Tenet Reports $274 Million of Adjusted EBITDA for First Quarter

Tenet Reports $274 Million of Adjusted EBITDA for First Quarter

Rick Black, 469-893-2647orThomas Rice, 469-893-2522

Tenet Healthcare Corporation (NYSE:THC) today reported Adjusted EBITDA of $274 million for the first quarter ended March 31, 2013, a decrease of $36 million as compared to Adjusted EBITDA of $310 million in the first quarter of 2012. Adjusted EBITDA in the first quarter of 2012 included $75 million from an industry-wide Medicare inpatient prospective payment settlement (“Rural Floor settlement”). Excluding this non-recurring item, Adjusted EBITDA increased by 16.6 percent. Income from continuing operations, excluding impairments, restructuring charges, acquisition-related costs and the loss on early extinguishment of debt, was $34 million after-tax, or $0.33 per diluted share, in the first quarter of 2013. In the first quarter of 2012, income from continuing operations was $13 million after-tax, or $0.15 per diluted share, excluding the Rural Floor settlement, litigation and investigation costs, impairments, restructuring charges, and acquisition-related costs. Net loss attributable to common shareholders in the first quarter of 2013 was $88 million after-tax, or $0.85 per share, compared to net income of $58 million after-tax, or $0.53 per diluted share, in the first quarter of 2012.

“Tenet generated strong earnings growth by rapidly adjusting costs in a soft volume environment in the first quarter,” said Trevor Fetter, president and chief executive officer. “Adjusted EBITDA grew by almost 17 percent, after excluding a non-recurring item which contributed to last year’s first quarter, and exceeded the mid-point of our Outlook range. After making adjustments for non-recurring items, earnings per share more than doubled. Our Conifer subsidiary continues to achieve its performance milestones and grew its EBITDA by 28 percent over last year’s first quarter.”

Adjusted admissions declined 2.5 percent in the first quarter reflecting 2.2 percent growth in outpatient visits offset by a 4.0 percent decline in inpatient admissions. The growth in outpatient visits was primarily driven by our successful outpatient center acquisition program. About half of the admissions decline was related to the loss of a Leap Year day and the observance of the Easter and Passover holidays in this year’s first quarter. The admissions decline also included a 2.8 percent decline in uninsured and charity admissions. Total emergency department visits increased 3.1 percent.

Net operating revenues were $2.387 billion, an increase of $85 million, or 3.7 percent, compared to net operating revenues of $2.302 billion in the first quarter of 2012. The increase in net operating revenues was 7.5 percent excluding the Rural Floor settlement from the first quarter of 2012.

Total net patient revenue per adjusted admission was $11,884, an increase of 1.6 percent, or 5.1 percent excluding the 2012 Rural Floor settlement. These pricing increases primarily reflect improved terms in our contracts with commercial managed care payers and higher Medicare reimbursement rates. Commercial managed care revenue increased 7.6 percent per admission, 4.7 percent per patient day, and 4.1 percent per outpatient visit.

Selected operating expenses of our hospital operations, defined as the sum of salaries, wages and benefits, supplies and other operating expenses excluding the Company’s Conifer services business, increased by 3.9 percent on a per adjusted admission basis. Excluding the incremental expenses related to increased physician employment, this growth was 2.1 percent. As a result of an increase in our patient length of stay, primarily related to a 1.6 percent increase in acuity, this cost metric increased only 2.0 percent on a per adjusted patient day basis, or 0.3 percent excluding incremental physician employment expenses. Supplies expense per adjusted admission decreased 1.2 percent, the seventh consecutive quarter this cost metric declined. No Health Information Technology (“HIT”) incentives were recorded in the first quarter of 2013.

Bad debt expense as a percent of revenues was 8.0 percent, an increase of 40 basis points compared to 7.6 percent in the first quarter of 2012. The first quarter 2012 percentage is 7.8 percent excluding the 2012 Rural Floor settlement. Our self-pay collection rate improved to 28.8 percent in the first quarter of 2013, as compared to 27.9 percent in the first quarter of 2012.

Conifer reported a 28 percent increase in EBITDA from $25 million in the first quarter of 2012 to $32 million. Conifer’s revenues essentially doubled from $107 million in the first quarter of 2012 to $211 million in this year’s first quarter. The growth in both metrics reflects the integration of Catholic Health Initiatives (“CHI”) revenue cycle operations and other new business. The profitability of the CHI integration is expected to produce incremental growth as the cost efficiencies related to this integration are captured over time.

Cash and cash equivalents were $95 million at March 31, 2013 compared to $364 million at December 31, 2012. The Company had a $20 million balance on its bank line at March 31, 2013. Accounts receivable days improved by one day to 52 days down from 53 days at December 31, 2012.

In the first quarter Tenet invested an additional $100 million to repurchase approximately 2.5 million shares. Under the current Board Authorized Repurchase Program of $500 million, the company has invested $200 million in the last two quarters to repurchase 5.86 million shares. Since 2011, Tenet has invested $892 million to repurchase almost 30 percent, or 38.9 million of its fully diluted shares, at a weighted average share price of $22.93, spending $892 million.

For the second quarter of 2013, the Outlook range for Adjusted EBITDA is $325 million to $375 million. This second quarter Outlook includes expected contributions to EBITDA of $54 million related to the anticipated approval of the managed care portion of the 30-month California Provider Fee program and $31 million from the recognition of HIT incentives. The Company is confirming the $1.325 billion to $1.425 billion Outlook range for 2013 Adjusted EBITDA.

Tenet management will discuss the Company’s first quarter 2013 results on an 11:30 a.m. (ET) webcast on April 30, 2013. This webcast may be accessed through Tenet’s website at .

Additional information regarding Tenet’s quarterly results of operations, including detailed tabular operational data, is contained in its Form 10-Q report, which will be filed with the Securities and Exchange Commission and posted on the Tenet investor relations website before the webcast. This press release includes certain non-GAAP measures, such as Adjusted EBITDA. A reconciliation of Adjusted EBITDA to net income attributable to Tenet common shareholders is included in the financial tables at the end of this release.

Tenet Healthcare Corporation, a leading health care services company, through its subsidiaries operates 49 hospitals, 122 free-standing outpatient centers and Conifer Health Solutions, a leader in business process solutions for health care providers that serves over 600 hospital and other clients nationwide. Tenet’s hospitals and related health care facilities are committed to providing high quality care to patients in the communities they serve. For more information, please visit .

This document contains “forward-looking statements” – that is, statements relating to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include the factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended Dec. 31, 2012, our quarterly reports on Form 10-Q, periodic reports on Form 8-K and other filings with the Securities and Exchange Commission. The Company assumes no obligation to update forward-looking statements contained in this press release as a result of new information or future events or developments.

Adjusted EBITDA, a non-GAAP term, is defined by the Company as net income (loss) attributable to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, net of tax; (2) net loss (income) attributable to noncontrolling interests; (3) preferred stock dividends; (4) income (loss) from discontinued operations, net of tax; (5) income tax benefit (expense); (6) investment earnings (loss); (7) gain (loss) from early extinguishment of debt; (8) net gain (loss) on sales of investments; (9) interest expense; (10) litigation and investigation benefit (costs), net of insurance recoveries; (11) hurricane insurance recoveries, net of costs; (12) impairment and restructuring charges and acquisition-related costs; and (13) depreciation and amortization. The Company’s Adjusted EBITDA may not be comparable to EBITDA reported by other companies.

The Company provides this information as a supplement to GAAP information to assist itself and investors in understanding the impact of various items on its financial statements, some of which are recurring or involve cash payments. The Company uses this information in its analysis of the performance of its business excluding items that it does not consider as relevant in the performance of its hospitals in continuing operations. In addition, from time to time we use this measure to define certain performance targets under our compensation programs. Adjusted EBITDA is not a measure of liquidity, but is a measure of operating performance that management uses in its business as an alternative to net income (loss) attributable to Tenet Healthcare Corporation common shareholders. Because Adjusted EBITDA 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 the Company’s financial performance.

The reconciliation of net income (loss) attributable to Tenet Healthcare Corporation common shareholders, the most comparable GAAP term, to Adjusted EBITDA, is set forth in the first table below for the three months ended March 31, 2013 and 2012.

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