.

Improving Profitability-As we return to more normal operations, we continue to
focus on growing patient volumes and effective cost management as a means to
improve profitability. We believe our inpatient admissions have been constrained
in recent years (prior to the COVID19 pandemic) by 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 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.

During the six months ended June 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 used 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 to finance these transactions.
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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 tables present selected operating statistics for our Hospital
Operations and Ambulatory Care segments, as well as consolidated net operating
revenues and expenses on a continuing operations basis:


                                                                     Three Months Ended June 30,                          Increase
Selected Operating Statistics                                     2022                         2021                      (Decrease)
Hospital Operations - hospitals and related
outpatient facilities:
Number of hospitals (at end of period)                                    60                           65                      (5)   (1)
Total admissions                                                     128,068                      153,319                   (16.5) %
Adjusted patient admissions(2)                                       239,031                      273,824                   (12.7) %
Paying admissions (excludes charity and uninsured)                   121,722                      143,864                   (15.4) %
Charity and uninsured admissions                                       6,346                        9,455                   (32.9) %
Admissions through emergency department                               96,137                      114,911                   (16.3) %
Emergency department visits, outpatient                              541,096                      541,417                    (0.1) %
Total emergency department visits                                    637,233                      656,328                    (2.9) %
Total surgeries                                                       87,387                      101,023                   (13.5) %
Patient days - total                                                 658,995                      757,003                   (12.9) %
Adjusted patient days(2)                                           1,192,999                    1,328,952                   (10.2) %
Average length of stay (days)                                           5.15                         4.94                     4.3  %
Average licensed beds                                                 15,382                       17,170                   (10.4) %
Utilization of licensed beds(3)                                         47.1  %                      48.4  %                 (1.3) % (1)
Total visits                                                       1,413,222                    1,653,430                   (14.5) %
Paying visits (excludes charity and uninsured)                     1,331,959                    1,540,577                   (13.5) %
Charity and uninsured visits                                          81,263                      112,853                   (28.0) %
Ambulatory Care:
Total consolidated facilities (at end of period)                         269                          232                      37    (1)
Total consolidated cases                                             317,437                      352,972                   (10.1) %

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

include outpatient services provided by facilities in our Hospital Operations segment

by multiplying actual patient admissions/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.




Total admissions decreased by 25,251, or 16.5%, and total surgeries decreased by
13,636, or 13.5%, in the three months ended June 30, 2022 compared to the three
months ended June 30, 2021. Total emergency department visits decreased 2.9% in
the three months ended June 30, 2022 compared to the same period in 2021. These
decreases in our patient volumes are primarily attributable to the impact of the
Cybersecurity Incident on certain of our hospitals and the sale of the Miami
Hospitals in August 2021. The decrease in Ambulatory Care total consolidated
cases of 10.1% in the three months ended June 30, 2022 compared to the same
period in 2021 is due primarily to the sale of the Ambulatory Care segment's
urgent care centers to a third party in April 2021 and the impact of the
COVID-19 pandemic.

                                                              Three Months Ended June 30,                 Increase
Revenues                                                       2022                  2021                (Decrease)
Net operating revenues:
Hospital Operations prior to inter-segment
eliminations                                             $        3,645          $    4,095                     (11.0) %
Ambulatory Care                                                     771                 664                      16.1  %
Conifer                                                             333                 319                       4.4  %
Inter-segment eliminations                                         (111)               (124)                    (10.5) %
Total                                                    $        4,638          $    4,954                      (6.4) %



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Consolidated net operating revenues decreased by $316 million, or 6.4%, in the
three months ended June 30, 2022 compared to the same period in 2021, primarily
due to the adverse impact of the Cybersecurity Incident and the loss of revenues
in our Hospital Operations segment from the Miami Hospitals we sold in August
2021, partially offset by high patient acuity and negotiated commercial rate
increases. On a consolidated basis, the decrease in net operating revenues was
further offset by higher revenues from our Ambulatory Care segment, which
increased $107 million, or 16.1%, in the 2022 period compared to the 2021
period. This increase was largely driven by our recently acquired ASCs and
negotiated commercial rate increases. Conifer's revenues, net of intercompany
eliminations, increased $27 million, or 13.8%, during the three months ended
June 30, 2022 compared to the same period in 2021, primarily due to contractual
rate increases and new business expansion. During the three months ended
June 30, 2022 and 2021, we recognized net grant income of $94 million and
$19 million, respectively, which amounts are not included in net operating
revenues.

Our accounts receivable days outstanding ("AR Days") from continuing operations
were 59.8 days at June 30, 2022 and 57.0 days at December 31, 2021. The increase
was primarily due to revenue recognized in the six months ended June 30, 2022
related to a recently approved Texas Medicaid supplemental funding program,
which revenue has not yet been entirely collected. 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.

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

                                         Three Months Ended June 30,              Increase
Selected Operating Expenses                   2022                   2021        (Decrease)
Hospital Operations:
Salaries, wages and benefits      $        1,752                   $ 1,941           (9.7) %
Supplies                                     605                       689          (12.2) %
Other operating expenses                     840                       901           (6.8) %
Total                             $        3,197                   $ 3,531           (9.5) %
Ambulatory Care:
Salaries, wages and benefits      $          201                   $   169           18.9  %
Supplies                                     205                       169           21.3  %
Other operating expenses                     100                        95            5.3  %
Total                             $          506                   $   433           16.9  %
Conifer:
Salaries, wages and benefits      $          173                   $   170            1.8  %
Supplies                                       1                         1              -  %
Other operating expenses                      66                        58           13.8  %
Total                             $          240                   $   229            4.8  %
Total:
Salaries, wages and benefits      $        2,126                   $ 2,280           (6.8) %
Supplies                                     811                       859           (5.6) %
Other operating expenses                   1,006                     1,054           (4.6) %
Total                             $        3,943                   $ 4,193           (6.0) %
Rent/lease expense(1):
Hospital Operations               $           68                   $    75           (9.3) %
Ambulatory Care                               28                        24           16.7  %
Conifer                                        3                         3              -  %
Total                             $           99                   $   102           (2.9) %


(1)    Included in other operating expenses.



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


                                                                                  Three Months Ended June 30,                 Increase
Selected Operating Expenses per Adjusted Patient Admission                         2022                  2021                (Decrease)
Hospital Operations:
Salaries, wages and benefits per adjusted patient admission(1)               $        7,331          $    7,090                       3.4  %
Supplies per adjusted patient admission(1)                                            2,534               2,519                       0.6  %
Other operating expenses per adjusted patient admission(1)                            3,509               3,289                       6.7  %
Total per adjusted patient admission                                         $       13,374          $   12,898                       3.7  %

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

outpatient services provided by facilities in our Hospital Operations segment by

multiplying actual patient 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 $189 million, or 9.7%, in the three months ended June 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 incentive compensation and
employee benefits costs, and our continued focus on cost-efficiency measures,
partially offset by increased overtime expense and annual merit increases for
certain of our employees. On a peradjustedpatient-admission basis, salaries,
wages and benefits increased 3.4% in the three months ended June 30, 2022
compared to the three months ended June 30, 2021, primarily due to lower
adjusted patient admissions.

Supplies expense for our Hospital Operations segment decreased $84 million, or
12.2%, during the three months ended June 30, 2022 compared to the three months
ended June 30, 2021. This decrease was primarily attributable to the sale of the
Miami Hospitals, the decrease in patient volumes during the 2022 period and our
cost-efficiency measures, partially offset by increased costs for certain
supplies as a result of the COVID-19 pandemic and high patient acuity. On a
peradjusted-patientadmission basis, supplies expense increased 0.6% in the
three months ended June 30, 2022 compared to the three months ended
June 30, 2021.

Other operating expenses for our Hospital Operations segment decreased $61
million, or 6.8%, in the three months ended June 30, 2022 compared to the same
period in 2021. The decrease was primarily attributable to sale of the Miami
Hospitals and our continued focus on cost-efficiency measures. On a
peradjustedpatientadmission basis, other operating expenses in the three
months ended June 30, 2022 increased 6.7% compared to the same period in 2021,
primarily due to lower adjusted patient admissions and the proportionally higher
level of fixed costs (e.g., rent expense) in other operating expenses.

LIQUIDITY AND CAPITAL RESOURCES OVERVIEW

Cash and cash equivalents were $1.351 billion at June 30, 2022 compared to
$1.405 billion at March 31, 2022.

Significant cash flow items in the three months ended June 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 $543 million (including $99 million from federal and
state grants);

•Proceeds from the sale of facilities and other assets of $61 million;

•Debt payments of $1.865 billion, including $1.826 billion of cash to redeem
$1.769 billion aggregate principal amount outstanding of our 6.750% senior
unsecured notes due 2023 (the "2023 Senior Unsecured Notes");

•Proceeds from the issuance of $2.000 billion aggregate principal amount of our
2030 Senior Secured First Lien Notes;

•Interest payments of $250 million;

•Income tax payments of $132 million;

•Capital expenditures of $152 million;

•$175 million of distributions paid to noncontrolling interests;

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•Payments totaling $42 million for restructuring charges, acquisitionrelated
costs, and litigation costs and settlements; and

•$26 million of payments for purchases of businesses or joint venture interests.


Net cash provided by operating activities was $347 million in the six months
ended June 30, 2022 compared to $779 million in the six months ended June 30,
2021. Key factors contributing to the change between the 2022 and 2021 periods
include the following:

•$475 million of Medicare advances recouped in the six months ended June
30, 2022 compared to $152 million recouped during the same period in 2021;

•$104 million of cash received from grants in the six months ended June 30, 2022
compared to $36 million received in the six months ended June 30, 2021;

•Lower interest payments of $70 million in 2022 period;

•Higher income tax payments of $106 million in the 2022 period;

•Decreased cash receipts of $56 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 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).

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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                                                   Six Months Ended
Net Patient Service Revenues Less                    June 30,                          Increase                          June 30,

Increase

Implicit Price Concessions from:             2022                2021               (Decrease)(1)                2022                2021               (Decrease)(1)
Medicare                                       17.3  %             18.4  %                    (1.1) %              17.5  %             18.6  %                    (1.1) %
Medicaid                                        7.4  %              7.6  %                    (0.2) %               6.4  %              7.4  %                    (1.0) %
Managed care(2)                                69.4  %             67.3  %                     2.1  %              70.3  %             67.6  %                     2.7  %
Uninsured                                       1.1  %              1.6  %                    (0.5) %               1.1  %              1.4  %                    (0.3) %
Indemnity and other                             4.8  %              5.1  %                    (0.3) %               4.7  %              5.0  %                    (0.3) %

(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                                                   Six Months Ended
                                                                   June 30,                          Increase                          June 30,                          Increase
Admissions from:                                           2022                2021               (Decrease)(1)                2022                2021               (Decrease)(1)
Medicare                                                     20.7  %             20.7  %                       -  %              21.1  %             21.1  %                       -  %
Medicaid                                                      5.6  %              5.7  %                    (0.1) %               5.6  %              5.7  %                    (0.1) %
Managed care(2)                                              65.7  %             64.3  %                     1.4  %              65.3  %             64.0  %                     1.3  %
Charity and uninsured                                         5.0  %              6.2  %                    (1.2) %               4.8  %              6.1  %                    (1.3) %
Indemnity and other                                           3.0  %              3.1  %                    (0.1) %               3.2  %              3.1  %                     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


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 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 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
$579 million and $697 million for the three months ended June 30, 2022 and 2021,
respectively, and $1.198 billion and $1.385 billion for the six months ended
June 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.

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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 19.2% and 17.3% of
total net patient service revenues less implicit price concessions of our acute
care hospitals and related outpatient facilities for the six months ended
June 30, 2022 and 2021, respectively. We also receive disproportionate share
hospital ("DSH") and other supplemental revenues under various state Medicaid
programs. For the six months ended June 30, 2022 and 2021, our total Medicaid
revenues attributable to DSH and other supplemental revenues were approximately
$292 million and $392 million, respectively. The decrease between the two
sixmonth periods was primarily attributable to $77 million of assessments we
recognized related to the Texas Comprehensive Hospital Increase Reimbursement
Program ("CHIRP") following its approval in 2022. During the six months ended
June 30, 2022, we also recognized $155 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.

Medicaid revenues attributable to DSH and other supplemental payment programs
included the following:

                                                                   Six Months Ended
                                                                       June 30,
                                                                                 2022       2021

Medicaid DSH                                                                    $  59      $  69

Other Medicaid supplemental payment programs, net                                 310        323
                                                                                  369        392

CHIRP assessments                                                                 (77)         -
                                                                                $ 292      $ 392



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 six months ended June 30, 2022 and 2021 were
$1.315 billion and $1.287 billion, respectively. During the six months ended
June 30, 2022, Medicaid and Managed Medicaid revenues comprised 33% and 67%,
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.


Proposed 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 federal fiscal year ("FFY"). In
April 2022, CMS issued proposed changes to the Hospital Inpatient Prospective
Payment Systems for Acute Care Hospitals and Fiscal Year 2023 Rates ("Proposed
IPPS Rule"). The Proposed IPPS Rule includes the following proposed payment and
policy changes:

•A market basket increase of 3.1% 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 proposed a 0.4% 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 3.2% 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 $43,214;

•A 1.63% 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 proposed payment and policy changes
in the Proposed IPPS Rule for operating costs will yield an average 1.4%
increase in Medicare operating MSDRG FFS payments for hospitals in urban areas,
and an average 2.3% increase in such payments for proprietary hospitals in
FFY 2023. We estimate that all the proposed payment and policy changes affecting
operating MSDRG and UCDSH payments will result in an estimated 2.3% increase
in our annual Medicare FFS IPPS payments, which yields an estimated increase of
approximately $45 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, as well as potential changes to the Proposed IPPS Rule, we
cannot provide any assurances regarding our estimate of the impact of the
proposed 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.

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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 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 and is seeking comments on potential remedies.

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, 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 six months ended
June 30, 2022 and 2021, our Hospital Operations and Ambulatory Care segments
together recognized a total of $87 million and $38 million, respectively, of PRF
grant income associated with lost revenues and COVIDrelated costs. Our Hospital
Operations segment also recognized $13 million and $12 million of grant income
from state and local grant programs during the same sixmonth periods in 2022
and 2021, respectively. In addition, we recognized $11 million of grant income
through our unconsolidated affiliates during the six months ended June 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
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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.


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 Protecting Medicare and American Farmers from
Sequester Cuts Act (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, after which the full 2% reduction will be
restored unless further legislation is passed. 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. 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 six months ended June 30, 2022 and 2021 was $4.819 billion
and $5.025 billion, respectively. Our top 10 managed care payers generated 62%
of our managed care net patient service revenues for the six months ended
June 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 June 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 June 30, 2022, a 3% increase or decrease in the estimated
contractual allowance would impact the estimated reserves by approximately $16
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
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care plans. Managed care accounts, net of contractual allowances recorded, are
further 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 six months ended June 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 June 30, 2022 and
December 31, 2021, 3% 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                 Six Months Ended
                                      June 30,                          June 30,
Estimated costs for:               2022             2021            2022            2021

Uninsured patients         $      136              $ 158      $     258            $ 326
Charity care patients              19                 29             40               49
Total                      $      155              $ 187      $     298            $ 375



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                     Six Months Ended
                                                                         June 30,                              June 30,
                                                                   2022                2021              2022              2021
Net operating revenues:
Hospital Operations                                          $    3,645             $ 4,095          $   7,443          $ 8,042
Ambulatory Care                                                     771                 664              1,509            1,310
Conifer                                                             333                 319                657              629
Inter-segment eliminations                                         (111)               (124)              (226)            (246)
Net operating revenues                                            4,638               4,954              9,383            9,735
Grant income                                                         94                  19                100               50
Equity in earnings of unconsolidated affiliates                      54                  54                100               96
Operating expenses:
Salaries, wages and benefits                                      2,126               2,280              4,308            4,481
Supplies                                                            811                 859              1,596            1,663
Other operating expenses, net                                     1,006               1,054              1,948            2,126
Depreciation and amortization                                       216                 221                419              445
Impairment and restructuring charges, and
acquisition-related costs                                            57                  20                 73               40
Litigation and investigation costs                                   18                  22                 38               35
Net gains on sales, consolidation and deconsolidation of             (1)                (15)                 -              (15)
facilities
Operating income                                             $      553             $   586          $   1,201          $ 1,106



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                                                                      Three Months Ended                           Six Months Ended
                                                                           June 30,                                    June 30,
                                                                  2022                  2021                  2022                  2021

Net operating revenues                                              100.0  %              100.0  %              100.0  %              100.0  %
Grant income                                                          2.0  %                0.4  %                1.1  %                0.5  %
Equity in earnings of unconsolidated affiliates                       1.2  %                1.1  %                1.1  %                1.0  %
Operating expenses:
Salaries, wages and benefits                                         45.8  %               46.0  %               45.9  %               46.0  %
Supplies                                                             17.5  %               17.4  %               17.0  %               17.1  %
Other operating expenses, net                                        21.7  %               21.3  %               20.8  %               21.8  %
Depreciation and amortization                                         4.7  %                4.5  %                4.5  %                4.6  %
Impairment and restructuring charges, and
acquisition-related costs                                             1.2  %                0.4  %                0.8  %                0.4  %
Litigation and investigation costs                                    0.4  %                0.4  %                0.4  %                0.4  %
Net gains on sales, consolidation and deconsolidation of                -  %               (0.3) %                  -  %               (0.2) %
facilities
Operating income                                                     11.9  %               11.8  %               12.8  %               11.4  %



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 June 30, 2022                                 Six Months Ended June 30, 2022
                                                  Hospital                                                        Hospital
                                                 Operations           Ambulatory Care          Conifer           Operations           Ambulatory Care         Conifer

Net operating revenues                         $     3,534           $

   771            $   333          $     7,217           $        1,509          $   657
Grant income                                            92                       2                  -                   96                        4                -
Equity in earnings of unconsolidated
affiliates                                               2                      52                  -                    6                       94                -
Operating expenses:
Salaries, wages and benefits                         1,752                     201                173                3,572                      395              341
Supplies                                               605                     205                  1                1,188                      406                2
Other operating expenses, net                          840                     100                 66                1,614                      205              129
Depreciation and amortization                          179                      28                  9                  346                       55               18
Impairment and restructuring charges, and
acquisition-related costs                               42                       5                 10                   54                        8

Litigation and investigation costs                      18                       -                  -                   26                        -

Net gains on sales, consolidation and
deconsolidation of facilities                           (1)                      -                  -                    -                        -                -
Operating income                               $       193           $         286            $    74          $       519           $          538          $   144

Net operating revenues                               100.0   %               100.0    %         100.0  %             100.0   %                100.0  %         100.0  %
Grant income                                           2.6   %                 0.3    %             -  %               1.3   %                  0.3  %             -  %
Equity in earnings of unconsolidated
affiliates                                             0.1   %                 6.7    %             -  %               0.1   %                  6.2  %             -  %
Operating expenses:
Salaries, wages and benefits                          49.6   %                26.1    %          52.0  %              49.5   %                 26.2  %          51.9  %
Supplies                                              17.1   %                26.6    %           0.3  %              16.5   %                 26.9  %           0.3  %
Other operating expenses, net                         23.7   %                13.0    %          19.8  %              22.3   %                 13.6  %          19.7  %
Depreciation and amortization                          5.1   %                 3.6    %           2.7  %               4.8   %                  3.6  %           2.7  %
Impairment and restructuring charges, and
acquisition-related costs                              1.2   %                 0.6    %           3.0  %               0.7   %                  0.5  %           1.7  %
Litigation and investigation costs                     0.5   %                   -    %             -  %               0.4   %                    -  %           1.8  %
Net gains on sales, consolidation and
deconsolidation of facilities                            -   %                   -    %             -  %                 -   %                    -  %             -  %
Operating income                                       5.5   %                37.1    %          22.2  %               7.2   %                 35.7  %          21.9  %



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                                                   Three Months Ended June 30, 2021                                 Six Months Ended June 30, 2021
                                          Hospital                                                        Hospital
                                         Operations           Ambulatory Care          Conifer           Operations           Ambulatory Care         Conifer

Net operating revenues                 $     3,971           $         664            $   319          $     7,796           $        1,310          $   629
Grant income                                     4                      15                  -                   28                       22                -
Equity in earnings of unconsolidated
affiliates                                       5                      49                  -                    9                       87                -
Operating expenses:
Salaries, wages and benefits                 1,941                     169                170                3,798                      343              340
Supplies                                       689                     169                  1                1,335                      326                2
Other operating expenses, net                  901                      95                 58                1,817                      198              111
Depreciation and amortization                  188                      23                 10                  378                       48               19
Impairment and restructuring charges,
and acquisition-related costs                   10                       4                  6                   20                        8

Litigation and investigation costs              19                       3                  -                   28                        6

Net gains on sales, consolidation and
deconsolidation of facilities                   (2)                    (13)                 -                   (2)                     (13)               -
Operating income                       $       234           $         278            $    74          $       459           $          503          $   144

Net operating revenues                       100.0   %               100.0    %         100.0  %             100.0   %                100.0  %         100.0  %
Grant income                                   0.1   %                 2.3    %             -  %               0.4   %                  1.7  %             -  %
Equity in earnings of unconsolidated
affiliates                                     0.1   %                 7.4    %             -  %               0.1   %                  6.6  %             -  %
Operating expenses:
Salaries, wages and benefits                  48.9   %                25.5    %          53.3  %              48.7   %                 26.2  %          54.1  %
Supplies                                      17.4   %                25.5    %           0.3  %              17.1   %                 24.9  %           0.3  %
Other operating expenses, net                 22.6   %                14.2    %          18.2  %              23.3   %                 15.0  %          17.6  %
Depreciation and amortization                  4.7   %                 3.5    %           3.1  %               4.8   %                  3.7  %           3.0  %
Impairment and restructuring charges,
and acquisition-related costs                  0.3   %                 0.6    %           1.9  %               0.3   %                  0.6  %           1.9  %
Litigation and investigation costs             0.5   %                 0.5    %             -  %               0.4   %                  0.5  %           0.2  %
Net gains on sales, consolidation and
deconsolidation of facilities                 (0.1)  %                (2.0)   %             -  %                 -   %                 (1.0) %             -  %
Operating income                               5.9   %                41.9    %          23.2  %               5.9   %                 38.4  %          22.9  %



Consolidated net operating revenues decreased by $316 million and $352 million,
or 6.4% and 3.6%, for the three and six months ended June 30, 2022,
respectively, compared to the three and six months ended June 30, 2021,
respectively. Hospital Operations net operating revenues net of intersegment
eliminations decreased by $437 million and $579 million, or 11.0% and 7.4%, for
the three and six months ended June 30, 2022, respectively, compared to the same
three and sixmonth periods in 2021, respectively. These decreases were
primarily due to the adverse impact of the Cybersecurity Incident and the loss
of revenues in our Hospital Operations segment from the Miami Hospitals we sold
in August 2021, partially offset by high patient acuity and negotiated
commercial rate increases. Our Hospital Operations segment also recognized grant
income from federal and state grants totaling $92 million and $96 million during
the three and six months ended June 30, 2022, respectively, which is not
included in net operating revenues.

Ambulatory Care net operating revenues increased by $107 million and
$199 million, or 16.1% and 15.2%, for the three and six months ended June 30,
2022, respectively, compared to the three and six months ended June 30, 2021,
respectively. The change in 2022 revenues for the threemonth period was driven
by an increase from acquisitions of $83 million, as well as an increase in
samefacility net operating revenues of $32 million due primarily to negotiated
commercial rate increases. These increases were partially offset by a decrease
of $8 million due primarily to the sale of the Ambulatory Care segment's urgent
care centers to a third party in April 2021. The change in 2022 revenues for the
sixmonth period was driven by an increase from acquisitions of $174 million, as
well as an increase in samefacility net operating revenues of $84 million due
primarily to higher surgical patient volumes and negotiated commercial rate
increases. These increases were partially offset by a decrease of $59 million
due primarily to the aforementioned sale of urgent care centers and the transfer
of imaging centers to the Hospital Operations segment in April 2021. Our
Ambulatory Care segment also recognized income from federal grants totaling
$2 million and $4 million during the three and six months ended June 30, 2022,
respectively, which is not included in net operating revenues.
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Conifer's net operating revenues increased by $14 million and $28 million, or
4.4% and 4.5%, for the three and six months ended June 30, 2022, respectively,
compared to the three and six months ended June 30, 2021, respectively.
Conifer's revenues from thirdparty clients, which revenues are not eliminated
in consolidation, increased $27 million and $48 million, or 13.8% and 12.5%, for
the three and six months ended June 30, 2022, respectively, compared to the same
three and sixmonth periods in 2021, respectively. This increase was primarily
due to contractual rate increases, new business expansion and the transition of
the Miami Hospitals to thirdparty clients.

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                                             Six Months Ended
                                                                        June 30,                        Increase                      June 30,                      Increase
Selected Operating Expenses                                       2022                2021             (Decrease)               2022              2021             (Decrease)
Hospital Operations - Same-Hospital:
Salaries, wages and benefits                                $    1,741             $ 1,828                    (4.8) %       $   3,553          $ 3,570                    (0.5) %
Supplies                                                           603                 644                    (6.4) %           1,184            1,247                    (5.1) %
Other operating expenses                                           825                 820                     0.6  %           1,586            1,663                    (4.6) %
Total                                                       $    3,169             $ 3,292                    (3.7) %       $   6,323          $ 6,480                    (2.4) %
Ambulatory Care:
Salaries, wages and benefits                                $      201             $   169                    18.9  %       $     395          $   343                    15.2  %
Supplies                                                           205                 169                    21.3  %             406              326                    24.5  %
Other operating expenses                                           100                  95                     5.3  %             205              198                     3.5  %
Total                                                       $      506             $   433                    16.9  %       $   1,006          $   867                    16.0  %
Conifer:
Salaries, wages and benefits                                $      173             $   170                     1.8  %       $     341          $   340                     0.3  %
Supplies                                                             1                   1                       -  %               2                2                       -  %
Other operating expenses                                            66                  58                    13.8  %             129              111                    16.2  %
Total                                                       $      240             $   229                     4.8  %       $     472          $   453                     4.2  %

Rent/lease expense(1):
Hospital Operations                                         $       66             $    69                    (4.3) %       $     134          $   141                    (5.0) %
Ambulatory Care                                                     28                  24                    16.7  %              55               51                     7.8  %
Conifer                                                              3                   3                       -  %               6                6                       -  %
Total                                                       $       97             $    96                     1.0  %       $     195          $   198                    (1.5) %


(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                                                                           Six Months Ended
                                                                                                        June 30,                                       Increase                                     June 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                                                                                  128,068                     139,331                    (8.1) %                             255,850                     273,451                    (6.4) %
Adjusted patient admissions(2)                                                                    239,031                     252,469                    (5.3) %                             466,964                     483,742                    (3.5) %
Paying admissions (excludes charity and uninsured)                                                121,823                     131,813                    (7.6) %                             243,620                     258,818                    (5.9) %
Charity and uninsured admissions                                                                    6,245                       7,518                   (16.9) %                              12,230                      14,633                   (16.4) %
Admissions through emergency department                                                            96,136                     102,617                    (6.3) %                             193,820                     203,464                    (4.7) %
Paying admissions as a percentage of total admissions                                                95.1  %                     94.6  %                  0.5  % (1)                            95.2  %                     94.6  %                  0.6  % (1)

Charity and uninsured admissions as a percentage of total admissions

                           4.9  %                      5.4  %                 (0.5) % (1)                             4.8  %                      5.4  %                 (0.6) % (1)

Emergency department admissions as a percentage of total admissions

                         75.1  %                     73.6  %                  1.5  % (1)                            75.8  %                     74.4  %                  1.4  % (1)
Surgeries - inpatient                                                                              33,749                      37,363                    (9.7) %                              66,657                      71,459                    (6.7) %
Surgeries - outpatient                                                                             53,638                      57,588                    (6.9) %                             104,896                     107,863                    (2.8) %
Total surgeries                                                                                    87,387                      94,951                    (8.0) %                             171,553                     179,322                    (4.3) %
Patient days - total                                                                              658,995                     695,445                    (5.2) %                           1,364,618                   1,426,970                    (4.4) %
Adjusted patient days(2)                                                                        1,192,999                   1,234,640                    (3.4) %                           2,417,823                   2,460,160                    (1.7) %
Average length of stay (days)                                                                        5.15                        4.99                     3.2  %                                5.33                        5.22                     2.1  %
Licensed beds (at end of period)                                                                   15,391                      15,399                    (0.1) %                              15,391                      15,399                    (0.1) %
Average licensed beds                                                                              15,382                      15,402                    (0.1) %                              15,389                      15,403                    (0.1) %
Utilization of licensed beds(3)                                                                      47.1  %                     49.6  %                 (2.5) % (1)                            49.0  %                     51.2  %                 (2.2) % (1)

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

include outpatient services provided by facilities in our Hospital Operations segment

by multiplying actual patient admissions/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                                                                      Six Months Ended
                                                                          June 30,                                    Increase                                   June 30,                                   Increase
Outpatient Visits                                              2022                         2021                     (Decrease)                       2022                        2021                     (Decrease)
Total visits                                                      1,281,256                 1,424,407                  (10.0) %                         2,521,642                 2,647,103                   (4.7) %
Paying visits (excludes charity and uninsured)                    1,201,750                 1,323,061                   (9.2) %                         2,367,468                 2,470,572                   (4.2) %
Charity and uninsured visits                                         79,506                   101,346                  (21.5) %                           154,174                   176,531                  (12.7) %
Emergency department visits                                         541,098                   511,030                    5.9  %                         1,041,763                   935,391                   11.4  %
Surgery visits                                                       53,638                    57,588                   (6.9) %                           104,896                   107,863                   (2.8) %
Paying visits as a percentage of total visits                          93.8  %                   92.9  %                 0.9  % (1)                          93.9  %                   93.3  %                 0.6  % (1)
Charity and uninsured visits as a percentage
of total visits                                                         6.2  %                    7.1  %                (0.9) % (1)                           6.1  %                    6.7  %                (0.6) % (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                                            Six Months Ended
                                                           June 30,                       Increase                      June 30,                      Increase
Revenues                                            2022               2021              (Decrease)              2022              2021              (Decrease)

Total segment net operating revenues(1) $ 3,498 $ 3,690

                    (5.2) %       $  7,150          $  7,251                    (1.4) %
Selected revenue data - hospitals and
related outpatient facilities:
Net patient service revenues(1)(2)              $    3,314          $  3,507                    (5.5) %       $  6,792          $  6,899                    (1.6) %
Net patient service revenue per adjusted
patient admission(1)(2)                         $   13,864          $ 13,891                    (0.2) %       $ 14,545          $ 14,262                     2.0  %
Net patient service revenue per adjusted
patient day(1)(2)                               $    2,778          $  2,841                    (2.2) %       $  2,809          $  2,804                     0.2  %

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

include outpatient services provided by facilities in our Hospital Operations segment

by multiplying actual patient admissions/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                                                               Six Months Ended
                                                                                  June 30,                                Increase                                June 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

     49.8  %              49.5  %                      0.3  %                       49.7  %              49.2  %                      0.5  %
Supplies as a percentage of net operating revenues                               17.2  %              17.5  %                     (0.3) %                       16.6  %              17.2  %                     (0.6) %
Other operating expenses as a percentage of net
operating revenues                                                               23.6  %              22.2  %                      1.4  %                       22.2  %              22.9  %                     (0.7) %

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




Revenues

Samehospital net operating revenues decreased $192 million, or 5.2%, during the
three months ended June 30, 2022 compared to the three months ended June 30,
2021, due in part to the adverse impact of the Cybersecurity Incident on our
patient volumes, partially offset by high patient acuity and negotiated
commercial rate increases. Our Hospital Operations segment also recognized grant
income totaling $92 million and $4 million from federal, state and local grants
in the three months ended June 30, 2022 and 2021, respectively, which is not
included in net operating revenues. Samehospital admissions and outpatient
visits decreased 8.1% and 10.0%, respectively, in the three months ended
June 30, 2022 compared to the same period in 2021, due in part to the impact of
the Cybersecurity Incident in April 2022.

Samehospital net operating revenues decreased $101 million, or 1.4%, during the
six months ended June 30, 2022 compared to the six months ended June 30, 2021,
primarily due to the same factors that impacted the threemonth period. Our
Hospital Operations segment also recognized grant income from federal, state and
local grants totaling $96 million and $28 million in the six months ended
June 30, 2022 and 2021, respectively, which is not included in net operating
revenues. Samehospital admissions decreased 6.4% in the six months ended
June 30, 2022 compared to the same period in 2021. This decrease was due in part
to the impacts of the Omicron variant in the first quarter of 2022 and the
Cybersecurity Incident in the second quarter of 2022. Samehospital outpatient
visits decreased by 4.7% during the 2022 period, due in part to the adverse
impact of the Cybersecurity Incident.

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

                                                                                                December 31,
                                                                         June 30, 2022              2021
Medicare                                                               $          141          $        155
Medicaid                                                                           54                    47
Net cost report settlements receivable and valuation allowances                    49                    33
Managed care                                                                    1,682                 1,602
Self-pay uninsured                                                                 12                    21
Self-pay balance after insurance                                                   70                    70
Estimated future recoveries                                                       141                   137
Other payers                                                                      345                   331
Total Hospital Operations                                                       2,494                 2,396
Ambulatory Care                                                                   346                   374

Accounts receivable, net                                               $

2,840 $ 2,770




Collection of accounts receivable has been a key area of focus, particularly
over the past several years. At June 30, 2022, our Hospital Operations segment
collection rate on selfpay accounts was approximately 28.2%. 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 June 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, 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 96.1% at
June 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
$2.445 billion and $2.363 billion at June 30, 2022 and December 31, 2021,
respectively, excluding cost report settlements receivable and valuation
allowances of $49 million and $33 million, respectively, at June 30, 2022 and
December 31, 2021:

                                                                     Indemnity,
                                                        Managed       Self-Pay
                            Medicare      Medicaid       Care        and Other       Total
At June 30, 2022:
0-60 days                       91  %         38  %        53  %           21  %      47  %
61-120 days                      5  %         27  %        16  %           14  %      16  %
121-180 days                     2  %         15  %        10  %            9  %      10  %
Over 180 days                    2  %         20  %        21  %           56  %      27  %
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 June 30, 2022, we had a cumulative total of patient account assignments to
Conifer of $1.870 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 June 30, 2022 and December 31, 2021 by aging category:

                    June 30, 2022       December 31, 2021
0-60 days          $           71      $               87
61-120 days                    19                      17
121-180 days                    4                       4
Over 180 days                  10                       7
Total              $          104      $              115

Salaries, Wages and Benefits


Samehospital salaries, wages and benefits decreased $87 million, or 4.8%, in
the three months ended June 30, 2022 compared to the same period in 2021. This
decrease was primarily attributable to reduced patient volumes and our continued
focus on costefficiency measures. Lower incentive compensation and employee
benefits costs also contributed to the decrease in 2022. These factors were
partially offset by increased premium pay and annual merit increases for certain
of our employees. Samehospital salaries, wages and benefits as a percentage of
net operating revenues increased by 30 basis points to 49.8% in the three months
ended June 30, 2022 compared to the three months ended June 30, 2021, due in
part to the adverse impact of the Cybersecurity Incident on our patient revenues
during the period. Salaries, wages and benefits expense for the three months
ended June 30, 2022 and 2021 included stockbased compensation expense of
$14 million and $12 million, respectively.

Samehospital salaries, wages and benefits decreased $17 million, or 0.5%, in
the six months ended June 30, 2022 compared to the same period in 2021. This
decrease was primarily attributable to the same factors that caused the decrease
in the three-month period, partially offset by increased premium pay, increased
contract labor costs and annual merit increases for certain of our employees.
Samehospital salaries, wages and benefits as a percentage of net operating
revenues increased by 50 basis points to 49.7% in the six months ended June 30,
2022 compared to the six months ended June 30, 2021, due in part to the adverse
impact of the Cybersecurity Incident on our patient revenues during the period.
Salaries, wages and benefits expense for the six months ended June 30, 2022 and
2021 included stockbased compensation expense of $26 million and $22 million,
respectively.

Supplies

Samehospital supplies expense decreased $41 million, or 6.4%, in the three
months ended June 30, 2022 compared to the same period in 2021. The decrease was
primarily due to lower patient volumes and our cost-efficiency measures,
including those described below, partially offset by the increased cost of
certain supplies as a result of the COVID19 pandemic and growth in our
higheracuity, supplyintensive surgical services. Samehospital supplies
expense as a percentage of net operating revenues decreased by 30 basis points
to 17.2% in the three months ended June 30, 2022 compared to the three months
ended June 30, 2021, primarily due to our continued focus on cost-efficiency
measures. 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.

Samehospital supplies expense decreased $63 million, or 5.1%, in the six months
ended June 30, 2022 compared to the same period in 2021. The decrease was
primarily due to the same factors that impacted the threemonth period ended
June 30, 2022. Samehospital supplies expense as a percentage of net operating
revenues decreased by 60 basis points to 16.6%
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in the six months ended June 30, 2022 compared to the six months ended
June 30, 2021, primarily due to our continued focus on cost-efficiency measures.

Other Operating Expenses, Net


Samehospital other operating expenses increased by $5 million, or 0.6%, in the
three months ended June 30, 2022 compared to the same period in 2021.
Samehospital other operating expenses as a percentage of net operating revenues
increased by 140 basis points to 23.6% for the three months ended June 30, 2022
compared to 22.2% for the three months ended June 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.

Samehospital other operating expenses decreased by $77 million, or 4.6%, in the
six months ended June 30, 2022 compared to the same period in 2021. The changes
in other operating expenses included:

•net gains from the sale of long-lived assets of $71 million; and

•decreased malpractice expense of $18 million.


Samehospital other operating expenses as a percentage of net operating revenues
decreased by 70 basis points to 22.2% in the six months ended June 30, 2022
compared to 22.9% for the six months ended June 30, 2021, primarily due to the
net gains from the sale of long-lived assets noted above.

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 operates (165 of 434 facilities at June 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 269 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.

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 62% 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.

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Results of Operations

The following table summarizes certain statement of operations items:

                                                    Three Months Ended                                           Six Months Ended
                                                         June 30,                      Increase                      June 30,                      Increase
                                                   2022              2021             (Decrease)               2022              2021             (Decrease)
Net operating revenues                         $      771          $  664                    16.1  %       $   1,509          $ 1,310                    15.2  %
Grant income                                   $        2          $   15                   (86.7) %       $       4          $    22                   (81.8) %
Equity in earnings of unconsolidated
affiliates                                     $       52          $   49                     6.1  %       $      94          $    87                     8.0  %
Salaries, wages and benefits                   $      201          $  169                    18.9  %       $     395          $   343                    15.2  %
Supplies                                       $      205          $  169                    21.3  %       $     406          $   326                    24.5  %
Other operating expenses, net                  $      100          $   95                     5.3  %       $     205          $   198                     3.5  %



Revenues

Ambulatory Care net operating revenues increased by $107 million, or 16.1%,
during the three months ended June 30, 2022 compared to the same period in 2021.
The change was driven by an increase from acquisitions of $83 million, as well
as an increase in samefacility net operating revenues of $32 million due
primarily to negotiated commercial rate increases. These increases were
partially offset by a decrease of $8 million due primarily to the sale of the
Ambulatory Care segment's urgent care centers to a third party in April 2021.
Our Ambulatory Care segment also recognized grant income from federal grants
totaling $2 million and $15 million during the three months ended June 30, 2022
and 2021, respectively, which is not included in net operating revenues.

Ambulatory Care net operating revenues increased by $199 million, or 15.2%,
during the six months ended June 30, 2022 compared to the same period in 2021.
The change was driven by an increase from acquisitions of $174 million, as well
as an increase in samefacility net operating revenues of $84 million due
primarily to higher surgical patient volumes and negotiated commercial rate
increases. These increases were partially offset by a decrease of $59 million
due primarily to the aforementioned sale of urgent care centers and the transfer
of imaging centers to the Hospital Operations segment. Our Ambulatory Care
segment also recognized grant income from federal grants totaling $4 million and
$22 million during the six months ended June 30, 2022 and 2021, respectively,
which is not included in net operating revenues.

Salaries, Wages and Benefits


Salaries, wages and benefits expense increased by $32 million, or 18.9%, during
the three months ended June 30, 2022 compared to the same period in 2021.
Salaries, wages and benefits expense was impacted by an increase from
acquisitions of $27 million, as well as an increase in samefacility salaries,
wages and benefits expense of $10 million due primarily to higher surgical
patient volumes. These increases were partially offset by a decrease of
$5 million due primarily to the aforementioned sale of urgent care centers.
Salaries, wages and benefits expense included $3 million of stockbased
compensation in each of the threemonth periods ended June 30, 2022 and 2021.

Salaries, wages and benefits expense increased by $52 million, or 15.2%, during
the six months ended June 30, 2022 compared to the same period in 2021.
Salaries, wages and benefits expense was impacted by an increase from
acquisitions of $53 million and an increase in samefacility salaries, wages and
benefits expense of $27 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 $6 million of
stockbased compensation expense in each of the sixmonth periods ended
June 30, 2022 and 2021.

Supplies


Supplies expense increased by $36 million, or 21.3%, during the three months
ended June 30, 2022 compared to the same period in 2021. The change was driven
by an increase from acquisitions of $31 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 and higher pricing of certain
supplies as a result of the COVID19 pandemic.

Supplies expense increased by $80 million, or 24.5%, during the six months ended
June 30, 2022 compared to the same period in 2021. The change was driven by an
increase from acquisitions of $63 million, as well as an increase in
samefacility supplies expense of $20 million due primarily to an increase in
surgical cases at our consolidated centers, 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 $3 million
due to the aforementioned sale of urgent care centers and the transfer of
imaging centers to the Hospital Operations segment.
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Other Operating Expenses, Net


Other operating expenses increased by $5 million, or 5.3%, during the three
months ended June 30, 2022 compared to the same period in 2021. The change was
driven by an increase from acquisitions of $8 million, partially offset by a
decrease in samefacility other operating expenses of $1 million and a decrease
of $2 million due to the sale of the Ambulatory Care segment's urgent care
centers.

Other operating expenses increased by $7 million, or 3.5%, during the six months
ended June 30, 2022 compared to the same period in 2021. The change was driven
by an increase from acquisitions of $20 million and an increase in samefacility
other operating expenses of $4 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      Six Months Ended
Ambulatory Care Facility Growth              June 30, 2022          June 30, 2022
Net revenues                                            2.8  %                5.8  %
Cases                                                  (0.9) %                3.3  %
Net revenue per case                                    3.7  %                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 June 30, 2022, the majority of facilities in our Ambulatory
Care segment are operated in this model.

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

Six

Months Ended

                                                                            June 30,                       Increase
Type of Ownership Interests Acquired                                2022                2021              (Decrease)
Controlling interests                                          $        66          $       63          $         3
Noncontrolling interests                                                    -                   1                  (1)
Equity investment in unconsolidated affiliates and
consolidated facilities                                                    14                   6                    8
Total                                                          $        80          $       70          $        10

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


Ownership Structure of Ambulatory Care Facilities             June 30, 2022
Owned with a health system partner                                 201
Owned without a health system partner                              233
Total                                                              434

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

                                                           Six Months Ended
                                                            June 30, 2022

Acquisitions                                                        7
De novo                                                             6
Dispositions/Mergers                                               (2)
Total increase in number of facilities operated                    11



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During the six months ended June 30, 2022, we acquired controlling interests in
three ASCs located in Florida and one in each of Arizona and New Hampshire. We
paid cash totaling $37 million for these acquisitions, which are jointly owned
with 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 six months ended June 30, 2022, we acquired controlling
interests in nine previously unconsolidated ASCs (including seven SCD Centers),
two of which are located in each of Florida and Pennsylvania and one in each of
Indiana, Maryland, Michigan, Texas and Wisconsin. We paid an aggregate of $29
million to acquire controlling interests in these facilities. Following our
acquisition of a controlling interest in the Texas ASC, we contributed our
ownership interest in it to our subsidiary Texas Health Ventures Group, L.L.C.

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 six months ended June 30, 2022, we invested
approximately $14 million in such transactions.

Conifer Segment

Revenues


Our Conifer segment generated net operating revenues of $333 million and $319
million during the three months ended June 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. The increase in
Conifer's net operating revenues was $14 million, or 4.4%. Conifer's revenues
from thirdparty clients, which revenues are not eliminated in consolidation,
increased $27 million, or 13.8%, for the three months ended June 30, 2022
compared to the same period in 2021. The increase was primarily attributable to
contractual rate increases and new business expansion.

Our Conifer segment generated net operating revenues of $657 million and $629
million during the six months ended June 30, 2022 and 2021, respectively. The
increase in Conifer's net operating revenues was $28 million, or 4.5%. Conifer
revenues from thirdparty clients, which revenues are not eliminated in
consolidation, increased $48 million, or 12.5%, for the six months ended
June 30, 2022 compared to the same period in 2021. The increase was primarily
driven by contractual rate increases and new business expansion, as well as the
transition of the five Miamiarea hospitals sold in August 2021 to a thirdparty
client.

Salaries, Wages and Benefits

Salaries, wages and benefits expense for Conifer increased $3 million, or 1.8%,
in the three months ended June 30, 2022 compared to the same period in 2021, and
increased $1 million, or 0.3%, in the six months ended June 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. Salaries, wages and benefits expense included
stockbased compensation expense of $1 million in each of the threemonth
periods ended June 30, 2022 and 2021, and $2 million in each of the sixmonth
periods ended June 30, 2022 and 2021.

Other Operating Expenses, Net


Other operating expenses for Conifer increased $8 million, or 13.8%, in the
three months ended June 30, 2022 compared to the same period in 2021. Other
operating expenses for Conifer increased $18 million, or 16.2%, in the six
months ended June 30, 2022 compared to the same period in 2021. The increase in
each period was primarily due to higher vendor fees and recruiting expenses in
2022.

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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                   Six Months Ended
                                                                     June 30,                            June 30,
                                                              2022               2021             2022              2021
Consolidated:
Impairment charges                                        $        5          $     1          $      6          $     1
Restructuring charges                                             49               18                61               34
Acquisition-related costs                                          3                1                 6                5
Total impairment and restructuring charges, and
acquisition-related costs                                 $       57          $    20          $     73          $    40

By segment:
Hospital Operations                                       $       42          $    10          $     54          $    20
Ambulatory Care                                                    5                4                 8                8
Conifer                                                           10                6                11               12
Total impairment and restructuring charges, and
acquisition-related costs                                 $       57          $    20          $     73          $    40



During the three and six months ended June 30, 2022, restructuring charges
consisted of $16 million and $21 million, respectively, of employee severance
costs, $3 million and $5 million, respectively, related to the transition of
various administrative functions to our GBC, $21 million and $22 million,
respectively, related to contract and lease termination fees, and $9 million and
$13 million, respectively, of other restructuring costs. Acquisitionrelated
costs consisted entirely of transaction costs during both periods.

During the three and six months ended June 30, 2021, restructuring charges
consisted of $6 million and $10 million, respectively, of employee severance
costs, $6 million and $12 million, respectively, related to the transition of
various administrative functions to our GBC, and $6 million and $12 million,
respectively, of other restructuring costs. Acquisitionrelated costs consisted
entirely of transaction costs during both periods.

Litigation and Investigation Costs


Litigation and investigation costs during the three months ended June 30, 2022
and 2021 were $18 million and $22 million, respectively, and $38 million and
$35 million during the six months ended June 30, 2022 and 2021, respectively.

Interest Expense

Interest expense for the three and six months ended June 30, 2022 was $222
million and $449 million, respectively, compared to $235 million and $475
million for the same periods in 2021.

Loss from Early Extinguishment of Debt


During the three and six months ended June 30, 2022, we incurred aggregate
losses from early extinguishment of debt of $66 million and $109 million,
respectively. 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 2023 Senior Unsecured Notes during
the six months 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 $31 million and $54 million for the
three and six months ended June 30, 2021, respectively. These losses related to
our retirement of approximately $1.888 billion aggregate principal amount of
certain of our senior unsecured and senior secured first lien notes in advance
of their maturity dates during the six months ended June 30, 2021.

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.

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Income Tax Expense

During the three months ended June 30, 2022, we recorded income tax expense of
$86 million in continuing operations on pre-tax income of $265 million compared
to $61 million on pre-tax income of $319 million during the prioryear period.
During the six months ended June 30, 2022, we recorded income tax expense of
$185 million in continuing operations on pretax income of $643 million compared
to $106 million on pre-tax income of $586 million during the six months ended
June 30, 2021. During the six months ended June 30, 2022, we recorded income tax
expense of $77 million to increase the valuation allowance for interest expense
carryforwards, including $39 million due to a change in the business interest
expense disallowance rules in 2022.

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                      Six Months Ended
                                                                   June 30,                               June 30,
                                                            2022               2021                2022                 2021
Tax expense at statutory federal rate of 21%            $       56          $    67          $     135               $   123
State income taxes, net of federal income tax                   11               14                 25                    26

benefit

Tax benefit attributable to noncontrolling                     (28)             (28)               (57)                  (53)
interests
Nondeductible goodwill                                           1                7                  1                     7

Stock-based compensation tax benefit                            (1)              (2)                (3)                   (3)
Changes in valuation allowance                                  45                -                 77                     -

Other items                                                      2                3                  7                     6
Income tax expense                                      $       86          $    61          $     185               $   106

Net Income Available to Noncontrolling Interests


Net income available to noncontrolling interests was $141 million for the three
months ended June 30, 2022 compared to $138 million for the three months ended
June 30, 2021. Net income available to noncontrolling interests for the 2022
period was comprised of $114 million related to our Ambulatory Care segment,
$8 million related to our Hospital Operations segment, and $19 million related
to our Conifer segment. Of the portion related to our Ambulatory Care segment,
$5 million related to the minority interest Baylor held in USPI until
June 30, 2022.

Net income available to noncontrolling interests was $281 million for the six
months ended June 30, 2022 compared to $263 million for the six months ended
June 30, 2021. Net income available to noncontrolling interests for the six
months ended June 30, 2022 was comprised of $213 million related to our
Ambulatory Care segment, $33 million related to our Hospital Operations segment
and $35 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

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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.

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 six months ended June 30, 2022 and 2021:

                                                                                Three Months Ended                  Six Months Ended
                                                                                     June 30,                           June 30,
                                                                               2022              2021             2022             2021

Net income available to Tenet Healthcare Corporation common
shareholders

$ 38 $ 119 $ 178 $ 216
Less: Net income available to noncontrolling interests

                          (141)            (138)            (281)            (263)
Income (loss) from discontinued operations, net of tax                             -               (1)               1               (1)
Income from continuing operations                                                179              258              458              480
Income tax expense                                                               (86)             (61)            (185)            (106)
Loss from early extinguishment of debt                                           (66)             (31)            (109)             (54)
Other non-operating income (expense), net                                          -               (1)               -                9
Interest expense                                                                (222)            (235)            (449)            (475)
Operating income                                                                 553              586            1,201            1,106
Litigation and investigation costs                                               (18)             (22)             (38)             (35)

Net gains on sales, consolidation and deconsolidation of facilities

        1               15                -               15

Impairment and restructuring charges, and acquisition-related costs

      (57)             (20)             (73)             (40)
Depreciation and amortization                                                   (216)            (221)            (419)            (445)

Adjusted EBITDA                                                            $     843          $   834          $ 1,731          $ 1,611

Net operating revenues                                                     $   4,638          $ 4,954          $ 9,383          $ 9,735

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

                                    0.8  %           2.4  %           1.9  %           2.2  %

Adjusted EBITDA as % of net operating revenues                                  18.2  %          16.8  %          18.4  %          16.5  %
(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 June 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 3.81x, or 3.92x if adjusted to include outstanding obligations
arising from cash advances received from Medicare pursuant to COVID19 relief
legislation. 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
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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. In the year ending December 31, 2023 and beyond,
we may also consider share repurchases depending on market conditions and other
investment opportunities. 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 $416 million and
$486 million in the six months ended June 30, 2022 and 2021, respectively.

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 beginning in August 2022. At
June 30, 2022, we had liabilities of $124 million recorded in other current
liabilities and $253 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 six months ended June 30, 2022, we made aggregate
payments of $25 million to acquire controlling interests in seven 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 expect to fund these payments using cash on hand.

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
$230 million of standby letters of credit outstanding and guarantees at
June 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), equipment and information systems additions and replacements,
introduction of new medical technologies, design and construction of new
buildings or hospitals, and various other capital improvements, as well as
commitments to make capital expenditures in connection with acquisitions of
businesses. Capital expenditures were $307 million and $243 million in the six
months ended June 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.

Income tax payments, net of tax refunds, were $140 million in the six months
ended June 30, 2022 compared to $34 million in the six months ended June 30,
2021.

SOURCES AND USES OF CASH

Our liquidity for the six months ended June 30, 2022 was primarily derived from
net cash provided by operating activities and cash on hand. During the six
months ended June 30, 2022, we also received supplemental funds from federal and
state grants provided under COVID19 relief legislation. We had $1.351 billion
of cash and cash equivalents on hand at June 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 June 30, 2022.
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When operating under normal conditions, 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 $347 million in the six months
ended June 30, 2022 compared to $779 million in the six months ended June 30,
2021. Key factors contributing to the change between the 2022 and 2021 periods
include the following:

•$475 million of Medicare advances recouped in the six months ended June
30, 2022 compared to $152 million recouped during the same period in 2021;

•$104 million of cash received from grants in the six months ended June 30, 2022
compared to $36 million received in the six months ended June 30, 2021;

•Lower interest payments of $70 million in 2022 period;

•Higher income tax payments of $106 million in the 2022 period;

•Decreased cash receipts of $56 million related to supplemental Medicaid
programs in California and Texas; and

•The timing of other working capital items.


We used net cash of $200 million and $195 million in investing activities during
the six months ended June 30, 2022 and 2021, respectively. This $5 million
additional use of cash between the 2022 and 2021 periods was attributable to an
increase in capital expenditures of $64 million and a $22 million increase in
cash used for purchases of marketable securities. These changes were partially
offset by an increase in proceeds from the sale of facilities and other assets
of $85 million, primarily related to the sale of several medical office
buildings in the first quarter of 2022.

Net cash used in financing activities was $1.160 billion for the six months
ended June 30, 2022 compared to $836 million for the six months ended
June 30, 2021. Financing activity during the six months ended June 30, 2022
included payments of $2.744 billion to early retire our long-term debt,
including $1.933 billion paid to redeem all $1.872 billion of aggregate
principal amount outstanding on 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 $98 million, primarily due to the
distribution of $61 million for minority interest holders' portion of the
proceeds received from the sale of several medical office buildings. These
factors were partially offset by proceeds of $2.000 billion from the issuance of
our 2030 Senior Secured First Lien Notes during the six months ended
June 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 June 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 interest rate. At June 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 June 30, 2022. We were in
compliance with all covenants and conditions in our Credit Agreement at June 30,
2022.

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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 June 30, 2022, we were in compliance with all
covenants and conditions in the LC Facility, and we had $127 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 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 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 six months ended June 30, 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. During the six months ended June 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.


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
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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 put/call arrangements and 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, 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.

TENET HEALTHCARE CORP – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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