TENET HEALTHCARE CORP [THC] Filings

10-Q 1 thc-20220331.htm 10-Q thc-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q


ý			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2022


¨			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission File Number 1-7293

_________________________________________

TENET HEALTHCARE CORPORATION

(Exact name of Registrant as specified in its charter)


Nevada			95-2557091
(State of Incorporation)			(IRS Employer Identification No.)

14201 Dallas Parkway

Dallas, TX 75254

(Address of principal executive offices, including zip code)

(469) 893-2200

(Registrant’s telephone number, including area code)

_____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock,

$0.05 par value

THC

New York Stock Exchange

6.875% Senior Notes due 2031

THC31

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ý No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company (each as defined in Exchange Act Rule 12b-2).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ¨ No ý

At April 22, 2022, there were 107,722,502 shares of the Registrant’s common stock outstanding.

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TENET HEALTHCARE CORPORATION

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Financial Statements	1

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 4.	Controls and Procedures	55



PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56



Item 6.	Exhibits	57

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(Unaudited)


	March 31,		December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,405	$	2,364
Accounts receivable	2,916		2,770
Inventories of supplies, at cost	391		384

Assets held for sale	19		—
Other current assets	1,397		1,557
Total current assets	6,128		7,075
Investments and other assets	3,385		3,254
Deferred income taxes	2		65
Property and equipment, at cost, less accumulated depreciation and amortization ($6,083 at March 31, 2022 and $5,960 at December 31, 2021)	6,296		6,427
Goodwill	9,352		9,261
Other intangible assets, at cost, less accumulated amortization ($1,330 at March 31, 2022 and $1,374 at December 31, 2021)	1,487		1,497
Total assets	$	26,650	$	27,579
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	132	$	135
Accounts payable	1,114		1,300
Accrued compensation and benefits	813		896
Professional and general liability reserves	272		254
Accrued interest payable	255		203

Contract liabilities	776		959
Other current liabilities	1,306		1,362
Total current liabilities	4,668		5,109
Long-term debt, net of current portion	14,719		15,511
Professional and general liability reserves	803		791
Defined benefit plan obligations	414		421
Deferred income taxes	36		36
Contract liabilities – long-term	14		15
Other long-term liabilities	1,582		1,439
Total liabilities	22,236		23,322
Commitments and contingencies
Redeemable noncontrolling interests in equity of consolidated subsidiaries	2,358		2,203
Equity:
Shareholders’ equity:
Common stock, $0.05 par value; authorized 262,500,000 shares; 156,019,148 shares issued at March 31, 2022 and 155,520,691 shares issued at December 31, 2021	8		8
Additional paid-in capital	4,765		4,877
Accumulated other comprehensive loss	(233)		(233)
Accumulated deficit	(1,074)		(1,214)
Common stock in treasury, at cost, 48,331,319 shares at March 31, 2022 and 48,331,649 shares at December 31, 2021	(2,410)		(2,410)
Total shareholders’ equity	1,056		1,028
Noncontrolling interests	1,000		1,026
Total equity	2,056		2,054
Total liabilities and equity	$	26,650	$	27,579

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in Millions, Except Per-Share Amounts

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net operating revenues	$	4,745	$	4,781
Grant income	6		31
Equity in earnings of unconsolidated affiliates	46		42
Operating expenses:
Salaries, wages and benefits	2,182		2,201
Supplies	785		804
Other operating expenses, net	942		1,072
Depreciation and amortization	203		224
Impairment and restructuring charges, and acquisition-related costs	16		20
Litigation and investigation costs	20		13
Net losses on sales, consolidation and deconsolidation of facilities	1		—
Operating income	648		520
Interest expense	(227)		(240)
Other non-operating income, net	—		10
Loss from early extinguishment of debt	(43)		(23)
Income from continuing operations, before income taxes	378		267
Income tax expense	(99)		(45)
Income from continuing operations, before discontinued operations	279		222
Discontinued operations:
Income from operations	1		—

Income from discontinued operations	1		—
Net income	280		222
Less: Net income available to noncontrolling interests	140		125
Net income available to Tenet Healthcare Corporation common shareholders	$	140	$	97
Amounts available to Tenet Healthcare Corporation common shareholders
Income from continuing operations, net of tax	$	139	$	97
Income from discontinued operations, net of tax	1		—
Net income available to Tenet Healthcare Corporation common shareholders	$	140	$	97
Earnings per share available to Tenet Healthcare Corporation common shareholders:
Basic
Continuing operations	$	1.29	$	0.91
Discontinued operations	0.01		—
	$	1.30	$	0.91
Diluted
Continuing operations	$	1.27	$	0.90
Discontinued operations	0.01		—
	$	1.28	$	0.90
Weighted average shares and dilutive securities outstanding (in thousands):
Basic	107,483		106,309
Diluted	112,020		108,065

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME

Dollars in Millions

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net income	$	280	$	222
Other comprehensive income:
Amortization of net actuarial loss included in other non-operating income, net	2		3
Unrealized losses on debt securities held as available-for-sale	(2)		—


Other comprehensive income before income taxes	—		3
Income tax expense related to items of other comprehensive income	—		(4)
Total other comprehensive loss, net of tax	—		(1)
Comprehensive net income	280		221
Less: Comprehensive income available to noncontrolling interests	140		125
Comprehensive income available to Tenet Healthcare Corporation common shareholders	$	140	$	96

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net income	$	280	$	222
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	203		224
Deferred income tax expense	63		24
Stock-based compensation expense	16		14
Impairment and restructuring charges, and acquisition-related costs	16		20
Litigation and investigation costs	20		13
Net losses on sales, consolidation and deconsolidation of facilities	1		—
Loss from early extinguishment of debt	43		23
Equity in earnings of unconsolidated affiliates, net of distributions received	21		28
Amortization of debt discount and debt issuance costs	8		9
Pre-tax income from discontinued operations	(1)		—
Other items, net	(64)		(7)
Changes in cash from operating assets and liabilities:
Accounts receivable	(151)		(53)
Inventories and other current assets	181		130
Income taxes	29		19
Accounts payable, accrued expenses, contract liabilities and other current liabilities	(360)		(87)
Other long-term liabilities	(21)		6
Payments for restructuring charges, acquisition-related costs, and litigation costs and settlements	(56)		(51)

Net cash provided by operating activities	228		534
Cash flows from investing activities:
Purchases of property and equipment	(155)		(121)
Purchases of businesses or joint venture interests, net of cash acquired	(40)		(25)
Proceeds from sales of facilities and other assets	148		13

Proceeds from sales of marketable securities, long-term investments and other assets	6		6
Purchases of marketable securities and equity investments	(19)		(11)

Other items, net	—		(7)
Net cash used in investing activities	(60)		(145)
Cash flows from financing activities:


Repayments of borrowings	(879)		(541)
Proceeds from borrowings	2		4
Debt issuance costs	(3)		—
Distributions paid to noncontrolling interests	(135)		(119)
Proceeds from sale of noncontrolling interests	4		6
Purchases of noncontrolling interests	(14)		(2)

Medicare advances and grants received by unconsolidated affiliates, net of recoupment	—		19
Other items, net	(102)		(61)
Net cash used in financing activities	(1,127)		(694)
Net decrease in cash and cash equivalents	(959)		(305)
Cash and cash equivalents at beginning of period	2,364		2,446
Cash and cash equivalents at end of period	$	1,405	$	2,141
Supplemental disclosures:
Interest paid, net of capitalized interest	$	(166)	$	(190)
Income tax payments, net	$	(8)	$	(2)

See accompanying Notes to Condensed Consolidated Financial Statements.

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TENET HEALTHCARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Description of Business and Basis of Presentation

Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we” or “us”) is a diversified healthcare services company headquartered in Dallas, Texas. Our care delivery network includes our subsidiary USPI Holding Company, Inc. (“USPI”), which operated or had ownership interests in over 400 ambulatory surgery centers and 24 surgical hospitals at March 31, 2022. We hold noncontrolling interests in 167 of these facilities, which are recorded using the equity method of accounting. At March 31, 2022, we held an ownership interest in USPI of approximately 95%. We also operated 60 acute care and specialty hospitals, over 110 other outpatient facilities, a network of employed physicians and a Global Business Center (“GBC”) in Manila, Philippines at March 31, 2022. In addition, we operate Conifer Health Solutions, LLC through our Conifer Holdings, Inc. subsidiary (“Conifer”). We owned an interest of approximately 76% in Conifer Health Solutions, LLC at March 31, 2022.

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 our acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro‑hospitals and physician practices. Our Ambulatory Care segment is comprised of the operations of USPI, which holds ownership interests in ambulatory surgery centers and surgical hospitals. Our Conifer segment provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients.

This quarterly report supplements our Annual Report on Form 10‑K for the year ended December 31, 2021 (“Annual Report”). As permitted by the Securities and Exchange Commission for interim reporting, we have omitted certain notes and disclosures that substantially duplicate those in our Annual Report. For further information, refer to the audited Consolidated Financial Statements and notes included in our Annual Report. Unless otherwise indicated, all financial and statistical data included in these notes to our Condensed Consolidated Financial Statements relate to our continuing operations, with dollar amounts expressed in millions (except per‑share amounts).

Effective January 1, 2022, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”) using the modified retrospective method. Among other amendments, ASU 2020-06 changed the accounting for diluted earnings‑per‑share for convertible instruments and contracts that may be settled in cash or stock. ASU 2020-06 eliminated an entity’s ability to rebut the presumption of share settlement for convertible instruments and contracts that can be partially or fully settled in cash at the issuer’s election. Additionally, ASU 2020-06 requires that the if‑converted method, which is more dilutive than the treasury stock method, be used for all convertible instruments. As a result of our adoption of ASU 2020-06, diluted weighted average shares outstanding increased by three million shares and diluted earnings per share available to Tenet common shareholders decreased $0.01 per share for the three months ended March 31, 2022.

Although the Condensed Consolidated Financial Statements and related notes within this document are unaudited, we believe all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. In preparing our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), we are required to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and these 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. Financial and statistical information we report to other regulatory agencies may be prepared on a basis other than GAAP or using different assumptions or reporting periods and, therefore, may vary from amounts presented herein. Although we make every effort to ensure that the information we report to those agencies is accurate, complete and consistent with applicable reporting guidelines, we cannot be responsible for the accuracy of the information they make available to the public.

Operating results for the three‑month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are not limited to: the impact of the COVID‑19 pandemic on our operations, business, financial condition and cash flows; the impact of the demand for, and availability of, qualified medical personnel on compensation costs; overall revenue and cost trends, particularly the timing and magnitude of price changes; fluctuations in contractual allowances and cost report settlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; trends in patient accounts receivable collectability and associated implicit

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price concessions; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; impairment of long‑lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to natural disasters and other weather‑related occurrences; litigation and investigation costs; acquisitions and dispositions of facilities and other assets; gains (losses) on sales, consolidation and deconsolidation of facilities; income tax rates and deferred tax asset valuation allowance activity; changes in estimates of accruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unit grants to employees and directors; gains (losses) from early extinguishment of debt; and changes in occupancy levels and patient volumes. Factors that affect service mix, revenue mix, patient volumes and, thereby, the results of operations at our hospitals and related healthcare facilities include, but are not limited to: changes in federal, state and local healthcare and business regulations, including mandated closures and other operating restrictions; the business environment, economic conditions and demographics of local communities in which we operate; the number of uninsured and underinsured individuals in local communities treated at our hospitals; disease hotspots and seasonal cycles of illness; climate and weather conditions; physician recruitment, satisfaction, retention and attrition; advances in technology and treatments that reduce length of stay; local healthcare competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; hospital performance data on quality measures and patient satisfaction, as well as standard charges for services; any unfavorable publicity about us, or our joint venture partners, that impacts our relationships with physicians and patients; and changing consumer behavior, including with respect to the timing of elective procedures. These considerations apply to year‑to‑year comparisons as well.

COVID‑19 Pandemic

The COVID‑19 pandemic has impacted all three segments of our business, as well as our patients, communities and employees, in varying degrees since March 2020. Throughout this time, federal, state and local authorities have undertaken several actions designed to assist healthcare providers in providing care to COVID‑19 and other patients and to mitigate the adverse economic impact of the COVID‑19 pandemic. Among other things, federal legislation (collectively, the “COVID Acts”) authorized aggregate grant payments of $178 billion to be distributed through the Public Health and Social Services Emergency Fund (“PRF”) to healthcare providers who experienced lost revenues and increased expenses as a result of the pandemic. The COVID Acts also revised the Medicare accelerated payment program (“MAPP”) and permitted employers to defer Social Security tax payments in 2020. Our participation in these programs and the related accounting policies are summarized below.

Grant Income–During the three months ended March 31, 2022, we received cash payments of $5 million from the PRF, included in cash flows from operating activities. During the three months ended March 31, 2021, we received cash payments of $31 million, included in cash flows from operating activities, and $28 million received by our unconsolidated affiliates, included in cash flows from financing activities, from the PRF and state and local grant programs. As a condition to receiving distributions, providers must agree to certain terms and conditions, including, among other things, that the funds are being used for lost revenues and unreimbursed COVID‑related costs as defined by the U.S. Department of Health and Human Services (“HHS”), and that the providers will not seek collection of out‑of‑pocket payments from a COVID‑19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in‑network provider. All recipients of PRF payments are required to comply with the reporting requirements described in the terms and conditions and as determined by the Secretary of HHS. PRF funds not utilized by the established deadlines, generally 12 to 18 months after receipt of the grant funds, will be recouped by HHS.

The table below summarizes grant funds received by our Hospital Operations and Ambulatory Care segments and by our unconsolidated affiliates for which we provide cash management services during the three months ended March 31, 2022 and 2021, and their location in the accompanying Condensed Consolidated Statements of Cash Flows.


	Three Months Ended March 31,
	2022		2021
Grant payments received from COVID-19 relief programs:
Included in cash flows from operating activities:
Hospital Operations	$	4	$	22
Ambulatory Care	1		9
	$	5	$	31

Included in cash flows from financing activities:
Unconsolidated affiliates for which we provide cash management services	$	—	$	28

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We recognize grant payments as income when there is reasonable assurance that we have complied with the conditions associated with the grant. The estimates we use to recognize grant income could change materially in the future based on our operating performance or fluctuations in the severity of COVID‑19 outbreaks at individual locations, as well as the government’s grant compliance guidance. 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 our condensed consolidated statements of operations.

The table below summarizes grant income recognized by our Hospital Operations and Ambulatory Care segments during the three months ended March 31, 2022 and 2021, as well as the grant income recognized by our unconsolidated affiliates during the same periods.


	Three Months Ended March 31,
	2022		2021









Grant income recognized from COVID-19 relief programs:
Included in grant income:
Hospital Operations	$	4	$	24
Ambulatory Care	2		7
	$	6	$	31

Included in equity in earnings of unconsolidated affiliates:
Unconsolidated affiliates	$	—	$	6

At March 31, 2022 and December 31, 2021, we had remaining deferred grant payment balances of $3 million and $5 million, respectively, which amounts were recorded in other current liabilities in the accompanying Condensed Consolidated Balance Sheets for those periods.

Medicare Accelerated Payment Program–In certain circumstances, when a hospital is experiencing financial difficulty due to delays in receiving payment for the Medicare services it provided, it may be eligible for an accelerated or advance payment pursuant to the MAPP. The COVID Acts revised the MAPP to disburse payments to healthcare providers more quickly. Recipients may retain the accelerated payments for one year from the date of receipt before recoupment commences, which is effectuated by a 25% offset of claims payments for 11 months, followed by a 50% offset for the succeeding six months. At the end of the 29‑month period, interest on the unrecouped balance will be assessed at 4.00% per annum. The initial 11‑month recoupment period began in April 2021.

Our Hospital Operations and Ambulatory Care segments did not receive any additional advance payments from the MAPP during the three months ended March 31, 2022 or 2021. During the three months ended March 31, 2022, $194 million of advances received in prior periods by our Hospital Operations segment and less than $1 million of advances received in prior periods by our Ambulatory Care segment were recouped through a reduction of our Medicare claims payments. No advances were recouped during the three months ended March 31, 2021. In the accompanying Condensed Consolidated Balance Sheets, advances totaling $686 million and $880 million were included in contract liabilities at March 31, 2022 and December 31, 2021, respectively.

Deferral of Employment Tax Payments–The COVID Acts permitted employers to defer payment of the 6.2% employer Social Security tax beginning March 27, 2020 through December 31, 2020. Deferred tax amounts are required to be paid in equal amounts over two years, with payments due in December 2021 and December 2022. At both March 31, 2022 and December 31, 2021, deferred Social Security tax payments totaling $128 million were included in accrued compensation and benefits in the accompanying Condensed Consolidated Balance Sheets.

Leases

During the three months ended March 31, 2022, we sold several medical office buildings held in our Hospital Operations segment for net cash proceeds of $147 million and concurrently entered into operating lease agreements to continue use of the facilities. We recognized a gain of $69 million from the sale of these buildings, presented in other operating expenses, net in the accompanying Condensed Consolidated Statement of Operations, and we recognized right-of-use assets and lease-related obligations of $109 million related to the leases, in each case in the three months ended March 31, 2022.

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Cash and Cash Equivalents

We treat highly liquid investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents were $1.405 billion and $2.364 billion at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022 and December 31, 2021, our book overdrafts were $175 million and $226 million, respectively, which were classified as accounts payable. At March 31, 2022 and December 31, 2021, $176 million and $188 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our insurance‑related subsidiaries.

Also at March 31, 2022 and December 31, 2021, we had $66 million and $95 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, $53 million and $88 million, respectively, were included in accounts payable.

During the three months ended March 31, 2022 and 2021, we recorded right‑of‑use assets related to non‑cancellable finance leases of $18 million and $11 million, respectively, and related to non‑cancellable operating leases of $187 million and $46 million, respectively.

Other Intangible Assets

The following tables provide information regarding other intangible assets, which were included in the accompanying Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021:


	Gross Carrying Amount		Accumulated Amortization		Net Book Value
At March 31, 2022:
Other intangible assets with finite useful lives:
Capitalized software costs	$	1,714	$	(1,119)	$	595
Contracts	295		(133)		162
Other	96		(78)		18
Total other intangible assets with finite lives	2,105		(1,330)		775

Other intangible assets with indefinite useful lives:
Trade names	102		—		102
Contracts	604		—		604
Other	6		—		6
Total other intangible assets with indefinite lives	712		—		712
Total other intangible assets	$	2,817	$	(1,330)	$	1,487


	Gross Carrying Amount		Accumulated Amortization		Net Book Value
At December 31, 2021:
Other intangible assets with finite useful lives:
Capitalized software costs	$	1,770	$	(1,165)	$	605
Contracts	295		(128)		167
Other	95		(81)		14
Total other intangible assets with finite lives	2,160		(1,374)		786

Other intangible assets with indefinite useful lives:
Trade names	102		—		102
Contracts	602		—		602
Other	7		—		7
Total other intangible assets with indefinite lives	711		—		711
Total other intangible assets	$	2,871	$	(1,374)	$	1,497

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Estimated future amortization of intangibles with finite useful lives at March 31, 2022 is as follows:


			Nine Months Ending		Years Ending								Later Years
					December 31,
	Total		2022		2023		2024		2025		2026
Amortization of intangible assets	$	775	$	119	$	119	$	116	$	96	$	76	$	249

We recognized amortization expense of $29 million and $47 million in the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021, respectively.

Investments in Unconsolidated Affiliates

We control 261 of the facilities within our Ambulatory Care segment and, therefore, consolidate their results. We account for many of the facilities our Ambulatory Care segment operates (167 of 428 at March 31, 2022), as well as additional companies in which our Hospital Operations segment holds ownership interests, under the equity method as investments in unconsolidated affiliates and report only our share of net income as equity in earnings of unconsolidated affiliates in the accompanying Condensed Consolidated Statements of Operations. No grant income was recognized during the three months ended March 31, 2022 by our unconsolidated affiliates. Equity in earnings of unconsolidated affiliates included $6 million of grant income for the three months ended March 31, 2021.

Summarized financial information for these equity method investees is included in the following table. For investments acquired during the reported periods, amounts below include 100% of the investee’s results beginning on the date of our acquisition of the investment.


	Three Months Ended March 31,
	2022		2021
Net operating revenues	$	769	$	634
Net income	$	169	$	165
Net income available to the investees	$	98	$	102

NOTE 2. ACCOUNTS RECEIVABLE

The principal components of accounts receivable are presented in the table below:


	March 31, 2022		December 31, 2021

Patient accounts receivable	$	2,761	$	2,600
Estimated future recoveries	139		137
Net cost reports and settlements receivable and valuation allowances	16		33
	$	2,916	$	2,770

We participate in various provider fee programs, which help reduce the amount of uncompensated care from indigent patients and those paying with Medicaid. The following table summarizes the amount and classification of assets and liabilities in the accompanying Condensed Consolidated Balance Sheets related to California’s provider fee program:


	March 31, 2022		December 31, 2021
Assets:
Other current assets	$	271	$	370
Investments and other assets	$	278	$	213

Liabilities:
Other current liabilities	$	123	$	123
Other long-term liabilities	$	52	$	60

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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 March 31,
	2022		2021
Estimated costs for:
Uninsured patients	$	122	$	168
Charity care patients	21		20
Total	$	143	$	188

NOTE 3. CONTRACT BALANCES

Hospital Operations Segment

Amounts related to services provided to patients for which we have not billed and that do not meet the conditions of unconditional right to payment at the end of the reporting period are contract assets. For our Hospital Operations segment, our contract assets include services that we have provided to patients who are still receiving inpatient care in our facilities at the end of the reporting period. Our Hospital Operations segment’s contract assets were included in other current assets in the accompanying Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021. Approximately 91% of our Hospital Operations segment’s contract assets meet the conditions for unconditional right to payment and are reclassified to patient receivables within 90 days.

In certain circumstances, when a hospital is experiencing financial difficulty due to delays in receiving payment for the Medicare services it provided, it may be eligible for an accelerated or advance payment pursuant to the Medicare accelerated payment program. As discussed in Note 1, the COVID Acts revised the MAPP to disburse payments more quickly due to the pandemic. Our Hospital Operations segment received advance payments from the MAPP following its expansion under the COVID Acts during the year ended December 31, 2020; however, no additional advances were received during the three months ended March 31, 2022 and 2021. The remaining advance payments were recorded as contract liabilities in the accompanying Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021.

The opening and closing balances of contract assets and contract liabilities for our Hospital Operations segment were as follows:


	Contract Assets		Contract Liabilities – Current Advances from Medicare		Contract Liabilities – Long-Term Advances from Medicare
December 31, 2021	$	181	$	876	$	—
March 31, 2022	169		682		—
Decrease	$	(12)	$	(194)	$	—

December 31, 2020	$	208	$	510	$	819
March 31, 2021	180		734		595
Increase (decrease)	$	(28)	$	224	$	(224)

During the three months ended March 31, 2022, $194 million of Medicare advance payments included in the opening contract liabilities balance for our Hospital Operations segment were recouped through a reduction of our Medicare claims payments. No amounts were recouped during the three months ended March 31, 2021.

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Ambulatory Care Segment

Our Ambulatory Care segment also received advance payments from the expanded Medicare accelerated payment program during the year ended December 31, 2020; however no additional advances were received during the three months ended March 31, 2022 and 2021.

The opening and closing balances of contract liabilities for our Ambulatory Care segment were as follows:


	Contract Liabilities – Current Advances from Medicare		Contract Liabilities – Long-Term Advances from Medicare
December 31, 2021	$	4	$	—
March 31, 2022	4		—
Increase	$	—	$	—

December 31, 2020	$	93	$	83
March 31, 2021	123		44
Increase (decrease)	$	30	$	(39)

During the three months ended March 31, 2022, less than $1 million of Medicare advance payments included in the opening contract liabilities balance for our Ambulatory Care segment were recouped through a reduction of our Medicare claims payments. No amounts were recouped during the three months ended March 31, 2021.

Conifer Segment

Conifer enters into contracts with clients to provide revenue cycle management and other services, such as value‑based care, consulting and engagement solutions. The payment terms and conditions in Conifer’s client contracts vary. In some cases, clients are invoiced in advance and (for other than fixed‑price fee arrangements) a true‑up to the actual fee is included on a subsequent invoice. In other cases, payment is due in arrears. In addition, some contracts contain performance incentives, penalties and other forms of variable consideration. When the timing of Conifer’s delivery of services is different from the timing of payments made by its clients, Conifer recognizes either unbilled revenue (performance precedes contractual right to invoice the client) or deferred revenue (client payment precedes Conifer service performance). In the following table, clients that prepay prior to obtaining control/benefit of services are represented by deferred contract revenue until the performance obligations are satisfied. Unbilled revenue represents arrangements in which Conifer has provided services to and the client has obtained control/benefit of these services prior to the contractual invoice date. Contracts with payment in arrears are recognized as receivables in the month the services are performed.

The opening and closing balances of Conifer’s receivables, contract assets and contract liabilities were as follows:


	Receivables		Contract Assets – Unbilled Revenue		Contract Liabilities – Current Deferred Revenue		Contract Liabilities – Long-Term Deferred Revenue
December 31, 2021	$	28	$	18	$	79	$	15
March 31, 2022	34		15		90		14
Increase (decrease)	$	6	$	(3)	$	11	$	(1)

December 31, 2020	$	56	$	20	$	56	$	16
March 31, 2021	56		14		60		16
Increase (decrease)	$	—	$	(6)	$	4	$	—

The differences between the opening and closing balances of Conifer’s contract assets and contract liabilities are primarily related to prepayments for those clients who are billed in advance, changes in estimates related to metric‑based services, and up‑front integration services that are typically not distinct and are, therefore, recognized over the performance obligation period to which they relate. Our Conifer segment’s receivables and contract assets were reported as part of other current assets in the accompanying Condensed Consolidated Balance Sheets, and its current and long‑term contract liabilities were reported as part of contract liabilities and contract liabilities – long‑term, respectively, in the accompanying Condensed Consolidated Balance Sheets.

In both of the three months ended March 31, 2022 and 2021, Conifer recognized $49 million of revenue that was included in the opening current deferred revenue liability. This revenue consists primarily of prepayments for those clients who are billed in advance, changes in estimates related to metric‑based services, and up‑front integration services that are recognized over the services period.

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Contract Costs

During both of the three months ended March 31, 2022 and 2021, we recognized amortization expense related to deferred contract setup costs of $1 million. At both March 31, 2022 and December 31, 2021, the unamortized client contract costs were $23 million and were presented as part of investments and other assets in the accompanying Condensed Consolidated Balance Sheets.

NOTE 4. ASSETS AND LIABILITIES HELD FOR SALE

In February 2022, we entered into a definitive agreement to sell one of our micro‑hospitals located in Arizona. As a result, the assets associated with the micro‑hospital were classified as held for sale at March 31, 2022 in the accompanying Condensed Consolidated Balance Sheet. The sale of this micro‑hospital was completed in April 2022.

Assets classified as held for sale at March 31, 2022 were comprised of the following:





Property and equipment	$	15
Other intangible assets	1
Goodwill	3



Net assets held for sale	$	19

The table below provides information on significant components of our business that have been recently disposed of:


	Three Months Ended March 31,
	2022		2021
Significant disposals:
Income from continuing operations, before income taxes





Miami-area hospitals and certain related operations	$	4	$	13

NOTE 5. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION‑RELATED COSTS

Our impairment tests presume stable, improving or, in some cases, declining operating results in our facilities, which are based on programs and initiatives being implemented that are designed to achieve each facility’s most recent projections. If these projections are not met, or negative trends occur that impact our future outlook, future impairments of long‑lived assets and goodwill may occur, and we may incur additional restructuring charges, which could be material.

At March 31, 2022, our continuing operations consisted of three reportable segments – Hospital Operations, Ambulatory Care and Conifer. Our segments are reporting units used to perform our goodwill impairment analysis.

We periodically incur costs to implement restructuring efforts for specific operations, which are recorded in our statement of operations as they are incurred. Our restructuring plans focus on various aspects of operations, including aligning our operations in the most strategic and cost‑effective structure, such as the establishment of offshore support operations at our GBC. Certain restructuring and acquisition‑related costs are based on estimates. Changes in estimates are recognized as they occur.

During the three months ended March 31, 2022, we recorded impairment and restructuring charges and acquisition‑related costs of $16 million, primarily consisting of $12 million of restructuring charges, $1 million of impairment charges and $3 million of acquisition‑related costs. Restructuring charges consisted of $5 million of employee severance costs, $2 million related to the transition of various administrative functions to our GBC and $5 million of other restructuring costs. Acquisition‑related costs consisted of $3 million of transaction costs.

During the three months ended March 31, 2021, we recorded impairment and restructuring charges and acquisition‑related costs of $20 million, consisting of $16 million of restructuring charges and $4 million of acquisition‑related costs. Restructuring charges consisted of $4 million of employee severance costs, $6 million related to the transition of various administrative functions to our GBC and $6 million of other restructuring costs. Acquisition‑related costs consisted of $4 million of transaction costs.

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NOTE 6. LONG-TERM DEBT

The table below presents our long‑term debt included in the accompanying Condensed Consolidated Balance Sheets:


	March 31, 2022		December 31, 2021
Senior unsecured notes:

6.750% due 2023	$	1,769	$	1,872

6.125% due 2028	2,500		2,500
6.875% due 2031	362		362
Senior secured first lien notes:
4.625% due 2024	770		770
4.625% due 2024	600		600
7.500% due 2025	—		700
4.875% due 2026	2,100		2,100
5.125% due 2027	1,500		1,500
4.625% due 2028	600		600
4.250% due 2029	1,400		1,400
4.375% due 2030	1,450		1,450
Senior secured second lien notes:


6.250% due 2027	1,500		1,500

Finance leases, mortgage and other notes	437		443
Unamortized issue costs and note discounts	(137)		(151)
Total long-term debt	14,851		15,646
Less current portion	132		135
Long-term debt, net of current portion	$	14,719	$	15,511

Senior Unsecured Notes and Senior Secured Notes

On February 23, 2022, we redeemed all $700 million aggregate principal amount outstanding of our 7.500% senior secured first lien notes due 2025 in advance of their maturity date. We paid $730 million from cash on hand to redeem the notes. In connection with the redemption, we recorded a loss from early extinguishment of debt of $38 million in the three months ended March 31, 2022, primarily related to the difference between the purchase price and the par value of the notes, as well as the write‑off of associated unamortized issuance costs.

Through a series of open‑market transactions in March 2022, we repurchased $103 million aggregate principal amount outstanding of our 6.750% senior unsecured notes due 2023. We paid $107 million from cash on hand to complete these transactions. In connection with the repurchases, we recorded aggregate losses from early extinguishment of debt of $5 million in the three months ended March 31, 2022, primarily related to the difference between the purchase prices and the par value of the notes, as well as the write‑off of associated unamortized issuance costs.

Credit Agreement

We have a senior secured revolving credit facility that provides for revolving loans in an aggregate principal amount of up to $1.500 billion with a $200 million subfacility for standby letters of credit. We amended our credit agreement (as amended to date, the “Credit Agreement”) in April 2020 to, among other things, (i) increase the aggregate revolving credit commitments from the previous limit of $1.500 billion to $1.900 billion (the “Increased Commitments”), subject to borrowing availability, and (ii) increase the advance rate and raise limits on certain eligible accounts receivable in the calculation of the borrowing base, in each case, for an incremental period of 364 days. In April 2021, we amended the Credit Agreement to, among other things, extend the availability of the Increased Commitments through April 22, 2022 and reduce the interest rate margins. In March 2022, we further amended our Credit Agreement to, among other things, (i) decrease the aggregate revolving credit commitments from the previous Increased Commitments to aggregate revolving credit commitments not to exceed $1.500 billion, subject to borrowing availability, (ii) extend the scheduled maturity date to March 16, 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 March 31, 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 revolving credit facility at March 31, 2022.

Obligations under the Credit Agreement continue to be guaranteed by substantially all of our domestic wholly owned hospital subsidiaries and secured by a first‑priority lien on the eligible inventory and accounts receivable owned by us and the subsidiary guarantors, including receivables for Medicaid supplemental payments.

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Outstanding revolving loans accrue interest depending on the type of loan at either (a) a base rate plus an applicable margin ranging from 0.25% to 0.75% per annum or (b) Term SOFR, Daily Simple SOFR or the Euro Interbank Offered Rate (EURIBOR) (each, as defined in the Credit Agreement) plus an applicable margin ranging from 1.25% to 1.75% per annum and (in the case of Term SOFR and Daily Simple SOFR only) a credit spread adjustment of 0.10%, in each case based on available credit. An unused commitment fee payable on the undrawn portion of the revolving loans ranges from 0.25% to 0.375% per annum based on available credit. Our borrowing availability is based on a specified percentage of eligible inventory and accounts receivable, including self‑pay accounts.

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. Obligations under the LC Facility are guaranteed and secured by a first‑priority pledge of the capital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal‑ranking basis with our senior secured first lien notes.

Drawings under any letter of credit issued under the LC Facility that we have not reimbursed within three business days after notice thereof accrue interest at a base rate plus a margin of 0.50% per annum. An unused commitment fee is payable at an initial rate of 0.25% per annum with a step up to 0.375% per annum should our secured‑debt‑to‑EBITDA ratio equal or exceed 3.00 to 1.00 at the end of any fiscal quarter. A fee on the aggregate outstanding amount of issued but undrawn letters of credit accrues at a rate of 1.50% per annum. An issuance fee equal to 0.125% per annum of the aggregate face amount of each outstanding letter of credit is payable to the account of the issuer of the related letter of credit. The LC Facility is subject to an effective maximum secured debt covenant of 4.25 to 1.00. At March 31, 2022, we had $138 million of standby letters of credit outstanding under the LC Facility.

NOTE 7. GUARANTEES

At March 31, 2022, the maximum potential amount of future payments under our income guarantees to certain physicians who agree to relocate and revenue collection guarantees to hospital‑based physician groups providing certain services at our hospitals was $118 million. We had a total liability of $102 million recorded for these guarantees included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet at March 31, 2022.

At March 31, 2022, we also had issued guarantees of the indebtedness and other obligations of our investees to third parties, the maximum potential amount of future payments under which was approximately $109 million. Of the total, $16 million relates to the obligations of consolidated subsidiaries, which obligations were recorded in the accompanying Condensed Consolidated Balance Sheet at March 31, 2022.

NOTE 8. EMPLOYEE BENEFIT PLANS

Share-Based Compensation Plans

The accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 include $16 million and $14 million, respectively, of pre-tax compensation costs related to our stock‑based compensation arrangements.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2022:


	Number of Options	Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value	Weighted Average Remaining Life
				(In Millions)
Outstanding at December 31, 2021	520,998	$	23.90

Exercised	(60,051)	$	28.26

TENET HEALTHCARE CORP [THC] Filings
10-Q	[2022-04-29]
10-K	[2022-02-18]
10-Q	[2021-10-29]
10-Q	[2021-07-30]
10-Q	[2021-04-30]
10-K	[2021-02-19]
10-Q	[2020-10-30]
10-Q	[2020-08-03]
10-Q	[2020-05-04]
10-K	[2020-02-24]
10-Q	[2019-11-04]
10-Q	[2019-08-05]
10-Q	[2019-04-29]
10-K	[2019-02-25]
10-Q	[2018-11-05]
10-Q	[2018-08-06]
10-Q	[2018-04-30]
10-K	[2018-02-26]
10-Q	[2017-11-07]
10-Q	[2017-08-07]
10-Q	[2017-05-01]
10-K	[2017-02-27]
10-Q	[2016-10-31]
10-Q	[2016-08-01]
10-Q	[2016-05-02]
10-K	[2016-02-22]
10-Q	[2015-11-02]
10-Q	[2015-08-03]
10-Q	[2015-05-04]
10-K	[2015-02-23]
10-Q	[2014-11-03]
10-Q	[2014-08-04]
10-Q	[2014-05-05]
10-K	[2014-02-24]
10-Q	[2013-11-04]
10-Q	[2013-08-06]
10-Q	[2013-04-30]
10-K	[2013-02-26]
10-Q	[2012-11-07]
10-Q	[2012-08-07]
10-Q	[2012-05-08]
10-K	[2012-02-28]