THC - Tenet Healthcare Corporation

Operator: Good morning, welcome to Tenet Healthcare's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. William McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's third quarter 2025 results as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Saum. Saumya Sutaria: All right. Thank you, Will, and good morning, everyone. We had another quarter of strong performance where we exceeded our expectations for revenue, adjusted EBITDA and margins. Third quarter 2025 net operating revenues were $5.3 billion, and consolidated adjusted EBITDA grew 12% over the third quarter 2024 to $1.1 billion. This represents an adjusted EBITDA margin of 20.8%, which is 170 basis points improvement over the prior year, driven by our strong same-store growth and continued operating efficiency. USPI continues to excel, and we generated $492 million in adjusted EBITDA, which represents 12% growth year-over-year. Same-facility revenues grew by 8.3% in the third quarter, highlighted by 11% growth in total joint replacements in the ASCs over the prior year. Our M&A and de novo activity remains robust as we acquired 11 centers and opened 2 de novo centers in the quarter, including facilities specializing in high acuity procedures such as spine and orthopedics. We have already spent nearly $300 million on M&A in this space year-to-date and expect to continue adding additional centers in the fourth quarter. The M&A and de novo pipelines remain strong. Turning to our hospital segment. Adjusted EBITDA grew 13% to $607 million in the third quarter of 2025. Same-store hospital admissions, adjusted admissions were up 1.4% in the quarter. And third quarter 2025 revenue per adjusted admission was up 5.9% over the prior year as payer mix and acuity remains strong. In September, we opened our newest hospital facility in Port St. Lucie, Florida. This facility expands capacity in one of the fastest-growing areas in the country. The hospital will provide comprehensive emergency in specialty care and is focused on leveraging state-of-the-art technology, including robotics and advanced cardiac catheterization techniques. Turning to our full year guidance. At this point in the year, we are once again raising our full year 2025 adjusted EBITDA guidance to a range of $4.47 billion to $4.57 billion. Building upon our substantial post second quarter guidance increase, indicating the confidence we have in our business this year, we have now increased our adjusted EBITDA guidance by $445 million or 11% at the midpoint of the range from our initial guidance. Additionally, we are increasing our investments in capital expenditures in 2025 and now expect to invest $875 million to $975 million to fuel organic growth in the future, a $150 million increase at the midpoint over our prior expectations. In addition to this increased investment, we are also raising our expectations for full year 2025 free cash flow minus NCI to a range of $1.495 billion to $1.695 billion, an increase of $250 million at the midpoint from our previous guidance range. This increase is driven not only by the fundamental growth in adjusted EBITDA, but also by the strong cash collection performance of Conifer. Let me turn to 2026 with a few points. Uncertainty about the enhanced premium tax subsidies and the impact on reimbursement and enrollment in the exchanges still exists. Approvals for various increases in state directed payment programs for 2026 are still pending. Currently, in our hospital segment planning process, we see healthy patient demand that would support same-store volume growth and a stable operating environment supported by disciplined cost controls in 2026. Our strategy, which is more focused on higher acuity services, has delivered a track record of improved margins and strong earnings growth over the past few years. The return on invested capital for this improved portfolio of hospital assets is such that we have confidently increased our CapEx per bed from prior levels to higher levels in both 2024 and 2025, and we should continue to see the benefits of that into 2026. At USPI, we expect same-store revenue growth in line with our long-term expectations, a continued focus on high acuity cases, operational efficiencies and disciplined cost controls. Additionally, we expect further contributions from M&A and de novo development. I would note that USPI is less exposed to Medicaid and the exchanges and our ASCs are on freestanding rates. We will continue to operate and invest in this attractive segment. In summary, we continue to deliver our commitments for sustained growth, expanding margins, a delevered balance sheet, and improved free cash flow generation. Our strong execution is driving attractive EBITDA growth that we are converting into significant free cash flow and our transformed portfolio of businesses are well positioned to drive sustained performance in the future. And with that, Sun will provide us a more detailed review of our financial results. Sun, over to you. Sun Park: Thank you, Saum, and good morning, everyone. We delivered strong results in third quarter 2025 with adjusted EBITDA above the high end of our guidance range, once again driven by strong same-store revenue growth, continued high patient acuity, favorable payer mix and effective cost controls. We generated total net operating revenues of $5.3 billion and consolidated adjusted EBITDA of $1.1 billion, a 12.4% increase year-over-year. Our adjusted EBITDA margin in the quarter was 20.8%, a continuation of our improved margin performance over multiple quarters. I would now like to highlight some key items for both of our segments, beginning with USPI, which again delivered strong operating results. In the third quarter, USPI's adjusted EBITDA grew 12% over last year, with adjusted EBITDA margins at 38.6%. USPI delivered an 8.3% increase in same-facility system-wide revenues with net revenue per case up 6.1% and same-facility case volumes up 2.1% -- turning to our hospital segment. Third quarter 2025 adjusted EBITDA was $607 million, with margins up 160 basis points over last year at 15.1%. Same-hospital inpatient adjusted admissions increased 1.4% and revenue per adjusted admissions grew 5.9%. Our consolidated salary, wages and benefits was 41.7% of net revenues, a 160 basis point improvement from the prior year, and our contract labor expense was 1.9% of consolidated SWB expenses. These improvements continue to be driven by our data-driven approach to capacity and labor management and disciplined operating expense controls. Finally, we recognized a $38 million pretax impact for Medicaid supplemental revenues related to prior years in the third quarter of 2025. As a reminder, in total, year-to-date, we have recorded $148 million of favorable pretax impacts associated with Medicaid supplemental revenues related to prior years. Next, we will discuss our cash flow, balance sheet and capital structure. We generated $778 million of free cash flow in the third quarter, amounting to $2.16 billion of free cash flow year-to-date, which is up 22% over the same 9-month period in the prior year. As of September 30, 2025, we had $2.98 billion of cash on hand with no borrowings outstanding under our line of credit facility. Additionally, we have no significant debt maturities until 2027. And finally, during the third quarter, we repurchased 598,000 shares of our stock for $93 million. Year-to-date through September 30, we have repurchased 7.8 million shares for $1.2 billion. Our leverage ratio as of September 30 was 2.3x EBITDA or 2.93x EBITDA less NCI, driven by our outstanding operational performance and continued focus on financial discipline. We believe we have significant financial flexibility to support our capital allocation priorities and drive shareholder value and are very pleased with our ongoing cash flow generation capabilities. We remain committed to a deleveraged balance sheet. Let me now turn to our outlook for 2025. For '25, we now expect consolidated net operating revenues in the range of $21.15 billion to $21.35 billion, an increase of $150 million over prior expectations. As Saum mentioned, we are raising our 2025 adjusted EBITDA outlook range by $50 million at the midpoint to $4.47 billion to $4.57 billion, reflecting our outperformance in the hospital business. This is in addition to the substantial $395 million guidance raise that we announced in the second quarter. At the midpoint of our range, we now expect our full year 2025 adjusted EBITDA to grow 13% over 2024. Turning to our cash flows for 2025. We now expect free cash flows in the range of $2.275 billion to $2.525 billion, distributions to noncontrolling interest in the range of $780 million to $830 million, resulting in free cash flow after NCI in the range of $1.495 billion to $1.695 billion, an increase of $250 million at the midpoint from our previous guidance range. This reflects our focus on strong free cash flow conversion from our EBITDA growth, the continued outstanding cash collection performance of Conifer and continued investment into high-priority areas of our business. Now turning to our capital deployment priorities. We are well positioned to create value for shareholders through the effective deployment of free cash flow, and our priorities have not changed. First, we will continue to prioritize capital investments to grow USPI through M&A. Second, we expect to continue investing in key hospital growth opportunities to fuel organic growth, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll continue to have a balanced approach to share repurchases depending on market conditions and other investment opportunities. We continue to deliver consistent growth and have disciplined operations, which has translated into outstanding financial results. We are confident in our ability to deliver on our increased outlook for 2025 as we continue to provide high-quality care for our patients. And with that, we're ready to begin the Q&A. Operator? Operator: [Operator Instructions] Our first question comes from Kevin Fischbeck with Bank of America. Kevin Fischbeck: I wanted to ask you about the Q4 guidance and kind of the expectations for utilization. Are you guys building anything in there for higher utilization before these subsidies expire? And how do you think about the capacity, I guess, particularly within USPI to accommodate utilization there? And then I guess, secondly, you mentioned that USPI is insulated from the headwinds for next year, but just trying to understand a little bit where you do see that pressure. I guess can you talk a little bit about exchange exposure within USPI? Saumya Sutaria: All right. There's a lot of questions in there, Kevin. So let me just tackle one by one and Sun, we can kind of complement here. First of all, we haven't built in anything nor are we seeing any kind of rush to the office, if you will, with respect to the exchange subsidies. We're not planning nor are we saying that we expect them to expire at this stage. I think much of what we're hearing is that it may take time, but a compromise will be achieved from our intelligence coming from Washington. So we're just sort of patiently waiting to see what happens there. From a capacity utilization standpoint, at USPI, we typically have, as you know, a busier late November and certainly December. And have planned for staffing and capacity stretch that happens in that time period every year. So the simplest way to look at it is we're not worried about our capacity to take on the demand that we would see in the typical end of the fourth quarter at USPI. We begin planning for that every year, months in advance with a very well-established protocol of how we do things. And there should be no reason that's different this year, including if there happened to be more demand that came because of the -- any kind of change in the exchanges or whatever that may be ahead of us from that perspective. What we have said about exchange business at USPI is a couple of things. One is there's a lot less exposure there on a per case or revenue basis than in the hospital segment. And the reason for that, we have said is that we typically see the exchange business, especially newer exchange members behaving with consumption patterns that are more similar to, for example, Medicaid, and that explains some of the difference. Sun, I don't know if there's anything you want to add here. Sun Park: Yes. Just a couple of metrics, Saum. Thank you. Kevin, I would also just note for USPI, our implied Q4 guidance is about an increase of $80 million roughly from Q3 into Q4, which is fairly standard if you look at our historical pacing and change into Q4. So I think we remain confident in our -- both our capacity as well as our ability to take care of those patients. And then exchange, I would just note for Q3, exchange was 8.4% of our total admissions and 7% of our total consolidated revenues. So a slight increase in total as a percent of admissions from Q2 and relatively flat in terms of total percent of consolidated revenue. So we do see continued strong exchange performance, but at this point, no significant increase in Q3. So we'll see in Q4. Operator: Our next question comes from Scott Fidel with Goldman Sachs. Scott Fidel: I wanted to hopefully just drill a little bit more to the CapEx inputs for the year, including the increase in the CapEx guidance. Maybe if you can talk about specific allocation of capital related to the increase and then maybe bucket some of the key larger investments that you're making within the CapEx for the full year. Saumya Sutaria: Yes. Scott, I appreciate the question. So I would just characterize the increased capital expenditure as more investment in both program or clinical program infrastructure, service line support and various other growth strategies in the hospitals. I mean, obviously, our CapEx plan for the year included the residual capital that was required to open up the Port St. Lucie Hospital. So this is capital expenditure that has extended above and beyond that where we see opportunities for growth. Look, as I indicated, the demand environment continues to be very healthy, and we see opportunities and the efficiency with which we operate, our focus on service levels to the physician community, we see the opportunity for them to choose our sites as a location of care for their patients. more and more. Obviously, the way in which we tend to deploy this capital is focused more on our high acuity strategy, so things that are relevant to the cardiac care unit, intensive care unit, cath labs, high-end imaging, et cetera, surgical programs. But that's really how we're making the investments around the country. And as we reviewed them through this business planning cycle, we felt it was a good time given the demand that we continue to see through the third quarter to go ahead and make those investments and raise our guidance. Operator: Our next question comes from Craig Hettenbach with Morgan Stanley. Craig Hettenbach: Yes. I want to just extend that just focus on free cash flow here, the increase to guidance. You mentioned kind of improved cash collections at Conifer, you also have margins coming up. So any other context around kind of free cash flow and importantly, just the sustainability of those trends as you see it? Saumya Sutaria: Sun, go ahead. Sun Park: Craig, thanks. Yes, as mentioned, this has been a long-term focus of ours, making sure not only EBITDA growth and EBITDA margins come through strong operational performance, but also then making sure that converts through free cash flow. And we listed some of the key drivers there. Obviously, the continued improving and fantastic performance by Conifer on cash collections. Obviously, growth in EBITDA comes through. And then probably a couple of other things that I'll point out. More broadly in terms of working capital management, we have spent a lot of time and focus on making sure we're optimizing all components of there. And then obviously, one of the additional benefits of our continued deleveraging is improvement in interest expenses, which also helps our free cash flow generation. We believe these operational efficiencies that we've implemented similar to our margin performance, whether it's Conifer or working capital management or continued EBITDA generation, we obviously will work hard to make these sustainable over a long period of time. Operator: Our next question comes from Jason Cassorla with Guggenheim Securities. Jason Cassorla: Great. I just wanted to go back to your commentary around the implied 4Q guidance on USPI. At the midpoint, it would imply year-over-year growth a little over 8%, which is still strong, marks a little bit of a deceleration from like the low to mid-teens you've done this year. Just any thoughts around that? Is it conservatism? Anything from a timing perspective, like the pace of development coming online that's impacting that? Just any further detail around the implied fourth quarter guidance for USPI would be helpful. Saumya Sutaria: Well, Sun, we can -- let me start. I don't think anything we're saying about the business demand organic performance really changes. I mean, obviously, we have certain assets at a larger scale and various other pricing elements that begin to lap year-over-year from that perspective. And so if anything, it's just math basically. But there's really no -- I mean, we don't -- there's no implication. We're not looking at this fourth quarter at USPI really any differently than in prior fourth quarter. As I said, we're intensely just focused on the ramp-up of business that we typically would see. Sun? Sun Park: Yes, I don't think I have anything further to add, Saum, thanks. Operator: Our next question comes from Ann Hynes with Mizuho. Ann Hynes: Just looking at the -- obviously, margins and cash flows have been very strong and costs have been very good. Going into 2026, especially the labor environment, I think that's better than expectations in 2025. Do you expect that to continue into 2026 on the labor side? And then any other inflationary pressure you would call out as we do our models, that would be great. Saumya Sutaria: Go ahead Sun. Sun Park: Sure. Ann, while we're not commenting specifically on '26 yet, we'll note a couple of things. You're right, our labor environment has generally been very strong and conducive to our operations, whether it's full-time labor expenses, whether it's our management of contract labor and other premium labor, whether it's pro fees. I think they've all been to our expectations. And in the current environment, as we sit here today, don't see any meaningful changes coming. In terms of other inflationary pressures, again, not commenting specifically on '26. But obviously, the other topic that we've talked about is tariffs. we've said that for 2025, we've been able to manage that fairly well due to both our sourcing optimization exercises, whether it's contracting, whether it's working with our vendors, whether it's picking the right products as well as through efforts through our GPO. So we remain confident based on our contract structure that we have a couple more cycles where we'll be able to manage this. But obviously, as we get into the future years, we'll have to remain nimble on the tariff dynamic. Operator: Our next question comes from Benjamin Rossi with JPMorgan Chase. Benjamin Rossi: I guess just checking in on Conifer. How did Conifer's contribution within the hospital operations segment shake out during 3Q? And then you've previously mentioned Conifer's ability to assist with patient eligibility and enrollment services during things like Medicaid redeterminations. I guess should the ACA exchange subsidies expire, do you think Conifer could have a similar utility for you in helping identify patients who have lost coverage and could be eligible for coverage elsewhere? Saumya Sutaria: Well, I mean, that's a very good insight about some of the capabilities that we have in Conifer. And by the way, I would flip it the other direction as well. Given the time frame we're at, but the likelihood -- the positive likelihood of a compromise that we keep hearing, it will also be important that we have invested in the right capacity and capabilities to utilize Conifer's ability to help with enrollment and enrollment in our markets in our clients' markets on the exchanges if the exchange enrollment time line gets delayed or extended. So yes, obviously, the capabilities to help enroll in other products is there, but we're also ramping up our investments and approach to support what might be a little bit of a dislocated enrollment time line on the exchanges given the potential for a later compromise. So it will work well on both dimensions, and we have been investing up in both our staffing and field deployment in preparation for that already. Conifer is performing well according to our expectations within the segment. Not a lot else to comment on there. I mean, Obviously, we are really happy with the way it's performing in the market for us and our base of clients from a cash collection standpoint that I noted before. Operator: Our next question comes from Ryan Langston with TD Cowen. Ryan Langston: Nice to see the ASC volumes positive. Any particular service lines or maybe even geographies driving this? And maybe same thing for the acute side, any hospital service lines stronger, weaker than you expected in the third quarter? Saumya Sutaria: Yes. No, I appreciate the question. A couple of things. I mean we said this at the start of the year when we gave guidance that we kind of saw the environment USPI picking up later in the year, just given -- we look very carefully, obviously, at how busy our physicians are. And as we looked at that, we saw it ramping up in the latter part of the year. I would say probably the biggest driver of that growth in addition to the core of the higher acuity services that we're investing in ortho, spine, some of the things we're doing in robotics and other things. Those things continue to go strong. We saw just based upon the numbers, healthier GI recovery into the third quarter, which is kind of what we were expecting given what the volumes and business of our physicians looked like in the first half. So that was probably an outsized driver of the USPI volume contribution. On the hospital side, and you can tell from the acuity net revenue per case, et cetera, I mean, that environment continues to be strong. Obviously, things like trauma and high acuity emergency visits and stuff, there's less elasticity there, right, with market conditions given the nature of that. The only thing I would note on the hospital side is that especially outpatient visits, which contribute to adjusted admissions, the respiratory and infectious disease volumes were a little bit lower than perhaps expectations. And that just may signal some sort of a slower start to the respiratory season. The numbers certainly seem to indicate that. But again, we're talking about the third quarter, right? So it's less of a harbinger than one would say. But factually speaking, the infectious disease respiratory areas are the only areas I would call out on a proportional basis. Operator: Our next question comes from Justin Lake with Wolfe Research. Justin Lake: I might have missed it, but I was hoping to get an update on total contribution from DPP in provider taxes in the third quarter and your updated estimate on that benefit for the year. And then I appreciate you pointing out the $148 million of prior year DPP that we should think about as being kind of onetime, I assume. Any other items we should consider for 2026 in terms of that bridge year-over-year versus kind of typical growth? Sun Park: Yes. Justin, on the DPP, in Q3, we had about -- we recorded almost $350 million, $346 million of supplemental Medicaid programs, of which we noted $38 million of that was prior year. So that brings us to about a little over $1 billion, $1.02 billion for year-to-date in fiscal '25. Then of that $148 million was out of period. So I think we're on track. It's right in the middle of kind of our expectations once you normalize for the out-of-period prior year payments. And then in terms of normalizations, I would say from a technical math basis, the $148 million of Medicaid supplemental payments that we pointed out are the largest normalization factor for '25 into '26. Obviously, there are a lot of other dynamics that we -- that Saum touched on in his opening comments around reimbursement and other dynamics that we'll have to take into consideration as we get deeper into guidance in our next earnings call. Operator: Our next question comes from Brian Tanquilut with Jefferies. Brian Tanquilut: Just a question on capital allocation. Obviously, you've set goals for USPI's acquisition spend and you've already exceeded that. And then how should we be thinking about that and then the buyback in terms of how you're thinking about throwing capital at the buyback since you've hit your M&A targets already? Saumya Sutaria: Yes. I mean the M&A targets every year are obviously guidance that we go into the year with respect to expectations of what we're going to do. We're responsive to a marketplace, as you can imagine. And we're very careful about our diligence in maintaining our high bar for acquisitions. This year, we have found more opportunities, a broader pipeline, certain processes that may have been competitive in addition that we won and just continued momentum on our de novo strategy. So I mean, the kind of cash flow that USPI generates, we can fund those increases. Now obviously, if you go back historically, with the platform deals that we have done, we've also outspent our typical guidance. So look, we try to update that as we go quarter-to-quarter based upon what we're seeing in the environment and what we're bringing on board. Obviously, having these additional assets on board is positive for the organization going into the following year. And as I noted, we also continue to see some more opportunity in the fourth quarter. So we'll see how that all plays out. I mean we just remain focused on executing the M&A and de novo strategy. And if we do it with the appropriate diligence and onboarding, we're just updating what the spend looks like in the given year. Look, on the second point, we've been very active repurchasers of our shares this year. I would continue to reiterate that our trading multiples, we're long-term active repurchasers of our shares. This quarter, obviously, was lower than the prior quarter. There's also a lot more uncertainty in the market. And we feel fine about what we've achieved this year in that regard. Operator: Our next question comes from A.J. Rice with UBS. Albert Rice: As you start to think about 2026, pulling budgeting together, et cetera, are there any particular areas on the expense management side? I know you've talked a little bit about some of the things you're seeing this year in labor, but whether it's labor supplies, other that are opportunities for incremental savings or programs to initiatives to move forward. And then obviously, there's a lot of discussion about AI, whether there's anything on AI that's worth calling out that you're focused on being able to deploy that? Saumya Sutaria: AJ, so short, medium, long term, kind of all embedded in there, we have undertaken over the last few months and ongoing, a business transformation initiative that is designed to look for those opportunities and also do contingency planning given the uncertainty in the marketplace. Those opportunities would include how we think about all aspects of what I would call labor costs within the organization. Obviously, this year, as we have noted before, we have done some work to rightsize our corporate structure given some of the asset divestitures that we've had in the past. It has very much been our philosophy to -- I think you know this, to use advanced analytics and where we have the ability to more automation and leveraging our Global Business Center, which is continuing to perform well and scale up. This will -- this year proportionately will be one of the larger scale-up years in the last few years within the Global Business Center, which we feel very good about. So there are a lot of opportunities there. Sun already talked about supplies, so I won't say a lot more there. And we continue to invest actively in improvement opportunities and our ability to drive more efficient and better collections in Conifer, some of which we've noted in earlier parts of this call. So very much comprehensively looking at these opportunities. But with a mindset of finding both shorter-term and longer-term opportunities that will impact the business. Operator: Our next question comes from Josh Raskin with Nephron Research. Joshua Raskin: Just first was a quick clarification, I think, on Kevin's question. Did you see the contribution from exchanges, the revenue contribution was less than the percentage of adjusted admissions. And then my real question, just sort of getting back to the M&A environment for the ASCs. There's been a couple more reports, media reports in terms of maybe a competitive landscape. And I'm just curious if that's been changing or if you're seeing anything on valuations yet. And as you speak to your conversations with physicians, maybe how they're evaluating opportunities in ASCs as well. Saumya Sutaria: I think the commentary going back to the first question from Kevin was simply that the exposure to exchanges either on volumes or revenue is less than in the hospital business at USPI, the exposure, whether you're looking at volumes of exchange patients or revenue from exchange patients proportionally in their business is less than the hospital business. That was what the comment was. I hope that helps clarify. The ASC opportunity, first of all, I would say it has so many different dimensions in terms of the growth platform that we have built at USPI, right? We're active in de novos. Those are more focused on higher-end specialties and partnerships with our more proactive health system partners. So there's really 2 threads there. We've worked hard to work with MSO organizations that are deploying capital and scaling their businesses to be the partner of choice on the ASC side. I think that has played out very nicely. And really there, the strategies are across multiple different service lines, GI, orthopedics, stuff that we do with MSOs in ophthalmology, obviously, our urology platform, et cetera. So there are multiple avenues of growth that develop there. Of course, we talk about the acquisition market a fair amount. And in that acquisition market, we have been, for a long period of time, the partner of choice. It's the reason we've scaled so effectively. But physicians, to get to your question of what are they looking for, I mean, they're looking for somebody who's delivered a consistent track record, who has demonstrated the ability to grow, who has demonstrated the ability to take on new assets and find that other doctors tell them that it went well when onboarded. And they're looking -- many times, single specialty physicians are looking for somebody who has a proven track record to help them diversify their business to grow the center and make it multi-specialty, which is, as you know, something that USPI has historically been very, very good at in terms of running larger multi-specialty type of centers that help these physicians get to the next level of maturity in their investment. So when I look across the board on the way the market works, we continue to be the advantaged party in what it takes to build and grow this segment. And so that's what gives us the confidence to continue ahead to spend more than we had originally thought we would spend and look forward to a healthy pipeline in 2026. Sun Park: And this is Sun. Josh, just to give you the numbers again, what we said was for HICS, it represents 8.4% of our admissions in Q3 of '25 and 7% of our total consolidated revenues. So the admission stat is a little slightly higher than the revenue stat, and that's been consistent for us historically. Hopefully, that helps. Operator: Our next question comes from Whit Mayo with Leerink Partners. Benjamin Mayo: Saum, CMS is this new Wiser model in fee-for-service Medicare that starts next year. Do you see any impact on prior auth or administrative work for USPI? I know it's only 6 states, but Texas is one of them and knee arthroscopy and certain implants, I think are an area they're focused on. So just any thoughts or insight into how you're preparing for this? Saumya Sutaria: Yes. Well, there is some movement in the pre-authorization space in fee-for-service Medicare, as you correctly note, the Wiser program still has some uncertainty about how -- and what scope of services it will be implemented for. But yes, we have taken into consideration what will be required there. There are really 3 threats to it. One is preparing documentation, understanding of documentation requirements for appropriate care. Two is actually consistently complying with those. And three is the operational element of managing our scheduling to be complemented by preauthorization having been achieved. So we're sort of prepared to do all of that. I mean we don't talk about it much, but we have a very capable revenue cycle function within USPI that deals with all of the end-to-end type of services that are required there. And so we feel pretty good about that. Look, the other thing is that in any marketplace, when these types of things are introduced, there's an adjustment period, but also physicians have the opportunity to adjust different mix into the centers as they fill their -- especially the ones that have block time. And so I think part of the move here will also be to increase commercial mix and work with the physicians to increase their commercial mix in that process. Operator: Our last question comes from Andrew Mok with Barclays Bank. Thomas Walsh: This is Thomas Walsh on for Andrew. As we await the finalization of the hospital outpatient rule, could you comment on whether the removal of the inpatient-only list is a net positive or net negative for the enterprise? Saumya Sutaria: Okay. So that came through really garbled. I think the question was, is the inpatient-only rule list going away? And is that a benefit to us? I don't know that it's going away. I think there's been discussion about the inpatient-only rule list and what that impact would be. I mean, obviously, for us, the benefit would be in the USPI segment and potentially a push for more in certain types of volumes that have been in the hospital setting into the outpatient setting. In our acute care hospital segment, because of our greater focus on high acuity work, proportionally, and it's not to say that we don't have the business, but proportionally, those cases wouldn't be affected as much as maybe a typical general acute care facility. But we haven't done any quantification of that, that we've shared anywhere. I think this policy is still very much up in the air being discussed and not even at the point where I would say that we're engaging in rule-making discussions about it. Operator: We have reached the end of the question-and-answer session, and this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Saumya Sutaria: Thank you.

Will McDowell: Good morning. Welcome to Tenet Healthcare Corporation's second quarter 2025 Earnings Conference Call. After the speakers' remarks, there will be a question and answer session for industry analysts. Can I respectfully ask that analysts limit themselves to one question each? I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. Saumya Sutaria: Pleased to have you join us for a discussion of Tenet Healthcare Corporation's second quarter 2025 results, as well as a discussion of our financial outlook. Tenet Healthcare Corporation's senior management participating in today's call will be Dr. Saumya Sutaria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation that has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet Healthcare Corporation is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-Ks and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Saumya Sutaria. Thank you, Will, and good morning, everyone. Sun Park: The second quarter continues our track record of strong outperformance in each of our businesses. We reported second quarter 2025 net operating revenues of $5.3 billion and consolidated adjusted EBITDA of $1.121 billion, which represents growth of 19% over 2024. Second quarter 2025 adjusted EBITDA margin of 21.3% represents a 280 basis point improvement over the prior year, driven by strong same-store growth and very efficient operating performance. USPI continues to deliver. We generated $498 million in adjusted EBITDA, which represents 11% growth over quarter 2024. Same facility revenues grew 7.7% in the second quarter, highlighted by a 12.6% growth in total joint replacements in the ASCs over the prior year. We added eight new centers in the quarter, including facilities specializing in high acuity procedures such as spine, orthopedics, and neurosurgery. We continue to see a robust pipeline for M&A opportunities and expect to exceed our baseline intention for $250 million of M&A spend in 2025. Turning to our hospital segment, adjusted EBITDA grew 25% to $623 million in the second quarter of 2025. Same-store hospital admissions were up 1.6% in the quarter. Second quarter 2025 revenue per adjusted admission was up 5.2% over the prior year as payer mix and acuity remained strong. We are making significant investments to expand our network to support growth in our markets and have confidence that the demographic trends, our high acuity service line priorities, and our efficient operating platform can generate ongoing returns in this segment. We have also reduced overhead given we downsized our hospital portfolio. Our results in both segments exceeded our expectations and extend our track record of consistently strong fundamental execution. We continue to capitalize on our compelling valuation and have deployed $1.1 billion to repurchase 7.2 million shares in the first half of 2025. As we noted in our release, the board of directors has authorized a $1.5 billion increase to our share repurchase program. Turning to our full-year guidance, at this point in the year, we are raising our full-year 2025 adjusted EBITDA guidance to a range of $4.4 to $4.54 billion, which represents an increase of $395 million or 10% roughly at the midpoint of the range of our prior guidance. The guidance increase is supported by fundamental strength in our businesses and expectations for continued growth. In summary, we continue to deliver on our commitments to a strong balance sheet and significantly improved free cash flow generation. Finally, in closing, we are committed to a culture of quality, transparency, and compliance. This culture permeates our business and is reflected in the dedication of our colleagues and caregivers that go to work each day to care for our patients and communities that we serve. We are pleased that these are the values that we have instilled into our organization, which continue to drive results and outperformance. And with that, Sun Park will provide a more detailed review of our financial results. Sun, turning it over to you. Sun Park: Thank you, Saumya Sutaria. Good morning, everyone. We delivered strong results in the second quarter of 2025, with adjusted EBITDA well above the high end of our guidance range, driven by strong fundamentals, including same-store revenue growth, continued high patient acuity, favorable payer mix, and effective cost controls. We generated total net operating revenues of $5.3 billion and consolidated adjusted EBITDA of $1.121 billion, a 19% increase over the second quarter of 2024. Second quarter adjusted EBITDA margin was 21.3%, a 280 basis point improvement over the prior year. I would now like to highlight some key items for each of our segments. Beginning with USPI, which again delivered strong operating results. In the second quarter, USPI's adjusted EBITDA grew 11% over last year, with adjusted EBITDA margin at 39.2%. USPI delivered a 7.7% increase in same system-wide revenues, with net revenue per case up 8.3% and case volumes down 0.6%, reflecting our continued disciplined shift towards higher acuity services. Turning now to our hospital segment, second quarter adjusted EBITDA was $623 million, with margins up 300 basis points over last year at 15.6%. Same hospital inpatient admissions increased 1.6%, and revenue per adjusted admissions grew 5.2%. Our consolidated salary, wages, and benefits were 41% of net revenues, a 140 basis point improvement from the prior year. And our contract labor expense, which was of consolidated SWB expense. This improvement has been driven by our data-driven approach to capacity and labor management and disciplined operating expense controls. Finally, we recognized a $79 million favorable pre-tax impact for additional Medicaid supplemental revenues related to prior periods in the second quarter of 2025. This includes the recently approved program in Tennessee. As a reminder, our second quarter 2024 results included a $30 million favorable pre-tax impact for additional Medicaid supplemental revenues related to the prior year. Next, we will discuss our cash flow, balance sheet, and capital structures. We generated $743 million of free cash flow in the second quarter, and as of June 30, 2025, we had $2.6 billion of cash on hand, with no borrowings outstanding under our $1.5 billion line of credit facility. Additionally, we have no significant debt maturities until 2027. And finally, during the second quarter, we repurchased 4.6 million shares of our stock for $747 million, and year-to-date through June 30, we have repurchased 7.2 million shares for $1.1 billion. Our leverage ratio as of June 30, 2025, was 2.45x EBITDA or 3.11 times EBITDA less NCI. Driven by our outstanding operational performance and continued focus on financial discipline, we are very pleased with our ongoing cash flow generation capabilities and remain committed to a deleveraged balance sheet. We believe we have significant financial flexibility to support our capital allocation priorities and drive shareholder value. Let me now turn to our outlook for 2025. For 2025, we now expect consolidated net operating revenues in the range of $20.95 to $21.25 billion, an increase of $300 million over prior expectations. As Saumya Sutaria mentioned, we are raising our 2025 adjusted EBITDA outlook by $395 million at the midpoint to $4.4 to $4.54 billion, reflecting the strong fundamental performance of our business. At the midpoint of our range, we now expect our full-year 2025 adjusted EBITDA to grow 12% over 2024. At USPI, we are now expecting 2025 adjusted EBITDA of $1.99 to $2.05 billion, a $70 million increase from prior expectations. In addition, we have increased our assumption for same facility USPI revenue growth by 100 basis points to 4% to 7% for 2025. In hospitals, we are raising our 2025 adjusted EBITDA by $325 million at the midpoint to $2.41 to $2.49 billion. Additionally, we are lowering our assumption for same hospital admissions growth by 50 basis points to 1.5% to 2.5% for 2025. Finally, we expect third quarter 2025 to be in the range of 22.5% to 23.5% of our full-year consolidated adjusted EBITDA. At the midpoint, we expect third quarter 2025 USPI EBITDA to be in the range of 23.5% to 24.5% of our full-year USPI adjusted EBITDA at the midpoint. Turning to our cash flows for 2025, we now expect free cash flows in the range of $2.025 to $2.275 billion, distributions to non-controlling interest in the range of $780 to $830 million, resulting in free cash flow after NCI in the range of $1.245 to $1.445 billion, an increase of $195 million at the midpoint of our range from prior outlook. Turning now to our capital deployment priorities, we are well-positioned to create value for shareholders through the effective deployment of free cash flow, and our priorities have not changed. First, we will continue to prioritize capital investments to grow USPI through M&A. Second, we expect to continue investing in key hospital growth opportunities to fuel organic growth, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll continue to have a balanced approach to share repurchases, depending on market conditions and other investment opportunities. As Saumya Sutaria noted, our board of directors has recently authorized a $1.5 billion increase to our share repurchase program. We continue to deliver consistent growth and have disciplined operations, which has translated into outstanding financial results. We are confident in our ability to deliver on our increased outlook for 2025 as we continue to provide high-quality care for those in the communities we serve. And with that, now ready to begin the Q&A. Operator? Operator: Thank you. At this time, we'll be conducting a question and answer session. As a reminder, Tenet Healthcare Corporation respectfully asks that analysts limit themselves to one question each. A confirmation tone will indicate your line is in the question queue. Our first question comes from A.J. Rice with UBS. Please proceed with your question. A.J. Rice: Hi, everybody. I might just ask about two aspects of the backdrop in Washington. The proposed rule on outpatient hospital care as the elimination of potentially of the inpatient-only rule. Can you just comment on what you think that might mean for your hospital and ASC business if that were to go through? And then just any updated figures on the public exchange volumes, how that contributed into the quarter, what you're seeing year to year, and do you have any updated thoughts on what the outlook for next year might be if the enhanced subsidies go away? Saumya Sutaria: Hey, A.J. Rice. It's Saumya Sutaria. So thanks for the questions. The first one, you know, obviously, enabling additional innovation in the ASCs is positive for the USPI business. You know, I think about it this way, which is one is the reimbursement allowable reimbursement and certainly, you know, this move is positive. At the same time, it takes work and experience in higher acuity ASC procedures to actually be able to successfully move those things from an inpatient setting to an outpatient setting. And as you know, the patient selection criteria and expertise make a big difference there. So that you're doing the right things clinically. Those are all areas in which we're pretty advanced as an ASC operator and platform. So I think it plays to our advantages. I think it represents an opportunity for the future. For sure, and I also think it gives us a platform to work with physicians to build the right protocols for many of these things to move into that more freestanding setting with the right patient selection. Sun Park, do you want to comment on the update on our exchange volumes? I would say just as a summary statement there, A.J. Rice, obviously, the efforts to lobby for their extension and importantly, the critical role they play in supporting small businesses and employees of small businesses in America is an added benefit of the exchanges that is obviously part of the discussion today. Sun Park: Yeah. Thank you, Saumya Sutaria. And just to add, you know, obviously, healthcare exchange remains an important part of our business. For the second quarter of 2025, we saw about a 23% increase in admissions year over year. We saw about a 28% increase in revenues from exchange year over year. In the second quarter, exchange volume now represents about 8% of our total admissions and about 7% of total consolidated Tenet Healthcare Corporation revenues. Operator: Our next question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Hi, thanks. Good morning. I was wondering if you could just give some more specifics on the outperformance in the core results, and I'm specifically looking at the incremental $70 million on the USPI side, the increase in guidance. And then within that, is there anything Tenet Healthcare Corporation has done specifically to improve your ability to sort of document, categorize patients as you submit claims? Are there new systems, new technologies, new vendors or partners? And obviously, anything relating to AI, I'd be curious if there's new things that you're doing within there. Saumya Sutaria: Hey, Josh Raskin. Well, going, you know, kind of going backwards, we have the USPI has its own significant revenue cycle capability. We think it's an industry-leading capability. It's an environment that mostly serves our own ASCs, but certainly serves ASCs beyond that. We're pretty busy in advancing a lot of those capabilities. I mean, it is not difficult for me to say that some of the improvement in our results over the last few years has been related to real standardization, technology deployment, better reporting, and certain advanced analytical tools that we have deployed into the ASC environment. Not surprising given our focus in revenue cycle as a company. That we have done that and it's certainly paying dividends in terms of how we work in that environment on the retail collection side. As you can imagine, these are elective procedures but also on the wholesale collection side all the way from authorization back through accurate documentation and more efficient management of the AR, you know, through technology and offshore capabilities. So we're really pleased with the platform that being built for ASC revenue cycle. Within USPI. Sun Park, do you want to comment on the nature of the guide? Sun Park: Yeah. Sure. So, Josh Raskin, in the first half and the second quarter, I think both consistent themes, you know, we've seen high acuity, good case mix, good payer mix, good growth in some of our key case lines, service lines, including ortho and total joints. So all the trends that we've discussed previously, I think continue in USPI for the second quarter. That's why you saw the strong net revenue overall growth of 7.7% as well as the strong net revenue per case. So and then I think good operating expense management, so we demonstrated a 39.2% EBITDA margin in the second quarter as well. So I think all those trends apply for both Q1 and Q2, which is all in about a $50 million increase versus our prior guidance. And then, you know, general expectations is for those trends to continue into the second half, which is part of the guidance raised for the remaining full year. I think, you know, we also remain positive on our M&A activity. In terms of contribution. As Saumya Sutaria noted in his opening statement, we expect to exceed our $250 million, you know, baseline assumption for USPI M&A. I think all those things contribute to the guidance raise. Operator: Thank you. Our next question comes from Andrew Mok with Barclays. Andrew Mok: Hi, good morning. Just wanted to ask about the volumes. There's a little bit of deceleration there in both the inpatient and adjusted admissions in the quarter. You took down the guidance by, I think, 50 basis points. Volumes impacted by any discrete items in the quarter or anything else to kind of call out driving some of the deceleration for the quarter and the full year? Thanks. Saumya Sutaria: Hey. Well, first of all, I think the guidance is just simply reflecting the math that would play out for the rest of the year. Now it's a strong quarter. I mean, we had strong volumes, the right acuity, and mix, and very much reflects the focus on our service lines as we have prioritized them. So I don't think there's anything particularly unusual other than seasonality. Operator: Alright. Thank you. Our next question comes from Matthew Gillmor with KeyBanc Capital Markets. Please proceed with your question. Matthew Gillmor: Hey. Thanks for the question. Wanted to ask about payer contracting. There's a lot of different dynamics creating pressure on payers. Has there been any discernible shift in terms of your negotiation with payers? Are you still getting the normal updates you'd expect, and is there anything to report with respect to denial activity? Saumya Sutaria: Yeah. Well, a couple of things. First of all, you know, obviously, different parts of the sector at various times certainly go through their ups and downs. And you know, I think our philosophy most importantly with the health plans, both the national plans and state-based plans, is to work consistently to create value in what we do in our level of pricing and our negotiations, and also to create predictability for both sides over a multiyear period. I mean, I think that's, you know, ultimately what's probably most important on both sides so that each party can then manage their own operations. And we have extended that philosophy over the last few years into the next wave of contracts. I think most people were aware that there are a number of contracts that are coming up and we're not seeing anything unusual in and certainly no change in our guidance with respect to the way that we have been negotiating our contracts. But again, I think that's because, you know, we're committed to the value that we provide there both from the standpoint of our highly efficient ambulatory business, but also working in an environment with reasonable and predictable rate increases so that we can focus on managing our own operations. The denials activity and it's really not just denial, it's kind of the disputes, documentation requests, denials, etcetera. Have ramped up over the past few years post-COVID to levels that are, I would argue, not acceptable in some cases. And we have adapted. Obviously, this is part of Conifer's job is to adapt and learn to respond to those things. In the early days, the responses, you know, were driving up expenditures. You know, today, as we have evolved and realized this is a new normal, we have of course deployed more technology, more automation, trained up more offshore staff and other things to be able to respond to those types of requests and activities in a more efficient and, I would argue, more effective manner. We track things like our yield relative to the volume or dollars that we're disputed or denied, and you know, I think Conifer is doing well there for both ourselves and for our clients. Relative to the overall industry. You can see it in our results and I think that translates across the board. And so you know, this is a constant battle with respect to what's appropriate there and obviously, we welcome, you know, both regulation and other things that would support a reduction of some of that what we consider inappropriate activity. Operator: Got it. Thank you. Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. First, I just want to follow-up on A.J. Rice's question. I do understand that the industry is lobbying for an extension of these subsidies and how important that could be to a lot of folks. But is there a framework that the company can share with us in terms of how to think about the potential impact to 2026 earnings if those subsidies do go away and then sticking with that DC stuff. Maybe you can give us an update on the provider tax run rate you're seeing in 2025? Versus, I think, the previous guidance was about $1.1 billion. And have you analyzed and have anything to share with us in terms of the impact of if that, you know, the bill that just passed does get rolled out with the impact to DPP could be over time. Those provider taxes tax. Saumya Sutaria: Yeah. Hey, Justin Lake. So we don't have any comments about 2026 at this stage, and certainly all of the work and effort is focused on helping stakeholders realize again how important the exchanges are for families who utilize them, including, you know, those that came off of Medicaid from a Medicaid redetermination standpoint over the last few years. It's very much my belief that because of the existence of the exchanges and the subsidies for the people who don't have very high income levels as Medicaid redetermination proceeded, the exchanges were a critical safety net for the individuals who needed health care insurance to have a landing spot and it created what I consider a pretty smooth Medicaid redetermination process because of the availability of those insurance options for individuals and families that needed it. And so that in addition to the fact that, you know, the exchanges represent critical support for small businesses that are unable to provide broad-based insurance coverage options to their employees, which supports obviously a very large part of the economy, represents two of the most important prongs of the conversation around why it's important to extend these subsidies, not the least of which is that it affects red states more than blue states. Given the nature of the administration and congress today, that's also an important fact. So to more than just look, I think the work is ongoing in that area. I think it's important and I think it's important for our industry. It affects other parts of our sector, but it also affects the macro economy through the support for small businesses, which helps to make them more competitive in the US economy at large. The current situation and bill that passed a lot of the impacts as you know, have been pushed out pretty far, you know, into the very, very end of 2027 or really 2028. From that standpoint. And we really don't have any insight into how this will be implemented. There are new legislative proposals that have already come up attempting to rescind some parts of the OBBB, which are in play in congress, and I think it just, you know, it remains an area of significant uncertainty and we don't have any sort of projections to provide from that standpoint, especially because we're talking about, again, as I said, out to 2028. Sun Park, do you want to cover there was a question in there about the DPP programs? Sun Park: Yeah. Let me just clarify that, Justin Lake. So for Q2 of 2025, we recorded about $350 million of total Medicaid supplemental payments. So for the first half of this year, we're at about the $675 million range. Now we have pointed out some one-timers. So once you normalize for that, in the first half of the year, our run rate for the full year is right around the $1.1, $1.2 billion range that we previously discussed. Justin Lake: Thanks. Operator: Our next question comes from Sarah James with Cantor Fitzgerald. Please proceed with your question. Sarah James: Thank you. I just wanted to circle back to what went on with the volume guide down. I understand seasonality and just the math of the quarter impact on the year, but what actually changed in this quarter or in your view of the year? Are there certain like segments or... Saumya Sutaria: Well, the most important thing that you know, we would be focused on that happened in the second quarter was, as I said earlier, the strength and success of our high acuity strategy that has been in place for multiple years continuing to demonstrate in this market the ability to generate revenue and earnings across our hospital portfolio. I mean, that's really at the end of the day, that's the most notable and important trend in the second quarter, which is that that strategy continues to deliver results. Operator: Thank you. Please proceed with your question. Our next question comes from Stephen Baxter with Wells Fargo. Stephen Baxter: Yeah. Hi. Thanks. Just to follow-up on Justin Lake's questions. I wanted to ask about the jump-off point for EBITDA this year. Is it as simple as, you know, removing the out-of-period Medicaid supplemental EBITDA? I think it's $79 million this quarter and $40 million with the first quarter. Or are there any other meaningful areas to consider whether they're Medicaid supplemental payments or other sort of one-time contributors to the year that you should think about as we're bridging to 2026? Thank you. Saumya Sutaria: We're not making any comments about 2026 nor are we commenting on headwinds and tailwinds yet. For the following year. Operator: Our next question comes from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix: Thank you very much. Just a quick follow-up on the acuity trends that you're seeing. Appreciate that the revenue per show is stronger acuity trends there, and that's consistent with your strategy. But, also, just wanted to square that with the hospital inpatient surgeries being down. Just a little more detail on where you're seeing that stronger case mix and how that's kind of translating into the stronger rates on the hospital side? Thanks. Saumya Sutaria: Yeah. I mean, our strength in cardiovascular, orthopedic, spine, neurosurgery, broad-based general surgery, robotics. I mean, those are all the areas that, you know, we continue to focus on in terms of our work. Now I would add to that emergency-driven trauma and trauma surgery as you know, we have a lot of very large urban emergency departments that have built trauma capabilities in order to service patients in need of trauma. And finally, you know, as we have indicated over the past few years, our transfer strategy always being willing to accept any patient from any outlying hospital, you know, as long as we have the services available to help them, we have been committed to providing that help. And, obviously, many of those patients tend to be sicker and may require more complex surgery. So all of those things have been contributors to the results from what we describe as a high acuity strategy. Of course. Operator: Our next question comes from Whit Mayo with Laurent Partners. Please proceed with your question. Whit Mayo: Thanks. Just one quick clarification. I was wondering if you could comment briefly on how much your medical case mix did increase in the quarter and if it changed much from prior trends. But my real question is, looking at the EBITDA growth at USPI. Is there any way to quantify the contract covenant, just wondering if those are contributing to any of the growth still. Thanks. Saumya Sutaria: Well, case mix acuity was up. I'm not sure exactly what you're asking. Sun Park, you may want to comment more specifically on that question. I mean, but consistent with what we're saying about acuity, case mix index was up. That's referring to the hospital segment. On the USPI side, you know, the revenue growth that we see obviously in a very dynamic business comes from all sorts of things including same-store growth, volume growth, our payer contract annual escalators, rostering of new facilities onto our managed care contracts as part of our network strategy of having an alliance of high quality, reliable centers, all of that contributes to the revenue growth. But that's why we provide the total revenue growth and also the same-store revenue growth so that one can differentiate between those. And I think all of that data is consistent with, you know, both with the success of the high acuity strategy, but also, you know, we're consistently performing in revenue growth above our long-term trend, which has been very positive for USPI. Sun Park: Yeah. And so just your, I'm sorry, Whit Mayo, your question on the case mix, we're up about 1%. And obviously, if you look at a longer period of time, that growth would be more significant based on acuity. Whit Mayo: Good. Thanks. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey, good morning guys. Thanks for taking my question. Nice quarter here. DSOs trended down nicely, even the lowest that I've ever seen with you guys. Can you talk about cash collections, what have you done differently? Or the parents doing something differently and from a cash flow perspective, should we continue with the models for the bulk of the cash flow going into repo with some M&A in there. So you can buy back around ten plus percent of your market cap each year while still delevering. Is that the right way to think about it? Saumya Sutaria: Yes. Well, okay. Just two separate things. Sun Park, do you want to start with the second one and then go back into the revenue cycle question? Sun Park: Yeah. Sure. So, Pito Chickering, yeah, we obviously have very strong free cash flow performance, have increased our guidance for free cash flow after NCI, you know, up $195 million. You know, I would say the other notable piece obviously, is the amount of share repurchases we completed in the second quarter of this year, where it was a substantial increase from our normal trends. You know, I would say looking forward, our capital allocation priorities haven't changed. Right? USPI, M&A, hospital CapEx for high acuity strategy, and then, maintaining our deleveraged balance sheet, and a balanced share repurchase approach. It's hard to predict what our run rate share repurchase activity will be in the next quarter, the second half of this year into 2026. I think that'll depend on, you know, tax and circumstances. But, you know, I do believe our free cash flow and financial performance and balance sheet flexibility will afford us to make the right decisions as those things come. Saumya Sutaria: Yeah. Look, in summary, on the first part of the question, as the industry has trended up, overall, in terms of denials and also the times to collect given some of the dispute and back and forth on documentation requests and other things. We've remained very focused on trying to keep that as tight as possible using technology automation. I mean, you know, one of the advantages that Conifer has is an incredibly standardized workflow that is really critical to not only collections, but also timely collections. In an environment where those time frames have been increasing for a long period of time. We're obviously, as we've talked about before, supplementing some of those capabilities that we have today that used to be manual with AI-enabled technologies that allow us to produce more rapid automated responses to various types of disputes, based upon pattern recognition that you would see from various sources that allow us to do that more effectively. That makes what we're doing more reliable, but also as you're pointing out sort of faster. The other thing I would say about this environment in which, you know, we talk a lot about some of it's highly inappropriate, the dispute denial activity and as I said earlier, I think it's also important that we spend our time being committed to very accurate documentation and coding. And I think one of the things that Conifer does well is produce accurate documentation and coding and that has a tendency to also reduce the dispute activity to some extent from the health plans. Right? I mean, it is a two-way street in the end. And both parties have to perform in that truth. And that speeds up collections to some extent. So anyway, I said this earlier and I'll let it be. Adapting to the current environment from a collection standpoint is a critical capability that we have developed, and that capability has moved from being manual when it first started to increase to much more technology-driven and workflow automation-driven. Pito Chickering: Great. Thanks so much. Operator: Our next question comes from Benjamin Rossi with JPMorgan Chase. Please proceed with your question. Benjamin Rossi: Good morning. Thanks for the question here. Just as a follow-up on your ACH exchange volumes, with your reported hospital length stay down, call it, 3% year over year and the ACA exchange volumes up 28% during Q2. Is there any additional detail you can provide on procedural mix or life stay across those exchange-based volumes? We've just been getting some comments from prominent payers in recent weeks regarding the elevated trend there across that group. So just curious if there are any particular areas that were contributors to that Q2 growth figure or if it was more broad-based across all specialties for your ACA exchange book, thanks. Saumya Sutaria: Yeah. I don't think there's been anything unusual in this quarter versus prior quarters with respect to the exchange volumes. I mean, remember the one thing I would say is the exchange business tends to behave similar to the Medicaid business more than the commercial business in the sense that a disproportionately larger amount of it is emergency department driven may still come with higher acuity, but it tends to be more emergency department driven. That's why, you know, the USPI segment. The impact of the exchanges on our business is higher in the hospital segment versus even though it's present in both. But I don't think that I noticed anything unusual about the nature of the exchange volumes, this quarter. Sun Park, is there anything you would point out there? Sun Park: No. I think you're right, Saumya Sutaria. It's pretty consistent with prior mix overall. Saumya Sutaria: Okay. Got it. Operator: Our next question comes from Ryan Langston with TD Cowen. Please proceed with your question. Ryan Langston: Thanks. Good morning. SWB continues to run pretty favorably. I mean, I assume as you achieve these levels, this becomes kind of the new baseline expectation to your operators. But I guess the question is how much more opportunity do you see on SWB? And I guess what types of initiatives can you execute on to keep up sort of this level of performance? Saumya Sutaria: Well, obviously, effective labor management has been a strength of our organization, not just recently, but over the last few years. We stay focused on the various parameters that drive demand. Obviously, length of stay, the acuity, the day-to-day productivity, and accurate staffing needs that we have in our hospitals. But at the same time from a supply standpoint, you know, we've really, I think, benefited from improved recruiting strategies, relationships with some terrific nursing schools around the country, where we've created good opportunities for their students and graduates to work in our environments, and also improving our retention rates as a result of what we've done. We found that making investments and we have made real investments in our nursing and overall hospital management director and other supervisor levels with special recognitions and other things that have been ongoing for multiple years because we see the value that they provide in terms of creating a stable and effective workforce for patient care, that has been an important part of what we have done over the last few years, and recognizing their efforts. So, I mean, I think, look, all of those things are sustainable strategies and all of them contribute to the improvements that we've made both in our efficiencies and effectiveness there. Operator: Thanks. Our next question comes from John Ransom with Raymond James. Please proceed with your question. John Ransom: Hey, good morning. I'm going to ask Saumya Sutaria a question. He's like, answer. When he's got an answer, I'll ask him another question. Do you think that now that we've gotten the bill behind us and we know the nose, is the environment if you're able to sell any more hospitals, is the environment they go out such that that's more profitable now? Saumya Sutaria: I, you know, John Ransom, I'm not sure how to answer that question. We don't comment on asset sales and anything that we may be looking at there. We're pretty happy with the portfolio. It's obviously performing. Based upon, you know, the last couple of years in the post-transaction environment. I don't know how to comment on whether the broader industry has fully understood the implications for them of the OBBB or anything else that may come, you know, I would take this opportunity to reiterate that our view from what we have seen so far in the external landscape related to legislation regulation, etcetera, Washington essentially, it, you know, we think about this pretty carefully. It has not changed our commitment to our core strategy. As it stands right now. And so I feel good about that. Looking forward. John Ransom: Yeah. So you let me write to my other question. What now that this bill is behind us, what are your current legislative and lobbying priorities at DC? Then where are you gonna send your time, miss? Saumya Sutaria: The most important area right now as I said, both for the health care industry, for the insurance industry, and importantly, we think now that we have an understanding of how important these exchanges are for small businesses, and keeping and remaining a competitive workforce for small businesses in America is engaging in dialogue about mechanisms to extend the exchange subsidies. Operator: Our final question comes from Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin Fischbeck: Alright. Great. Thanks. I guess, to understand a little bit more of the commentary on hospital volumes and the payer mix. I guess how much of the payer mix improvement that you're seeing is because of exchange growth? If we took exchanges out, would you still be talking about improved payer mix to the same degree? And then when we think about the volume outlook, the volume outlook being lower you guys have always had a different view on volume, so it's hard to kinda tell what how much is this high acuity strategy versus underlying demand? Do you have a sense of what underlying demand growth was in the quarter? Was it consistent with where Q1 was or did it decelerate similar to how your overall volumes decelerated from Q1 to Q2? Thanks. Saumya Sutaria: Yeah. A couple of things. One is, you know, commercial mix was strong. And as I indicated earlier, maybe another way of describing that. I mean, the obviously, the growth that Sun Park described in the exchanges indicates that some of that mixed strength is definitely on the payer mix side, is definitely coming from the exchanges and this is again, going back to the importance of the exchanges as a landing spot as Medicaid redetermination has worked its way through the overall system. It's been an important landing spot. And then finally, no. I mean, I think look. Underlying demand in this environment is still strong on a macro basis. I mean, it wouldn't be the case that we would be able to lose significant amounts of underlying what you would call general med surg emergency department, etcetera, demand and exist solely on a high acuity strategy. Right? The high acuity strategy is meant to support the types of margin expansion and growth that we have seen on an efficient basis in the hospital segment and the margin expansion in the hospital segment over the last twelve and we're just looking over the last twelve months or even over the last three to four years has been significant. And that's really what the strategy has helped support but I don't think it's worth making anything of, you know, one single quarter especially when you have seasonal trends and quarter to quarter trends and, you know, ramp on and ramp off of respiratory illness and other things I think this will play itself out over time. The underlying demand environment, you know, when you compare it to a multiyear basis still seems strong to me. Operator: Okay. Great. Thanks. We have reached the end of the question and answer session, and this concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.

Will McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We are pleased to have you join us for a discussion of Tenet Healthcare Corporation's first quarter 2025 results, as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saumya Sutaria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recently filed Form 10-K and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Saumya Sutaria. Saumya Sutaria: Thank you, Will, and good morning, everyone. We reported first quarter 2025 net operating revenues of $5.2 billion and consolidated adjusted EBITDA of $1.163 billion, which represents growth of 14% over 2024. Adjusted EBITDA margin of 22.3% in the first quarter of 2025, a 320 basis point improvement over the prior year, demonstrates our strong growth and continued operating discipline. USPI had a nice start to the year as we generated $56 million in adjusted EBITDA, which represents 16% growth over the first quarter of 2024. Same facility revenues grew 6.8% in the first quarter and were highlighted by a 12% growth in total joint replacements in the ASCs over the prior year. Turning to our hospital segment, adjusted EBITDA grew 12% to $707 million in the first quarter of 2025. Same store hospital admissions were up 4.4% as we continue to open up capacity to respond to the strong utilization environment. Acuity and payer mix remain strong with first quarter 2025 revenue per adjusted admission up 2.8% over the prior year. In all, our first quarter results were above our expectations driven by fundamental continued strength in the same store revenue growth due to customer demand, high acuity, and effective cost management. Regarding our 2025 full year guidance, we are not addressing the underlying outperformance in our business units during the first quarter. We are early in the year and while we are very pleased with both our fundamental outperformance and the continued demand for our services and momentum, we carry into the balance of the year we'll address our full year expectations in the future. Turning to capital deployment. We are well positioned to create value for shareholders through effective capital deployment of the cash flows that our portfolio of business generates. We've demonstrated an ability to flex our operations during challenging times and our transformed portfolio is better positioned to handle economic stresses. We continue to see significant opportunity for M&A in the ambulatory space and intend to invest a baseline of approximately $250 million towards this opportunity each year. During the quarter, we added six new centers, including a strategic partnership with ChoiceCare Surgery Center in Midland, Texas. ChoiceCare is a 16,000 square foot state-of-the-art, multi-specialty surgery center with a focus on orthopedic surgery and urology among other service lines. Our cash flows have enabled us to make incremental investments in capital expenditures to fuel organic growth such as our expanded L&D department at Abrazo West Campus in Arizona. Our top-tier medical professionals and latest medical technology reflect our commitment to delivering exceptional care to women and their families in one of the fastest-growing communities in the United States. We have significantly deleveraged our balance sheet with a net debt to EBITDA minus NCI ratio of 3.1 as of March 31, 2025, competitive with our leading peers. We remain committed to a deleveraged balance sheet as it provides us the flexibility to actively deploy capital to create value. We believe that our current valuation is disjointed relative to our growth prospects, strong operating capabilities, and transformed portfolio of businesses. We see this as an opportunity that we can capitalize on via share repurchase. We repurchased 2.6 million shares in the first quarter of 2025 for $348 million and going forward, we plan to be active repurchasers of our shares, particularly at our current valuation multiple leveraging the significant cash flow generation of our business. In summary, we've had a strong start to the year based on fundamental growth and cost management. We are executing effectively on our growth strategy with an intense focus on serving our patients and delivering value with our physician partners. Importantly, we are not altering our business strategy because of healthcare policy uncertainty that the industry is currently facing. We will steadily execute on our growth strategies with consistent capital investments and continued demonstration of our strong operating capabilities. We see significant opportunity for growth which we believe translates into attractive free cash flow generation that we can deploy across our discussed priorities to generate value for shareholders. And with that, Sun will provide a more detailed review of our financial results. Sun Park: Thank you, Saumya, and good morning, everyone. We are pleased to report another strong quarter to start off our fiscal 2025. We generated total net operating revenues of $5.2 billion and consolidated adjusted EBITDA of $1.163 billion, a 14% increase over the first quarter of 2024. Our first quarter adjusted EBITDA margin was 22.3%, a 320 basis point improvement over last year. Adjusted EBITDA was well above the high end of our guidance range, driven by strong fundamentals including same store revenue growth, continued high patient acuity, favorable payer mix, and effective cost controls. I would now like to highlight some key items for each of our segments. Beginning with USPI, which again delivered strong operating results. In the first quarter, USPI's adjusted EBITDA grew 16% over last year with adjusted EBITDA margin at 38%. USPI delivered a 6.8% increase in same facility system-wide revenues with net revenue per case up 9.1% and case volumes down 2.1% reflecting our continued disciplined shift toward higher acuity services. Turning to our hospital segment, quarter 2025 adjusted EBITDA was $707 million with margins up 310 basis points over last year at 17.5%. Excluding the hospitals divested in 2024, we adjusted EBITDA grew 23% over the first quarter of 2024. Same hospital inpatient admissions increased 4.4% and revenue per adjusted admissions grew 2.8%. Our consolidated salary, wages, and benefits in the first quarter was 40.6% of our net revenues, a 260 basis point improvement from the prior year. And our consolidated contract labor expense was 2%, up from 2% in the prior year. Our consolidated contract labor expense was 2%, SWND. In the first quarter of 2025, we recognized a $40 million favorable pre-tax impact for additional Medicaid supplemental revenues related to prior years. As a reminder, first quarter 2024 results included a $44 million favorable pre-tax impact for additional Medicaid revenues related to the prior year. Next, we will discuss our cash flow balance sheet and capital structure. We generated $642 million of free cash flow in the first quarter, and as of March 31, 2025, had $3 billion of cash on hand with no borrowings outstanding under our $1.5 billion line of credit facility. Additionally, we have no significant debt maturities until 2027. And finally, we repurchased 2.6 million shares of our stock for $348 million in the first quarter. Our leverage ratio as of quarter-end was 2.46 times EBITDA or 3.14 times EBITDA less NCI. Driven by our outstanding operational performance, and continued focus on financial discipline. We are very pleased with our ongoing cash flow generation capabilities and have a commitment to a deleveraged balance sheet. We believe we have significant financial flexibility to support our capital allocation priorities and drive shareholder value. Let me now turn to our outlook for 2025. As Saumya noted, we are not making any adjustments to our full year 2025 outlook at this time. While we had strong fundamental outperformance in the first quarter, and have continued confidence in our ability to achieve our full year targets, it is early in the year, and we will revisit our full year guidance as needed in subsequent quarters. As such, we are reaffirming the full year 2025 guidance that we initially provided in February. A few items of note, our outlook continues to assume $35 million of net revenues associated with the Tennessee supplemental Medicaid programs, which have not yet been fully approved. As such, we did not record any revenues associated with these programs in the first quarter of 2025. We expect second quarter consolidated adjusted EBITDA to be in the range of 24% to 25% of our full year consolidated adjusted EBITDA at the midpoint. We expect USPI's EBITDA in the second quarter to be in the range of 24.25% to 25.25% of our full year USPI adjusted EBITDA at the midpoint. Turning to our cash flows for 2025, we continue to expect free cash flows in the range of $1.8 to $2.05 billion, distributions to NCI in the range of $750 million to $800 million, resulting in free cash flow after NCI in the range of $1.05 billion to $1.25 billion, all consistent with our initial 2025 guidance. And finally, as a reminder, our capital deployment priorities have not changed. First, we will continue to prioritize capital investments to grow USPI, M&A. Second, we expect to continue to invest in key hospital growth opportunities including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll have a balanced approach to share repurchases depending on market conditions and other investment opportunities. Given our attractive free cash flow profile and current valuations, we plan to continue to be active repurchasers of our stock in 2025. We are pleased with our strong start to the year and are confident in our ability to deliver on our outlook for 2025 as we continue to provide high-quality care for those in the communities we serve. And with that, ready to begin the Q&A. Operator? Operator: Thank you. At this time, we will be conducting a question and answer session. As a reminder, Tenet respectfully asks that analysts limit themselves to one question each. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. Before pressing the star keys. One moment please while we poll for questions. Our first question comes from Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: Hey, good morning. Just a couple of quick ones here. I just wanted to ask specifically understand the posture you are adopting on guidance. But I guess as we think about the first quarter itself, is there anything that you would kind of call out maybe besides the $40 million of incremental Medicaid supplementals that you would frame potentially as an added period item that we should think about bridging from Q1 to Q2? And then just on USPI, you know, revenue per case growth, you know, the highest we have seen for quite some time in a normal operating environment. Despite the total joint case growth being a little bit lower than it was this time last year. Anything you kind of call out there as the driver of sort of the higher acuity, higher revenue intensity and potentially backfilling, you know, the total joint growth. Thank you. Saumya Sutaria: Yeah. Hey, Stephen. Saumya here. Thanks for the questions. Number one, on the first point, no, there's nothing else I mean, we are just not addressing guidance this early in the year. We recognize fundamental outperformance. So there are no other items there. On the USPI side from a revenue per case growth standpoint, I would say three factors, you know, obviously, our contracting platform, acuity, and, you know, we continue to take strategic opportunities in particular accelerating some of what we have been working on for the last year or two on low acuity work. And, you know, I mean, look, the growth rates on joints and things like that I mean, as the platform gets bigger and bigger, obviously, on a percentage basis, the growth rates will come down a bit. But, you know, we are pleased with the joint, you know, the growth, the continued ongoing march forward in moving the joints into the outpatient setting. As we have said, we think that's a big opportunity. Operator: Our next question comes from Greg Hinenbach with Morgan Stanley Investment. Please proceed with your question. Greg Hinenbach: Thank you. For USPI, can you just talk about the pipeline of potential acquisitions and just your confidence of being able to deploy the $250 million in investment? Saumya Sutaria: Yeah. The pipeline looks good. I mean, you know, $250 million is always kind of a goal range that we put. Obviously, we have been well, we have certainly been spending on average a lot more than that, almost double that because of some of the platforms over the past five, six years. But, yeah, that's still our goal and the pipeline looks healthy. The number of de novos look healthy. In terms of syndicated centers that will stand up from the ground up, the corollary question that often comes is multiples are not really changing very much. From where they have been. You know, obviously, our focus is a little bit more on some centers that have the potential for USPI to deploy its service line diversification capabilities and add things like ortho and whatnot that may not be necessarily part of those centers. But yeah, we feel we feel pretty good. I mean, the USPI environment looks great. Right? And, you know, again, I'm sure it will come up, but you I'll remind you that you know, we do not have as much exposure in that environment to certainly Medicaid and while the exchanges are certainly relevant there, they are less relevant than the hospital segment. Operator: Got it. Appreciate the color. Operator: Our next question comes from Joanna Gajuk with Bank of America. Please proceed with your question. Joanna Gajuk: Hi. Good morning. Thanks so much for taking the question. So maybe I guess, I want to follow-up actually the first question around just the strength in the quarter. I understand that you want to be conservative and you do not want to update all the elements early in the year, but just walk us through because the hospital segment where in particular, those margins were much better, and you are going to need to exclude the $40 million call out of period. So is there something else in that segment that came in much better than internal expectations? Thank you. Saumya Sutaria: Hey. It's Saumya again, and Sun can comment. Just so that we are both consistent on this. I do not see I mean, it we had a good quarter. I mean, we had a bunch of things in motion from last year. Regarding expense management. You know, you can maybe you can review some of those statistics. Obviously, as we started to think about various policy changes and other things that could be out there or could be part of the discussion, we were thinking about expense management, very carefully coming into 2025, the growth environment's been good. We have been able to accommodate volume without adding a lot of contract labor. Where we have been expanding capacity. Our recruiting of staff and nursing has been good. Our retention rates have improved. Yeah. I do not I mean, I know it it it I understand the question, you know, is there something else in there, but there's not. It's just it's just we we put together you know, three or four good things together in the same quarter, and it ended up generating better results than we might have expected. Sun? Sun Park: Yeah. I'll just add. Look, the $40 million of out of period you mentioned, you know, obviously, that's balanced with about the same amount, $44 million of out of period adjustments we had in Q1 of last year. So that's, you know, kind of even. And then as Saumya said, I think it really was operational strength. You know, our acuity our payer mix, remained strong. You know, our net revenue per adjusted emissions 2.8% compares very favorably to our, OPEX per adjusted emissions of about 50 bps, I believe. It was. And then, you know, as Saumya said, we are very focused on operating discipline, especially labor. You know, we had a basis point improvement in SWB in the hospital segment. Between Q1 of last year and Q1 of this year. That reflects not only the contract labor discipline, but just a stable wage environment overall as well as other, operating, this one from our, field force. And then I would say, finally, you know, we were very focused on our other lines as well. If you look at our supplies, if you look at our other OpEx line items, we demonstrated some incremental improvement there as well. Not just quarter versus Q1 of last year, but if you look at our 2024 results, you know, we have been working hard at this, you know, quarter by quarter making some incremental improvements. So I think all those things have contributed to a very strong Q1. Joanna Gajuk: Great. Thank you. Operator: Our next question comes from Ryan Langston with TD Cowen. Please proceed with your question. Ryan Langston: Great. Thanks. Good morning. You mentioned a couple times obviously the first quarter we saw really tight labor management. I guess, how much more room do you think you can actually improve that labor, you know, performance? And then maybe just give us a sense on what types of initiatives you guys have put in place and or are working on to kind of keep up that level of performance? Saumya Sutaria: Well, if if I improve we are referring specifically to the narrow narrow issue of the percentage of contract labor, I'm not sure that necessarily decreasing that further is an improvement. Right? Because obviously, there are times where you would utilize contract labor in in order to open up capacity for things that you may be doing which are accretive. So you know, I think what we have said all along was that our strategy was to reduce contract labor, have our full-time employees that provide good care leverage all the nursing school and other relationships, text, and other things that we built during COVID in order to help train graduates that then might choose to stay within our system and positively impact our retention rates because there's a degree of familiarity there. And, of course, the net consequence of all that is that we can return to following our overall SWB inflation rather than just being focused on the narrow topic of contract labor, expenses. So that that's kind of the journey that we have been on as you can as you can imagine and appreciate from our comments over the past couple of years. So I think, look, I mean, the, you know, the the importance the next year or two is is really on recruiting and retention. Of of the staff necessary to build and grow the business. I think the contract labor is fine where it is. Ryan Langston: Okay. Thank you. Operator: Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Megan Holton: Good morning, guys. This is Megan Holton for Brian. And congrats on the quarter. I guess just piggying off Joanna's question on the hospital business. Can you provide some color in the acuity, the payer mix, what drove that revenue per adjusted admission? Of your peers have spoken to exchange volume growth. Are you seeing the same growth? And can you quantify that growth? Saumya Sutaria: Yeah. Hey, Megan. Thanks for the question. Sun Park: Yeah. I think couple of pieces. So I'll I'll repeat our statement that we saw continued acuity strength as well as, strong peer mix. You know, I I think if you, look at our stats, in terms of total managed care as percent of our net patient revenues, it it remains around 70%, very consistent with kinda what we had last year. And then our acuity strategy is again very consistent with last year. Agreed that was a continued strength for us. In Q1 of 2025. We saw a 35% increase in exchange admissions. And at this point, our revenues from from exchange is about 7% of total consolidated revenues. So a little higher, I think, than fiscal 2024 where we ended fiscal 2024. And we'll see for the rest of the year, you know, we we think, you know, the environment continues to be strong across our different payer areas. And, you know, we'll we'll update our guidance as we go. Operator: Thank you. Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. Just wanted to follow-up on the SWB discussion. It's certainly kind of jumped off the page on the hospital side. Is, you know, beyond the contract labor, is there anything else special going on in the quarter? And if not, you know, is this a reasonable kind of run rate to be thinking about, you know, whether it's SWB per adjusted admission or the ratio it's you know, And, you know, just to to follow-up on that, like, if it if it is, you know, what would have to go wrong for you not to, you know, materially outperform? I mean, it certainly seems like I guess, the question would be, if you're is this what you would is this ratio what you embedded in your hospital EBITDA guidance or is it running materially better? Thanks. Saumya Sutaria: Hey, Justin. I mean, a couple things. I mean, we are not really updating guidance. Right? I mean, there's a few things. Obviously, the more we diversify the business into the ambulatory side, that helps in terms of the the USPI or the USPI component. And in particular, the impact on salary, wages, and benefits. So I you know, look. I I think without some discontinuity in the environment, we feel pretty good about the various aspects of labor management that that we are undertaking in this environment and at the same time, again, I I cannot emphasize enough from my perspective the importance of having our own workforce that knows our physicians and knows our environment and and doing better and better on retention of that staff is a really important part of our strategic goal to expand capacity in in a high-quality way, and that's that's kind of the balance that we are looking for right now. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey, guys. Great job this quarter. I guess you know, you're gonna see a trend here. I'm gonna hit the S and P leverage maybe a slightly different way here, your average like the stay was down for 2.3 days percent on a same store basis. You know, is that due to flu, or is that just better productivity? And as you think about where I was looking at the stake in trend, where do you think we can exit the year? Or is this leverage due to uncompensated care, which looks to be down this quarter despite revenues going up. It looks like this is due to implicit price concessions and security write-offs down. So any thoughts around uncompleted care reductions down this year and how that impacts your margins? Thanks. Saumya Sutaria: Well, let's go in reverse order. The uncompensated care piece is not the same store. Right? I mean, remember, we divested a bunch of assets in in many cases that were in markets with less favorable payer mix. So I do not think you can I do not think you can look at that decline necessarily on a same store on a same store type of basis? If that helps. Yeah. And then you wanna take the other Sun Park: Yeah. So on on some of your other questions look. I mean I mean, on on the length of stay, I I yeah. There probably was some flu impact, but I think overall, again, it comes back down to you operating discipline and and trying to make sure we balance the right patient care as well as our workflows and efficiency. Right? So we are working hard on that. And then, you know, I think you're your general question around kind of sustainable know, sustainment of kind of the pieces. Look, I think it all comes back into two things that we mentioned. It's a stable external environment in terms of wages and fees. We've and then we focused a lot on our operating discipline, which was just showing up in our metrics. One final kind of footnote to Saumya's answer on the uncompensated care number. I think you're absolutely I think Saumya's right. It's it's not same store, so I think that distorts the comparison. And then I think, obviously, if you look at the individual line items, while some are going up and some are going down versus 2024, you kinda have to take that all together And if you look at the total uncompensated care percentage as revenues, we've been pretty consistent 2024 to 2025. So I do not think that's driving the margins. Operator: Our next question comes from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix: Great. Thank you very much. Just a quick question back to ambulatory rate growth that's strong 9.1% growth. I appreciate the commentary about the continued mix shift in M&A towards higher acuity specialties. But we just I had noticed that one of your ASC peers has started to see less couple quarters a more balanced mix of rates and and and volume growth overall. In the ambulatory. Just wondering just based on your M&A plans and based on the shift you're seeing towards higher acuity, how persistent you think this rate momentum is over the next couple of years? Thanks. Saumya Sutaria: Well, I mean, projecting projecting out over the next couple of years on ASC rates is a little bit tough. I mean, I think that if you think about what we have been doing and and it's a fair criticism, by the way, if if that's what it is that you know, our rate guidance has been under what we have been actually achieving for for a couple of years. That's that's fair. You know, our guidance obviously is much more long term. In terms of the revenue growth combination of volume and rate our near term impact is driven a lot by what we have been doing around not only growing higher acuity, but it's same time working actively to create capacity to resindicate some of our partnerships and other things with certain low acuity business moving out of the ASC environment. And, you know, it took us a while to get that balance right. But I think we've got that balance a lot better. And then when you add on top of that, the fact that, you know, most of what we're doing in the ASC costs 30 to 50% less than the same acute care setting, our contracting strategies have been helpful because you know, there is a desire by all stakeholders to move things into a lower cost setting including you know, providing fair rates in the ASC environment, which we've been able to achieve. So, you know, when you put all that together, I do not disagree with the premise at all that we should see momentum on the net revenue per case in the ASC environment for some time to come. And that's a that, you know, that's a good thing. That's and the ASC should be the leading edge of innovation of getting you you know, appropriate higher acuity care into a lower cost setting. Operator: Our next question comes from Whit Mayo with Larink Partners. Please proceed with your question. Whit Mayo: Hey, thanks. So when you talked about opening up capacity on the acute care side, just any numbers around this to frame maybe what the year over year increase was from those initiatives Well, I think the numbers Saumya Sutaria: what I was referring to is specifically the the same store hospital growth numbers included capacity expansion as one of the reasons that they were so robust I mean, we haven't quantified how if you're asking how many beds or something like that, we haven't quantified that. Whit Mayo: Maybe just another question just around USPI and the commentary around physician additions, recruiting efforts. She talked about re syndication efforts as well. Just wondering if there's anything to share about what those numbers mean in terms of a year over year increase versus maybe history Saumya Sutaria: I would say that the physician activity is is on a numbers basis, gross numbers basis, very similar to in the past. I mean, the ASC environment is an environment where you have to be constantly engaged in renewing, refreshing, and re syndicating partnerships. What I was referring to before on the re syndication piece directly tied to the commentary about net revenue per case is that sometimes that's a specialty shift. Right? I mean, in in many ASCs, you're renewing, refreshing, etcetera. The same specialties. But if you're making service line shifts and transitions, towards higher acuity, you may be re syndicating with different specialists than were in the ASCs before, and that's what I was referring to. And that obviously takes a lot more work to get done. You have to identify new individuals, perhaps new practices, that join an existing ASC versus simply working with your existing practices to add doctors when they may have retirements or departures or whatever the case may be. So it's, you know, it it the service line transition work that we've undertaken in the last few years it's a lot of work and it's and again, as as you know, we we it took us a while to get admittedly the balance right in how we've how we've been doing it. We feel much better about it now. It's been much more consistent for the last couple of years. And it's driving earnings growth above our expectations and above USPI's long term trends, which is which is terrific because it's a momentum driver for that business. Whit Mayo: Yeah. Thanks. Operator: As a reminder, we ask that you please limit yourself to one question. Our next question comes from Ann Hynes with Mizuho. Please proceed with your question. Ann Hynes: Hi. Good morning. Thank you. Again, I want to focus on the Q1 beat because it was so meaningful. I know you said that it was better than your internal expectations. Can you just go through what was the main driver? What surprised you most about the quarter internally? And also, you know, I get this question a lot just because the macroeconomic economic environment is very volatile. People are concerned about a recession. Do you think there is any type of, like, front loading of volumes if people are worried that they might lose their jobs? Thanks. Sun Park: Hi, Ann. I'll take the first part and then hand off to Saumya. On the Q1 beat, listen, I mean, I think we covered a lot of the dynamics that we talked about. In terms of what we assumed in our guidance versus what we're showing up. I mean, obviously, we talked we mentioned before the strength in exchange patients growing 35% admissions. You know, we weren't quite sure how what that number would be. Q1. You know, we figured it would be relatively strong. But, again, compared to last year, you know, we expect it to go down. So we weren't quite sure how that would turn up, but we were bay very pleased to see pleased to see that. And, you know, I think that's reflective of not only the coverage and payer environment, but also of our our continued networking strategy of of being broad access to these exchange populations. So I think we're pleased to see that. Other than that, I do not know that we have anything else to point out that we haven't covered already. So I'll hand off that to Saumya on the other question. Saumya Sutaria: Yeah. I do not I mean, I do not how you know, how can one tell honestly if if there's a you a surge in demand that's coming. I mean, we do not necessarily see in in our for example, our physician practice offices or other things significant changes. Sometimes you see changes at USPI and cancellation rates and other things. We haven't really seen much of a difference there. I do not I do not know I do not know that there's anything I could point to to affirmatively say that people are trying to utilize their coverage out of a fear of losing it. I do not you know, we probably have to think a little bit more about how to how to track some things that might give us a sense that that's happening. Ann Hynes: Thanks. Operator: Our next question comes from Benjamin Rossi with JPMorgan Chase. Please proceed with your question. Benjamin Rossi: Great. Thanks for taking my question here. So I appreciate the unknown here, but regarding tariffs, we've been getting some commentary from your peers on framing exposure on finished goods supply spend, particularly outside of the US. Do you have any additional context on framing there and and maybe how much of your supply spend would be off contract or direct for manufacturers? And then beyond scope of supply, are there any differences in your procurement setup between ambulatory and hospital? Thanks. Saumya Sutaria: Yeah. No. Thanks for the question. And I think just mean remember we are active members of of HealthTrust and that's true not just on the hospital business, but know, you can imagine at our scale where the anchor client on the ambulatory surgery side as well. And and well engaged with with the other peers and partners who also are in the ASC business. So there is no there is no separation between Tenet and USPI. And our engagement with and our engagement with HealthTrust. And now we do not have any commentary to add. I mean, the numbers that you have heard are in terms of the supply spend base, the location of where it's coming from, the pharmaceuticals points, all the same. No different. Benjamin Rossi: Got it. Thanks for the color. Operator: Our next question comes from A.J. Rice with UBS. Please proceed with your question. A.J. Rice: Hi, everybody. Thanks. I understand that you do not want to sort of quantify things that are unknown that are being discussed in Washington. But as I think about and see commentary from nonprofit peers, we see some nonprofits saying they're putting in hiring freeze so they get clarity. Others are saying they're looking at their capital budgets. I wondered if you could comment, obviously, you got the public exchange, the supplemental payment, questions related to provider tax, even some discussion about site neutral payments. Are there contingency plans that you make at this point? Do you sort of just have to sit back and see what happens? Or how how do you guys think about getting in front of any of that or is it affecting in any way your business? And then I I will throw in there specifically AdvantageCare contracting. Do you approach that differently? Do they approach it differently? I know you typically do three year deals. Is there any thought that maybe we should take a little more narrow focus until there's some clarity? Any any thoughts along those lines be helpful. Saumya Sutaria: Sure, A.J. Thanks for the question. So let's let's just I mean, I'll just say let's just step back. Right? Our coming into this year, regardless of the policy uncertainty, I think the best way to frame the answer to this question is have we changed our priorities or have we added to our priorities? And I would I would argue it's the latter. And our number one priority going into this year was to build off of what was a strong utilization environment in 2024, with us having significant outperformance of our expectations, and carrying that into 2025 both through our capital initiatives, our growth prospects, and acquisitions, at USPI, and the capacity expansion in the markets where we thought we still had beds that we could open up as we could accommodate that without excessive contract labor. So that still remained priority one. Okay? Priority two was the cost control. And in particular, it had to do with what I've talked about earlier, which is labor And and now I would say what we've added to that is a much tighter look and initiation of some actions on the supply side, to tighten up our utilization where it's possible to do so. In advance of any theoretical know, tariff business or whatever may may come to pass. And that's you know, that's kinda priority number two. Priority number three has been engaging as constructively as possible in the discussion in Washington, both through our various agencies that we work with, but more importantly, in my view, directly as myself and selected other leaders have been doing in order to shape the dialogue about you know, the the potential impact of cuts. I mean, I you know, I've said this publicly before and I'll do so a little bit more in in the coming weeks in in other forums, The polling is very clear about how the public all over the country feels about the importance of the exchange tax subsidy extensions and Medicaid. And it you you know, when I others are sharing it, I'll share it here in a couple weeks, is that what what we found in our work it's it's really important insight about how much support there is for these these programs and and for healthcare coverage for people. So that's been priority number three. So priority number four has been contingency planning. We haven't really moved that up the list yet. Of course, we're contingency planning. Look, we did a good job during COVID, which was a shock to the system. And we'll do it again if we need to. But we're not moving that up. To priority number one, two, or three right now because we still believe that our operating platform can receive and accept all patients that need care and do it in an accretive manner. And so the growth is still an important important way to go. If there is some shock that comes out of Washington, obviously, priority four may move up. In terms of our list, but it is not there right now. On your other question about managed care, you know, look, I think in in it's the contract renewal cycles come up in in various sequences They tend to be as you said, three year potential deals. I do not I do not see a whole lot of reason if you're negotiating fair contracts and partnerships with the plans to be looking at different time frames to create a bunch of uncertainty every year from that from that perspective. A.J. Rice: Okay. Alright. Thanks a lot. Operator: Our next question comes from Andrew Mok with Barclays. Please proceed with your question. Andrew Mok: Hi. You delivered another quarter of double digit same store growth in total joints. I think you've done that almost every quarter since you started disclosing that a few years ago. Can you give us a sense for how that market has evolved over the last five years or so in terms of eligible population or penetration of seniors? And where do you think that those numbers can go? Thanks. Saumya Sutaria: Yeah. Well, there's there's still a lot of HOPD work that goes on there that isn't really due to comorbidities or other sorts of things. Right? It's I mean, there are people that have active HOPD strategies, and then they're just physicians that are less comfortable in a non-hospital environment. And then you have, you know, of course, in some markets more than others, high quantities of employed orthopedic surgeons that aren't really allowed to, quote unquote, invest in ambulatory surgery into lower cost settings. Obviously, combining that with getting trainees in orthopedics more exposed to same day type of settings is an is an important piece of this, and, you know, obviously, the insurers creating incentives to do so is important. From that perspective as well. And, you know, part of that incentive is you've got to compensate adequately for that outpatient care because it's so much lower cost than a hospital setting. So I think when the when the issues move from all of these various things in the milieu to only the clinical care considerations which is who's appropriate for what setting, we'll know that the shift is complete. We're not there yet. Right? We're kinda halfway through that process and there's still runway to go. Andrew Mok: Great. Thanks. Operator: Our last question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Hi. Thanks for fitting me in. I guess I want to take the margins from maybe a more optimistic view. So even excluding the $40 million retro payment, the hospital margins were, you know, called 17%. Do you think there's additional room for margin expansion there on the acute care side? I mean, you've seen almost a doubling over the last decade. And and maybe what sort of volumes would you need to get there? And what areas do you still think there's operating leverage? Saumya Sutaria: Yeah. Josh, Thanks for the question. I mean, look, we we always operate with the mindset that there's margin expansion potential. The drivers of the margin expansion obviously, in the hospital segment as as a whole entity, are are multifold. Right? One is just we've instituted and Tenet and hardwired now significantly more operating discipline over the last few years than existed prior. That helps. Our controls around utilization and other things are much much more data driven. So while we started them top down, during COVID, based upon that data driven environment, just the operators have a chance to react much more quickly and nimbly Payer mix over the last few years has improved. You can't escape the fact that the exchanges have been a supportive environment. You know, we didn't know would happen with redetermination. It ended up being accretive to to revenue and and margins from that perspective. And, of course, we've had the benefit of portfolio transformation on the hospital business where you know, on average, slightly lower margin facilities were divested versus the remaining portfolio. And then the operating leverage in the future comes from better cost structure in labor, better standardization of the supply environment, And as as I've said all along for many years, you know, we have had a focus on asset utilization. Which continuing to build and grow the business to improve our asset utilization we'll continue to improve, hopefully, margins, all other things being equal. And so that's kinda what we focus on. And again, that gets back to also Josh just A.J.'s question around priorities. That's why our priorities right now are still in this environment to continue to build and grow the business rather than than of any kind of retreat yet. Josh Raskin: That's perfect. Thanks. Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

Operator: Good morning. Welcome to Tenet Healthcare's Fourth Quarter 2024 Earnings Conference Call. After the speaker remarks there will be a question-and-answer session for industry analysts [Operator Instructions]. Tenet respectfully asks that analysts restrict themselves to one question each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's fourth quarter 2024 results as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Saum. Saumya Sutaria: Thank you, Will, and good morning, everyone. We delivered outstanding performance in 2024 characterized by strong same-store revenue growth, disciplined operations and effective capital deployment. In addition, the year was highlighted by portfolio transactions that have transformed our franchise to be well-positioned for long-term growth with strategic flexibility and from operating revenues of $20.7 billion and consolidated adjusted EBITDA of $4 billion, which represents 13% growth over 2023. Full-year adjusted EBITDA margin of 19.3% improved over 200 basis points from prior year. Our fourth quarter results were above our expectations driven by continued same-store revenue strength, high acuity growth as well as effective cost management. Our disciplined approach has enabled us to consistently exceed our performance expectations each quarter this year, furthering our track record. I would note that our full-year adjusted EBITDA ended the year over $600 million higher than the midpoint of our initial expectations, driven by strong growth and operational performance. USPI had a fantastic year in 2024. We generated $1.81 billion in adjusted EBITDA, which represents 17% growth over 2023 and adjusted EBITDA margins of 4%. Same-facility revenues grew 7.8% in 2024, another year substantially above our long-term goals. High acuity volume growth was highlighted by total joint replacements in the ASCs, up 19% over prior year. Importantly, customer service levels in our centers remain quite high as we earned a 96.6 overall patient experience score in 2024. Turning to our Hospital segment. Despite the sale of 14 hospitals during the year, we generated $2.185 billion of adjusted EBITDA in 2024, which represents 9% growth over prior year. Same-store hospital admissions were up 4.7% as we continue to open up capacity to respond to a strong utilization environment. Acuity and payer mix were strong throughout 2024 and drove a 4.6% increase in same-store revenue per adjusted admission over prior year. This was an important year for Tenet as we transformed our portfolio of businesses through the multiple – through high multiple sales of 14 hospitals and related operations, generating $5 billion in gross proceeds and enabling significant balance sheet deleveraging. In addition, we added nearly 70 ambulatory surgical centers to the portfolio in 2024 as we were very active in both M&A and de novo development. And finally, in the past 2 years, we have returned capital to shareholders via share repurchase retiring approximately 14% of our outstanding shares for $1.12 billion since our repurchase program began in the fourth quarter of 2022. Going forward, we plan to be active repurchasers of our shares, particularly at our current valuation multiples. These actions have resulted in a portfolio of businesses that is more predictable, capital efficient and able to operate in a variety of environments with better margins and ample free cash flow for the benefit of shareholders. In summary, we're very pleased with our team's performance in 2024, and we believe that we will carry this momentum into the New Year. Turning to 2025 guidance. We are projecting full-year 2025 adjusted EBITDA of $3.975 billion to $4.175 billion, which is an attractive 7% growth rate at the midpoint on a normalized basis. We anticipate adjusted EBITDA growth at USPI of approximately 8.5% at the midpoint of our guidance for '25 based on our expectation of 3% to 6% growth in same-facility revenue fueled by ongoing strength in acuity, continuing effective operational execution and additional sites of care joining the portfolio. We intend to invest approximately $250 million each year towards M&A in the ambulatory space and the pipeline of opportunities remain strong. We anticipate adding 10 to 12 de novo centers in 2025. Our ability to consistently scale our platform to create additional low-cost sites of care for patients and physicians continues to pay dividends as it improves our overall growth, profitability, capital efficiency and resiliency in this regulatory environment. Turning to our Hospital segment. We are expecting adjusted EBITDA growth of approximately 5.7% on a normalized basis at the midpoint for 2025. This projected growth is going to be driven by 2% to 3% adjusted admissions growth and a strong operating discipline that our team has demonstrated for many years. The Hospital segment's performance will be enhanced by strategic capital deployment service lines and contributions from the new [West over Hills] facility, which opened in the third quarter of 2024. Additionally, as we have noted, we have expanded the relationships that Conifer has with acquirers of hospitals we've sold, and this should contribute to growth in 2025. Finally, we acknowledge that there is currently a great deal of focus on the impact of potential regulatory changes in our space. We have demonstrated an ability to perform well in a variety of operating environments, and believe we are differentiated from our peer set as we navigate potential changes going forward. For example, our ASCs operate with freestanding ASC rates, which insulates that important part of our business from potential changes in site neutrality rules. In summary, we had an outstanding year in 2024 and believe that we are in a great position for another strong year in 2025. Our guidance reflects the opportunities before us and the momentum that we carry into the New Year. Our established management team stands ready to execute our focused strategy and deliver value for patients, physician partners and in turn shareholders. And with that, Sun will now provide a more detailed review of our financial results. Sun? Sun Park: Thank you, Saum, and good morning, everyone. We are very pleased with the strong finish to the year. In the fourth quarter, we generated total net operating revenues of $5.1 billion and consolidated adjusted EBITDA of $1.048 billion, which represents an adjusted EBITDA margin of 20.7%, up almost 200 basis points from fourth quarter of '23. For full-year '24 we generated $20.7 billion of total net operating revenues and consolidated adjusted EBITDA of $3.995 billion. These results were driven by strong same-store revenue growth, continued high patient acuity, favorable payer mix and effective cost controls. Now I'd like to highlight some key items for each of our segments beginning with USPI, which again delivered strong operating results. In the fourth quarter, USPI's adjusted EBITDA grew 14% over last year with adjusted EBITDA margin at 42.1%. USPI delivered an 8.6% increase in same-facility system-wide revenues driven by high acuity levels and favorable payer mix. Same-facility system-wide surgical case volume grew slightly over last year. And turning to our Hospital segment. Fourth quarter adjusted EBITDA was $518 million, with margins up 90 basis points over last year at 13.6%. Normalized for the best hospitals. Adjusted EBITDA grew 13% over fourth quarter of '23. Same-hospital inpatient admissions increased 5% and revenue per adjusted admission grew 0.6%. Our consolidated salary, wages and benefits in fourth quarter of '24 was 41.3% of net revenues and our consolidated contract labor expense was 2.1% of SWB, both substantially lower than the 43% and the 2.8%, respectively, that we reported in the fourth quarter of '23. Next, we will discuss our cash flow, balance sheet and capital structure. Our cash flow performance was very strong in '24 with $1.1 billion of free cash flow for the year. This includes the payment of $855 million in income taxes related to our completed divestitures. Excluding these tax payments, this represents nearly $2 billion of free cash flow for the year or $1.3 billion of free cash flow after distributions to non-controlling interests or NCI. For full-year 2024, we repurchased 5.6 million shares of our stock for $672 million. We finished the year with over $3 billion of cash on hand with no borrowings outstanding under our $1.5 billion line of credit facility. Our year-end leverage ratio was 2.5x EBITDA or 3.2x EBITDA less NCI, a substantial improvement over the past year. Reflecting the proceeds that we received from our hospital divestitures as well as our outstanding operational performance. We are very pleased with our ongoing cash flow generation and have a commitment to a deleveraged balance sheet. We believe we have significant financial flexibility to support our capital allocation priorities and drive shareholder value. Let me now turn to our outlook for 2025. We expect consolidated net operating revenues in the range of $20.6 billion to $21.0 billion. Our projected consolidated adjusted EBITDA is in the range of $3.975 billion to $4.175 billion. As a reminder, there are 2 normalizing items that I would call out when comparing our '25 adjusted EBITDA to the prior year. First, we reported $114 million of adjusted EBITDA from facilities that we divested in '24 and will not recur. Additionally, we reported $74 million of out-of-period supplemental Medicaid payments in Michigan and Texas in '24. After normalizing for these items, our '25 adjusted EBITDA is expected to grow 7% at the midpoint of our range. Our '25 outlook assumes continued growth in same-store volumes and effective pricing as well as strong operational efficiencies and disciplined cost controls. Additionally, we anticipate further contributions from recent investments and partnerships in the Hospital segment as well as from M&A and de novo center openings at USPI. In addition, we are also assuming the following: same-hospital admissions growth of 2% to 3% and adjusted admissions growth of 2% to 3% and for USPI, same-facility revenue growth of 3% to 6%. On a normalized basis, we expect adjusted EBITDA to grow 8.5% at USPI and 5.7% for our Hospital segment at the respective midpoints of our guidance ranges. Our outlook also assumes $35 million of net revenues from the Tennessee supplemental Medicaid programs. About one-third of this increase is related to the second half of '24 and is expected to be recorded in the first quarter of this year. Finally, we would expect first quarter 2025 consolidated adjusted EBITDA to be in the range of 24% to 25% of our full-year consolidated EBITDA at the midpoint. We anticipate that USPI's EBITDA in the first quarter of this year will be 21% to 22% of our full-year USPI EBITDA at the midpoint. Turning to our cash flows for '25. We expect cash flow from operations in the range of $2.5 billion to $2.85 billion, capital expenditures in the range of $700 million to $800 million resulting in free cash flows in the range of $1.8 billion to $2.05 billion. In addition, we're also assuming distributions to NCI in the range of $750 million to $800 million which would result in free cash flow after NCI in the range of $1.05 billion to $1.25 billion. And finally, as a reminder, our capital deployment priorities have not changed. First, we'll prioritize capital investments to grow USPI through M&A. Second, we need to invest in key hospital growth opportunities, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll have a balanced approach to share repurchases, depending on market conditions and other investment opportunities. Given our attractive free cash flow profile and current valuations, we plan to be active repurchasers of shares in 2025. In conclusion, we had an outstanding year in 2024 with effective operational execution, robust growth and a transformed portfolio of business. We're confident in our ability to deliver on our outlook for '25 and continue to drive value for patients, physician partners and shareholders. And with that, we're ready to begin our Q&A. Operator? Operator: At this time, we will conducting a question-and-answer session [Operator Instructions] As a reminder, we ask that you please limit to one question. [Operator Instructions] Our first question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: So looking at Tenet’s sort of in the last few years, the biggest change has been the cash flows and your deleveraging. Your cash flow guidance for this year is up 90% year-over-year or nearly $1 billion more cash flow from operations. So looking at your cash flow guidance for this year after NCI, it's about $1.15 billion at the midpoint. If we pull out $250 million for M&A, it's about $900 million left to deploy with a leverage at sort of 3.2x EBITDA less NCI. Can you refresh us on what your ideal target leverage ratios are? And should we be modeling the rest of that going to share repo at this point? Saumya Sutaria: Hi, Peter, it's Saum. First of all, I appreciate reiterating the improvements that we've made in generating free cash flow from this business from operations, it's obviously been a very important part of our goal over the last few years and getting to this point probably earlier than we thought. We're very comfortable with the leverage that we operate at today. And importantly, it gives us -- we look at it and say it gives us significant strategic flexibility with respect to the business, both in terms of activity that we may pursue in growing and scaling USPI, as I noted in my comments, but also from the perspective, especially, as I said, at these valuation multiples in terms of share repurchase. And both Sun and I noted that we would plan to be active repurchasers of our shares at these multiples makes complete sense. We don't have debt coming due for a couple of years, right? I mean, so we're not in any situation of urgency there regardless. And I think the return on share repurchase at this point would be higher anyway. So our thinking is relatively clear about that in the coming years. Obviously, we need to continue executing operationally with the track record that we've built to generate that free cash flow. But as we've talked about in the last couple of years, we've really hardwired our approach there. The last thing I would point out in addition to what I said about USPI in my comments, we don't -- USPI does not have a tremendous amount of Medicaid exposure. So when you think about utilization of our cash flows and regulatory risk that may be out there, I mean the reality is half our EBITDA is generated in the segment that isn't really facing risk from any scenario out there related to Medicaid programs and that's very helpful. It's very different than it might have looked 5 or 6 years ago. So we feel confident about the valuation opportunities for the company. Operator: Our next question comes from Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse: Can you maybe spend a minute on just the volume environment that you're seeing today? Obviously, 2023 and 2024 were pretty strong years some of that just recovery and normalization post the pandemic. Where do you think we're at from a volume perspective today? And how do you expect volumes to progress throughout the course of the year? Saumya Sutaria: I mean the simple statement I would make right now is that we've anticipated the volume environment continuing to be strong coming into 2025. I mean that's the simplest summary statement I would make. We don't -- there aren't obvious trends from December 31 to January 1 that appear to have changed. I mean the coverage environment looks good, the employment environment looks good, demographics, both in terms of areas where, at least our portfolio is now positioned relative to where it was has attractive demographics and as we've noted, we've had opportunity to expand capacity and take on that capacity without excessive cost to do so, and we're doing it in a deliberate way. So we -- I mean, our guidance reflects that. We feel pretty good about going into 2025. Operator: Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Congrats on the quarter. Maybe, Saum, as I think about your comments on Medicaid and USPI, just curious how you're thinking about the risk overall for the company from all the political headlines that are out there? And what the Republic are trying to do with changes to health care policy and what you're doing to prepare for that just for that potential change, whether it's Medicaid or health insurance exchanges across both business lines. Saumya Sutaria: A few things. So I mean, first of all, the fundamental underpinnings of success in an environment with any kind of uncertainty in our view is operating discipline in what we do, right? And the other important underpinning is having a clear understanding of the economics of our business internally meaning we understand clearly our service lines, our markets, et cetera, that may have greater dependency or less dependency upon certain types of supplemental payments where, for example, the strength in the exchanges has contributed to earnings, et cetera. So the combination of the operating discipline and the insights about the business probably give us an opportunity to manage and pivot as needed depending on what happens. You're right. The segments are different. I mean we've taken the opportunity over the past few years to create resiliency in USPI by making sure that the ambulatory surgery centers as a part of USPI are on freestanding rates, the Medicaid exposure is de minimis in that business, and that's very helpful from that perspective and the exchange business there has had less impact than it had on the acute care segment in terms of the exchange growth from that perspective. So from a USPI perspective, look, this is all about an important tailwind of moving things into a lower-cost setting in an expensive portion of the health care industry, which is surgical care, right? And doing so in a way where we're constantly increasing the acuity of the work at USPI because it creates more value for the purchaser. On the acute care hospital side, I think it's important to continue to search for efficiencies that allow us to generate margins, we always talk about the concept of Medicare profitability, right? Can you generate margins on Medicare reimbursement in order to have a metric out there for efficiency goals that you would create because it's important to be able to operate in that type of environment? Specifically on the acute care side, the number one adaptive action today is helping the regulators understand the importance that these programs provide for basic access for people that wouldn't otherwise have access to care. And that's really important because if that shapes -- or is a factor in shaping policy I think that what comes out of that policy will likely be manageable for us and something that we can get behind. I'm not sure that right now taking a bunch of actions to restructure the business is the right thing to do. I think there's a very strong case to be made that many of these things are really critical to providing access and it happens to be that access is also being provided in states with voters that really matter to this administration, and that's an important supporting factor as well. Operator: Our next question comes from Andrew Mok with Barclays. Please proceed with your question. Andrew Mok: When I look at the ASC case mix from '23 to '24, it doesn't look like there are significant mix changes. We actually see MSK down 1 percentage point in ophthalmology, up 1 percentage point but you're increasing acuity significantly to the point where you're seeing high single-digit same-store revenue growth without meaningful case growth. So can you speak to the types of cases driving acuity higher because it's not obvious from the case mix disclosures. Saumya Sutaria: Yes. No problem. I mean just to clarify, the Orthopedics line item has a lot of things in there. That's why we call out the highest acuity work in joint cases, for example, which is where you have the hips, knees, obviously, the shoulder expansion, that's where the acuity is actually growing. I mean, remember, when you look at certain low acuity procedures that we may do in ASCs, the revenue per case is an eighth or ninth of a single joint case, total joint case from that perspective. So, I mean, we're doing exactly what we wanted with the business, which is we're growing the acuity, we're growing the net revenue per case, we are reducing exposure to high-volume, low-revenue cases. In some cases, things that could also be done in offices that further strengthen the resiliency and value of what USPI is building. So that orthopedics line item has a lot of things in there from high acuity to low acuity cases and it's the reason we call out the really high acuity work. That's a fundamental driver of the net revenue per case strength, which you're seeing. Operator: Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: A couple of things just numbers-wise. Maybe you could tell us, you've mentioned Tennessee as a tailwind that $35 million you mentioned, for instance, Michigan, is not going to -- you're going to have a little bit of a onetime headwind there. But when you think about ex those issues kind of core DPP dollars year-over-year, can you tell us what's assumed in the guidance? And then same for exchanges, like what kind of exchange growth do you kind of expect in your markets, exchange volume growth within that guidance? Sun Park: Hey, Justin, it's Sun, and thanks for the question. On your question about supplemental payments. Yes, I think you called out the kind of the one-timers that we've referenced. The other point in fiscal '24, is we still had a little bit of value from hospitals that were divested during the course of the year, but that's mostly in Q1. So there are a couple of those moving factors. But in fiscal '24, we generated about $1.16 billion of Medicaid supplemental payments. Going into '25, our guidance assumes something pretty consistent with that. You mentioned the Tennessee one time, but excluding that, we were pretty consistent year-over-year. On your question about exchange, as we've said multiple times, total admissions and revenues from exchange population was a strong growth driver in 2024. We expect that to continue for Saum's earlier comments around the overall volume environment. The enrollment -- the renewal cycle seems to have been positive. We'll see how much of that turns into actual admissions but we certainly won't see the 40%, 50% growth that we saw in '24, but we still continue to see a strong environment. Just as an example, we're -- our strategy, long-term strategy has always to be in broad networks from a contracting standpoint as an example. So we see good things for '25. Operator: Our next question comes from Benjamin Rossi with JPMorgan Chase. Please proceed with your question. Benjamin Rossi: So just cross-supplies were seen some pressure here as a percentage of revenue with that category increase in about 100 bps year-over-year to 18.3. How would you characterize your current supply dynamics exiting the quarter? Is there anything discrete occurring within there? Is this largely a byproduct of your push in the higher acuity? Just kind of curious where you're seeing that number settling out in the steady state during 2025. Saumya Sutaria: Ben, yes, I think it's what you said on the latter piece. It is a just kind of part with our acuity strategy. So the supplies will go up as a percentage a little bit in Q4. But over the year, we've been pretty well balanced, and we expect it to be, again, balanced in '25. Operator: Next question comes from Joanna Gajuk with Bank of America. Please proceed with your question. Joanna Gajuk: So on the guidance element and both are same-store revenue 3% to 6% right, that seems to be sort of more like a normalized growth because clearly, you grew very nicely in '24, almost 8%. So is it just conservatism? Could it maybe also break down volumes versus pricing that's included in that range? Saumya Sutaria: Hi, it's Saum. Look, a couple of things there. First of all, long term, as we've learned with USPI, and I think we've shared this data before, we've looked at 10 years' worth of USPI's performance and same-store growth rates of around 4% to 6% is what we guide to. Now history suggests over that 10-year period, we've performed at the upper end of that range, 6% that has looked better strengthened over the last 5, 6 years, actually over that average period, okay? So you point out this year almost -- or this year, past year '24, 7.8%, the prior year was 9.2% growth rate. So we're running very hot from that perspective in terms of long-term averages with respect to USPI. So our guide just comes -- brings us right back to what our long-term growth rate is. In terms of the year-to-year, as you've seen, it can be lumpy, right? '23, huge volume growth. '24 more growth in acuity and intensity and part of what we're signaling for '25 is it's definitely our plan to continue the shift to higher acuity procedures. I started to point out some of the factors driving that in terms of the revenue intensity of some of these cases, how efficiently we're able to do them in our operating rooms now and generate margin, how we are scaling those programs into more centers. We now have robots in almost 150 of our programs around the country. This is the direction in which we're taking the organization and so, yes, the guidance reflects kind of our long-term average. But we've obviously been running quite a bit above that. Operator: Our next question comes from A.J. Rice with UBS. Please proceed with your question. A.J. Rice: Saum, I would ask maybe on where you're at with managed care content. I know we've been in a period where you've been getting toward the high end of historical rate updates to pay for some of the labor challenges in the last few years. Is '25 a year in which you'll still type of dynamic maybe where are you at in terms of signing up contracts? And then also on the managed care side, any update on thoughts about denial activity, prior authorization challenges and other term changes that you're dealing with? Saumya Sutaria: Yes, why don't we take those reverse? The -- I mean, I would say that the environment is no different than it has been. I mean there's a constant back and forth of administrative costs that goes into adjudicating claims that probably is unnecessary but obviously, both sides have a point of view on that. What I would say, more importantly than anything else from our perspective is the work that Conifer does in driving initial disputes to a very, very attractive low rate of denials is critical and our skill set in doing that in both working collaboratively with the payers and adversely where needed on the basis of solid documentation, appropriate coding, compliant coding and efficient revenue cycle operations has made a big difference. We're seeing a gap in what we generate in terms of lower denial rates than the industry from what we are seeing with respect to initial dispute rates and that's good because that means we're doing things right in generating the appropriate cash flow from the work we're doing. Sun, maybe you want to comment on the managed care side. Sun Park: A.J., for your first part of the question, as we've said historically, we are continuing to see commercial rates increases in the 3% to 5% range and some of the contracts have been at or slightly above the high end of that range as respect to the inflationary pressures that you've mentioned. So I think the overall situation there is pretty consistent. And then in terms of contracting, going to '25, we're over 90% contracted for '25 and probably about over 50% contracted for '26 as well. So we have great visibility into '25 and beyond. Operator: Our next question comes from Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: I wanted to come back to the same-store hospital volume guidance for 2025. I appreciate you're still expecting exchange growth inside of that number to some degree. I would also love to hear any quantification you can offer about how much hospital capacity you'll have online in 2025 compared to 2024. Trying to break out that 2% to 3% and maybe think about maybe what's the market level growth inside of that compared to how much of it is coming from capacity. Saumya Sutaria: Yes. Stephen, it's obviously both. I mean, the majority of that is the market-level demand that we're seeing versus the selective markets in which there's still capacity that we're bringing online but it is a contributor, which is why I called it out before. We haven't quantified what that looks like between the two numbers, but it is both and the majority of it is market-based demand across the board. Some of this is also related to the service line choices which have been highlighted, the things that we're doing that are taking care of people with multiple chronic illnesses that continue to grow in prevalence are continuing to create more demand than perhaps certain types of lower acuity work, which may be coming out of hospitals in our environment and so that's really how we think about it in terms of the growth rates. Yes. Look, it's been a very busy year in the acute care environment. And as I said, I think the most important thing we're taking into the year from a mindset perspective is we're not seeing changes in the demand patterns. That it was a comment to Jamie's question earlier, we're not seeing changes in the demand pattern right now and so I mean, I'm not going to go forecasting what we may see in the later part of the year, but we're not seeing that right now. Operator: Our next question comes from Michael Ha with Baird. Please proceed with your question. Michael Ha: Just a quick clarification first and then my real one, and apologies if I missed it, but your USPI at 3% to 6% growth guide, what's the volume versus pricing split on that? And then my real question, I'm sorry to add one more question on policy. And I understand USPI is minimal Medicaid exposure but the hospital and maybe taking a different approach just given all the news flow, NIH cuts or just potential focus on Medicaid administrative cuts. If those were to implement those cuts, it might not be overly impactful, but still perhaps a couple of percent of overall Medicaid spend. So I'm curious to hear your view if that were to happen, how do you think states might react? What's your view on the likelihood that states might potentially slow that Medicaid cut down to provider rates and impact kind in hospitals more broadly? Saumya Sutaria: Yes. A couple of different things. So let's just start with the business side of it, first with respect to USPI. As I indicated, there's no long-term deviation from our approach of thinking about half and half roughly managed care and volume at USPI but because it's lumpy and it's proven to be lumpy, we're not guiding specifically for the year with respect to that and you can understand that. I mean we're successfully now 2 years in a row executing our strategy of increasing lower volume, high acuity cases and in fact, as you can tell from our quarterly beats consistently, we're exceeding what we expect from the standpoint of what we can do in same-store revenue growth in that environment. And so we're pleased by that, that we can do that. We obviously had a little bit of fits and starts around that a few years ago in terms of how we were executing it but we got it right, and it's working, and I'm really pleased with that. So the long-term algorithm is the same. But from a short-term standpoint, we're giving you the revenue guidance with obviously the track record of it being stronger. I don't -- on the policy side, I think to be clear, we don't have -- even in our academic medical center enterprises and affiliations, we don't have significant NIH or NSF indirect grant cost exposure in our business. So, in particular, as you can imagine, when we saw that, we thought about that in our environment and where we had RON grants and other things within our environment, but we don't have that significantly in our environment. I think the broader question of Medicaid policy and other things is an important one. But look, the focus on that is articulated and you can't tell what's going to happen. But the focus that's articulated on reducing fraud and abuse, including in some of the public comments made yesterday all the way in the Oval Office. I think one thing that people may find is that Medicaid redeterminations over the last couple of years have probably done a lot to reduce the number of people eligible or not eligible who happen to be on Medicaid. And so I'm -- again, no way to predict for sure. But I'm somewhat comforted by the fact that some of that work has already been done through this redetermination process. So we'll see where this goes and what remains to be seen. Finally, as to speculation -- speculating on what the state's responses may be. I think the states are going to be important allies across the board in advocating for the dollars that come through these Medicaid partnerships with the federal government because again, I go back to -- this is the only way to create access for the people that need it that are on Medicaid. This is not some program that's generating incredible windfalls for health systems on that basis. The unit reimbursement is still below the cost of that care and so I think that, that's going to be an important balancing factor. The states will play an important role in this. Operator: Our next question comes from Ann Hynes with Mizuho. Please proceed with your question. Ann Hynes: So I know there's some big surgery center assets out there in the market. Can you remind us, given your delivered balance sheet, what your appetite is versus larger scale M&A in the surgery center business? Saumya Sutaria: Hey, Ann, it's Saum. Obviously, I'm not going to comment on any kind of M&A opportunities. We're very aware of everything that's available in the market. We've proven our ability over the last few years to deploy M&A capital both on a single-asset basis and large multicenter asset acquisitions. I would tell you that the first year post our acquisition early last year of the portfolio that we took on went better than we thought it would. So that's good news. As I said early on in my comments, our balance sheet provides us plenty of flexibility to approach things but look, we're disciplined, we believe in growth businesses, we believe in areas in which we can add value and we have a lot of flexibility given our cash flow generation and valuation multiple to deploy cash for the benefit of shareholders in multiple different avenues at this point. Operator: Our next question comes from Whit Mayo with Leerink Partners. Please proceed with your question. Whit Mayo: Just to stick on USPI for a second. Are there any new health system partners that we may not be aware of in the last year? I know you've been selective and disciplined with the financial strength of the partners that you want to work with. But I'm just not sure I've had an update or heard an update on anything new [updated] relationships with any health systems in some time. And maybe just a broader comment on the de novo activity, the 10 to 12 this year, any of those with new partners? Or are those all existing partners? Saumya Sutaria: Hey,Whit, it's Saum. No, we haven't provided any updates on health system partners and other things. And remember, I mean, our platform is such that we work just as effectively with partners as we do without partners because of our ability to generate contract synergies, managed care, supply chain, everything, right, in our management capacity for these assets. So we're growing the portfolio in both -- with both vectors, and I don't think that's going to change. I mean, I think the expansion of de novo assets can occur in many different ways. Some are in existing markets, some are in new markets, some are with MSOs that are expanding their physician side footprint. And as I've said in the past, have realized that there isn't a better operator of ASCs to generate margin from those investments for those doctors than USPI. So that's another vector of growth that is helping to create de novo activities. It's a multipronged growth strategy, and I don't think that's really going to change looking forward. Operator: Our next question comes from John Ransom with Raymond James. Please proceed with your question. John Ransom: Saum, I predict you'll hate this question, but bear with me. So we've heard from a few folks that the fourth quarter seasonal uptick is not quite what it used to be because just the fact that deductibles have gotten so high, particularly in commercial plans. Do you think there's any evidence of that? Saumya Sutaria: So John, are you referring just care delivery overall or USPI specifically? John Ransom: I mean in electives, so electives either in the hospital or in the USPI. Saumya Sutaria: Yes, elective work. Yes. Well, it's -- I mean, again, I'm not sure that I'm going to be able to give you a statistically significant answer. But I would say that the seasonality in Q4 and especially that ramps on elective surgery is a bit. I mean Q4 is still a more productive quarter and our asset utilization in our USPI segment does go up still in Q4 but it has tempered a bit overall. And also -- and how much of it is the deductibles versus somewhat the impact of -- if you look at our Q4, the impact of just some of these weather events were relevant. And so how much of it was a seasonality shift versus some of the weather events that we -- I don't know that we've really calculated that but it is -- I mean you're picking up on something that we've sort of said, intuitively, it feels a little bit different, but the general pattern hasn't changed. John Ransom: And so just a follow-up, and thanks for that answer. If we look at '23 and '24, utilization was up for -- in '23, I'd say, electives in '24. There was a bunch of other stuff going on like [indiscernible] and cancer cases and what have you. Do you think -- again, probably you can't answer this question, but it seems to us like '25 were kind of back to more kind of a normalized year where maybe we've cleared out all the COVID backlog and we're kind of clear all of this kind of wonky events in '23 and '24. Is that kind of your -- is that what's implied in your guidance? Is that -- that's kind of where we are? Saumya Sutaria: I mean, that is kind of -- I mean, at some point, we have to get back to an environment where we're not explaining everything either on the basis of COVID or post-COVID or whatever the case may be. No one ever gets that entirely right. But I do think that is a little bit of what the guidance implies. And as I said, I think that's a fair way to plan for the year and yet at the same time, I don't see shifts necessarily in the strength -- the strong demand environment that we saw in '24 yet in particular. So we'll see how that plays out. Operator: Our next question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: I'm going to stick on the USPI topic. So can you speak maybe to the broader competitive landscape for ASC transactions? Are you seeing more competition and if you could differentiate between larger sets of assets or even one-offs or even competitors developing de novos in your markets? And then in your prepared remarks, Saum, you mentioned the de novo growth. Is that indicative of more what we'll call sort of organic center expansions as opposed to acquired centers? Saumya Sutaria: Well, let me go in reverse. Look, we think de novo development activity is really critical, and we've been focused on that and scaling that up. I mean again, part of our thinking here, Josh, is that consistent with our move into more high acuity ambulatory surgical work, de novos also represent a significant value shift in markets, right? Because usually what you're doing is you're building from the ground up, you're moving things into a lower-cost setting it's value for the consumers and payers in the markets to be focused on de novos in addition to everything else that we may be doing to grow the portfolio and expand the high acuity services. So that -- it's part of our value strategy. Maybe that's why you're seeing more of it from the de novo side. In terms of the competitive landscape, no, I don't think the competitive landscape has changed. I mean, the easiest way to assess the competitive landscape is to just count the center counts across different organizations and some are scaling better than others. And that probably more than anything, reflects competitive -- the output of whatever competitive entity exists. We've been pretty pleased with our ability to scale, competitive situations and processes where we want them and maintain high-quality high-profit margin centers and we always assess that pipeline every year. The pipeline still looks good for doing that. Josh Raskin: That's helpful. Is it fair to assume that the de novo long-term returns on capital are higher? Saumya Sutaria: Yes, of course. Yes. Because again, the -- it's not like building an acute care facility, right? The building costs are low. It's a shorter time frame once the partnership is syndicated, there's work upfront in syndicating the partnership that takes time, but that's not a capital-intensive activity. Look, I think at the start of this, Pete pointed out one of the big changes in the organization around the generation of free cash flow. We also focus on measuring and following our overall return on invested capital within the organization and obviously, the more we shift into this ambulatory segment, the more that gets better and obviously, the more we do de novos, we see that, that gets better in terms of what we're doing in the business when we're deploying our cash. So, yes, you're absolutely picking up on what we're doing for the right reasons. Operator: Our next question comes from Matthew Gillmor with KeyBanc Capital Markets. Please proceed with your question. Matthew Gillmor: I wanted to follow up on the cost management and efficiency comments. The company has clearly made a lot of progress the last few years, and you noted the SWB and contract labor metrics. As you look ahead, are there any areas of particular focus that are going to continue to drive efficiency in 2025 and beyond that you'd highlight for us? Saumya Sutaria: Sure. I mean, I think that -- the cost management agenda doesn't change in terms of managing labor, managing supplies, managing purchase services, active vendor consolidation, activities, scaling our service lines in which we've got a cost structure that we're comfortable with. Obviously, just that scale creates opportunity. I've said in the acute care segment, I've said all along, we're really pleased with the improvements that we've made in so many of the metrics from the standpoint of cost, labor, overhead, supplies, purchase services relative to our peer set in the industry. Obviously, we always continue to note that an area that we can improve is our asset utilization and that's obviously in comparison to what we look at as kind of the gold standard out there. So that's really an area that we're continuing to work on as we expand capacity and build volumes into some of the facilities that we took capacity off-line during the pandemic from an efficiency standpoint. Our global business center has contributed significantly to our cost savings. If you think about the last 4, 5 years, the journey we've been on, of course, there's obvious unit cost savings that you see on an immediate basis. But there's a lot of cash flow that goes into actually restructuring and building and scaling that enterprise. And what might have started with kind of commodity work in certain areas of finance, or accounts receivable has expanded to 10, 12 different service lines that we are now running effectively in the global business center clinical areas, clinical analytics physician credentialing a variety of things and that's an important part of our efficiency agenda as we look forward as well. And it's -- now that it's obviously well passed breakeven cash flow, those savings materially contribute to what we're doing. Operator: Our next question is from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Mike Murray: Hi, this is Mike Murray on for Ben. So ASC total joint procedures grew nicely in 2024. I wanted to hear your expectations for growth in 2025 and beyond. And then cardiology procedures have been the latest slated to drive material growth in ASCs? Can you discuss any early progress there? And when do you see these procedures really accelerating? Saumya Sutaria: Hey, it's Saum. We -- obviously, we anticipate continuing to focus on our orthopaedics line of business going forward. We're not going to guide service line level volumes from that perspective. But we still think, obviously, there's a tailwind in ambulatory surgical growth from an orthopedic standpoint and that's both the stuff we're doing today and expansion of the procedure set that could be done safely in ASC. Same with cardiac. I mean, as I've said all along, the opportunity in a wide variety of cardiovascular procedures is there. I've always been clear that I think that, that opportunity will proceed more slowly than people anticipate because of important patient safety considerations and payer mix considerations and also the CapEx required to build a cardiac center is very different than building other types of ASCs given the equipment that you have to have in there. So the upfront investment for the physician partners and other things is much higher with potentially lower margin assets. And so from economic reasons and patient safety reasons, I think this market will evolve, but I think it will evolve slower than people like to think. And we'll obviously be participants in that as we are today, but we're also -- we're not going to try to rush it and sacrifice patient safety and quality in that regard. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Operator: Good morning, and welcome to Tenet Healthcare's Third Quarter 2024 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may now begin. Will McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's third quarter 2024 results as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Saum. Saum Sutaria: Thanks, Will, and good morning, everybody. Before we discuss our third quarter results, I'd like to take a moment to acknowledge and pay respect to those impacted by the hurricanes in our company, in our peers in those markets, and in our partners and suppliers who operate in those regions. The devastation is significant, but the energy to recover and rebuild shows the best of the American spirit rallying together in a crisis. Moving on to our results. Once again, our performance in the third quarter exceeded our expectations and represents a continuation of consistently strong operating results driven by volume growth and disciplined operations. In the third quarter, we reported net operating revenues of $5.1 billion. Consolidated adjusted EBITDA was $978 million, representing growth of 15% over third quarter 2023, and an adjusted EBITDA margin of 19.1%. USPI's results were once again strong with $439 million in adjusted EBITDA, which represents 19% growth over third quarter 2023. Same-facility revenues grew 8.7% and adjusted EBITDA margins remain robust. Orthopedic volumes are strong and total joint replacements in the ASCs were up 19% over prior year, coupled with the ongoing growth in urology and GI procedures. We did open six new de novos in the quarter, including a new partnership with Synergy Orthopedics establishing the largest dedicated musculoskeletal outpatient surgery center in San Diego, California. De novo development activity remains an important part of USPI's growth story and we have nearly 20 centers currently in syndication stages or under construction. Turning to our Hospital segment. Adjusted EBITDA was $539 million in the third quarter, representing 11% growth over the third quarter 2023 and importantly, strong sequential growth. The strong utilization environment remains with same-store hospital admissions up 5.2% as we continue to open up capacity in a cost-efficient way. Third quarter 2024 revenue per adjusted admission was up 3.3% over prior year, reflecting continued strength in acuity and mix. We've proven our ability to succeed in tough operating environments, leading the way in 2022 and 2023 in cost management in the aftermath of COVID and now in 2024 with robust demand where our efficient operating chassis has allowed us to deliver stronger results than expected throughout the year. As such, we are continuing to make significant investments in expanding our network to support growth in our markets over the coming years. In July, we opened our newest hospital in Westover Hills, a rapidly growing area near San Antonio. The hospital is focused on procedural services with state-of-the-art operating rooms in cath labs, a large emergency department and an entire floor devoted to women's services. Additionally, construction of our next hospital in Port St. Lucie, Florida continues with an opening planned for 2025. Turning to our full year 2024 guidance. We are once again raising our full year 2024 guidance to a range of $3.9 billion to $4 billion based on the fundamental organic outperformance in both of our business units. This represents an increase of $50 million at the midpoint of the range over our prior guidance increased and announced at the second quarter call. We've now raised our adjusted EBITDA guidance by nearly $600 million from our initial expectations this year. Clearly, we are pleased with our strong performance throughout the year. Before I turn the call over to Sun, I'd like to spend a little bit of time discussing our portfolio transformation. We completed the sale of our Alabama hospitals on September 30. All of the sales that we have executed on have been at high multiples to reflect the operational improvements that we have made to each of these facilities over the last several years. More importantly, as a result of these sales, our current hospital portfolio has an enhanced return profile, more attractive geographies for us and our business model, higher expected returns on invested capital that should result. Conifer has retained and in many cases, expanded its relationship with the acquirers of the hospitals, demonstrating the value we deliver to providers and revenue cycle management. While our hospitals are well positioned to benefit from a favorable operating environment, we've built a leadership team and a culture of operating discipline to be able to execute and deliver results during more challenging times as well. The actions we have taken have enabled us to significantly improve our leverage ratio and we are committed to a deleveraged balance sheet going forward. After accounting for the tax payments that are still due on asset sales, our leverage ratio on an EBITDA minus NCI basis is around 3. We are very pleased with the deleveraging accomplished to-date. Looking forward, we are well positioned to create value for shareholders through stronger free cash flow generation. Our transformed portfolio provides us with a high degree of capital and financial flexibility. We will continue to deploy capital to enhance growth in our industry-leading ambulatory surgical business through M&A and de novo development, increased capital spending to fuel organic growth and return excess capital to shareholders via share repurchase given that we believe our equity continues to trade at attractive multiples relative to the market. The combination of an established management team of focused strategy and consistent operations and disciplined capital deployment positions us to drive significant value for physicians, patients and in turn, our shareholders. And with that, Sun will now provide a more detailed view of our financial results. Sun? Sun Park: Thank you, Saum, and good morning, everyone. Our financial results in the third quarter continue to be strong with adjusted EBITDA coming in well above our guidance range. In the third quarter, we generated total net operating revenues of $5.1 billion and consolidated adjusted EBITDA of $978 million, a 15% increase over third quarter 2023. Our third quarter adjusted EBITDA margin of 19.1% is up 220 basis points from third quarter of 2023. These results were driven by strong same-store revenue growth, favorable payer mix and effective cost controls. I would now like to highlight some key items for each of our segments in the third quarter, beginning with USPI, which again delivered strong operating results. USPI's adjusted EBITDA grew 19% over last year, with adjusted EBITDA margin at 38.5%. USPI delivered 8.7% increase in same-facility system-wide revenues over last year with same-facility system-wide net revenue per case, up 7.6%, driven by high levels of acuity and favorable payer mix. Same-facility system-wide cases grew 1%. Turning to our Hospital segment. Adjusted EBITDA grew 11% with margins up 180 basis points over last year at 13.5%. Excluding the divested hospitals, adjusted EBITDA in our Hospital segment grew 24% over third quarter of 2023. Same-hospital inpatient admissions increased 5.2% and revenue per adjusted admission grew 3.3%, again demonstrating favorable payer mix and continued high acuity levels. Our consolidated salary, wages and benefits were 43.3% of net revenues in the quarter, and our consolidated contract labor expense was 2.2% of SW&B, both substantially lower than the 45.2% and 3.1%, respectively, that we reported in third quarter of 2023. Next, we will discuss our cash flow, balance sheet and capital structure. We generated $829 million of free cash flow in the third quarter. And as of September 30, we had $4.1 billion of cash on hand with no borrowings outstanding under our $1.5 billion line of credit facility. We repurchased 795,000 shares of our stock for $124 million during the quarter. And year-to-date, we have repurchased 5.6 million shares for $672 million. As Saum mentioned, our leverage ratio as of September 30 was 2.2x EBITDA or 2.8x EBITDA less NCI, a substantial improvement from year-end, reflecting the proceeds that we received from our hospital divestitures as well as our outstanding operational performance. Let me now turn to our outlook for 2024. For 2024, we now expect consolidated net operating revenues in the range of $20.6 billion to $20.8 billion, $100 million lower at the midpoint versus our prior expectations due primarily to the sale of the Alabama hospitals. We are raising our 2024 adjusted EBITDA outlook range by $50 million to $3.9 billion to $4.0 billion, reflecting the strong fundamental performance of our businesses, partially offset by the impact of the sale of our Alabama hospitals. At the midpoint of our range, we now expect our full year 2024 adjusted EBITDA to grow 12% over 2023 or 20% when taking into account the impact of reduced EBITDA from divested facilities. At USPI, we have narrowed the range of our expected 2024 adjusted EBITDA to $1.76 billion to $1.80 billion. And in the Hospital segment, we are raising our 2024 adjusted EBITDA outlook range by $50 million at the midpoint to $2.14 billion to $2.20 billion. Turning to cash flows. We now expect free cash flows in the range of $975 million to $1.225 billion. This range includes the payment of about $875 million in net taxes related to our completed divestitures, including the recent Alabama transaction. Excluding these tax payments, this represents $1.975 billion of free cash flow at the midpoint of our 2024 outlook or $1.225 billion of free cash flow less NCI, an increase of $50 million over prior expectations. As we've said before, the continued improvement in our cash flow performance has helped us deleverage our balance sheet while making disciplined investments in our business and delivering value for our shareholders. Now I'd like to spend a minute discussing 2025. We are still conducting our business planning processes and evaluating key assumptions, and therefore, it's premature at this point for us to provide specifics on 2025 guidance. However, we do want to give you some context for our current thinking about next year. First of all, there are two normalizing items that I would call out. We have reported $113 million of adjusted EBITDA in 2024 from facilities that we have divested and that will not recur in 2025. In addition, we have reported $74 million of out-of-period favorable adjustments from supplemental Medicaid programs in Michigan and Texas in 2024. More than offsetting these two items at a consolidated level, we expect continued growth in same-store volumes and effective pricing, some potential additional revenue from Medicaid supplemental programs and continued strong operational efficiencies and disciplined cost controls. We also anticipate further contributions from recent investments in partnerships in the Hospital segment as well as from an M&A and de novo development within USPI. We look forward to completing the planning process and sharing guidance with you for 2025 in February of our earnings call. And finally, as a reminder, our capital deployment priorities have not changed. First, we will continue to prioritize capital investments to grow USPI for M&A. Second, we expect to invest in key hospital growth opportunities, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll have a balanced approach to share repurchases, depending on market conditions and other investment opportunities. We consider our equity to be very attractive at the multiples at which it trades and see this as an opportunity to drive value for shareholders with our attractive free cash flow profile. In conclusion, we're extraordinarily pleased with our strong performance in 2024 and the significant progress we have made with our portfolio transformation. We are confident in our ability to deliver on our increased outlook for 2024 as we remain focused on providing patient centered care in the communities we serve. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Hi. Thanks. Just a couple of quick clarifications. I think the ASC segment guidance for USPI implies a drop sequentially in EBITDA that would obviously be seasonally very unusual. So I’m just curious if there’s anything to call out there. And I think cash flow, if you could just tell us what the total tax payments in 4Q are going to be. And then just my real question would be, could you just talk about changes or any changes that you’re potentially seeing from managed care behavior? Saum Sutaria: Okay. There’s three questions there. So let’s handle them. Why don’t we start with the – I don’t think that’s accurate on the USPI point. So let’s just try to clarify that first and the tax payments, and I’ll talk about managed care. Sun Park: Yes, Josh, this is Sun. For USPI EBITDA, we reported $439 million in Q3 and our guidance currently implies $500 million at the midpoint for USPI in Q4. So whatever – what we see each year a Q4 upswing. In terms of tax payments... Josh Raskin: I’m sorry, I was looking at growth rates, so I screwed up the question. Sorry about that. Sun Park: I see. Okay. Thank you. On tax, as we put in our investor presentation, we have $875 million of total deal payments for the year, of which we expect to pay about $700 million in Q4 in addition with our kind of standard other tax payments. Saum Sutaria: Josh, on the managed care side, I’ll probably keep the comments limited to what dialogue has been around two topics. One is just the impact of the two-midnight rule and particularly in the Medicare Advantage space. And secondly, I think there’s been discussions about the impact of managed care denials. Look, when it comes to two-midnight, I think the process of adopting fully adopting the guidance on the two-midnight rule in the Medicare Advantage market is what I would describe as still underway. I don’t think it’s been fully adopted. And at least for us, we have seen probably somewhere between 50 and 100 basis points contribution to our overall admissions growth, but certainly short of and with more work then there should be if the two-midnight rule was fully adopted. And I guess at some level that goes back to this issue of disputes and denials and other things. I mean, again, I can only speak about us. We’re very disciplined and clean and compliant in the way that we document and code. And I do think that if you look at the last few years, the amount of activity that we’ve seen in the industry, increasing administrative costs on both sides for payers and providers related to disputes and denials has gone up in somewhat of an extraordinary way. And it’s certainly frustrating if you’re sitting on this side of that activity. And at the same time, we have made the right investments and have the right capabilities and processes inside of Conifer for us and our clients, to have mitigated that impact relative to what’s been happening in the industry. But at some point, there has to be a solution to this because it’s really just wasted administrative time and cost. Sun Park: And Josh, this is Sun again, sorry. I think you also asked about USPI revenues sequentially. So Q3 was $11.39 for USPI revenue and our guidance implies about $11.25 in Q4, so sequentially flat. I think two things. One is, we didn’t change our USPI guidance, so we opted to leave both the EBITDA and revenues as they were. And then second, we also see, as you know, a pretty strong EBITDA margin increase in Q4. Again, historically, and we expect the same. So those are kind of the two pieces for the revenue and EBITDA guidance. Saum Sutaria: Yes. And look, we have been more fortunate in our ability to plan and recover given what happened from the hurricane standpoint, we had 148 facilities impacted and at some point, shut down. Only one of them at this point is still shut down. And so what we have done, we’re confident that we will work on bringing back that business in the fourth quarter. We’re confident that the margins will improve, and we’ve committed to our guidance for the year that we raised last quarter for USPI, and we’re going to keep it for the fourth quarter and therefore, the full year from what we raised. And yes, it might make the numbers look slightly a little wonky there. But realize that we did have impact, but at the same time, we’ve made a decision that we think our operations will recover to the point where we’ll be able to meet that guidance. Josh Raskin: Perfect. Thanks. Operator: Our next question comes from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix: Great. Thank you very much. I was wondering if you could provide a little bit more detail on your 2025 comments, specifically around growth in SS volumes next year. Is that the degree to which you see those continuing to kind of outpace historical trends? Is there any moderation assumed in there? And just your general thoughts on that momentum. Thank you. Saum Sutaria: Yes. No, thank you. Good question for 2025. We continue to see a strong demand environment. As we’ve talked about before, we do believe that the demand recovery, especially in the Hospital segment, around the country continues as kind of the replacement of the early mortality that occurred from COVID in that demand environment. And we don’t know when that’s going to slow down to a more normal range. But currently, we still see that robust demand environment. And at the same time, we’ve spent the year working on cost efficiently, expanding our capacity in order to accommodate that volume so that we’re not doing it with expensive contract labor, which really is a testament to our work in nurse recruiting that we have done this year through many of the terrific relationships formed with schools around the country. And so I don’t – I can’t sit here today and say that we’re forecasting some kind of a decline as we look forward. I mean as we think about our operations, moving from the fourth quarter to the first quarter, we’re not thinking about them differently at this point. Operator: Our next question comes from A.J. Rice with UBS. Please proceed with your question. A.J. Rice: Hi, everybody. Thanks. Maybe I’ll use Josh’s approach. One clarification and then one question. Clarification being around the 1% USPI same-facility volume growth. That’s a step-up from the first half. But you sort of alluded to maybe there was a little bit of impact from hurricanes in there. Just wondered if it was. And I know long-term, you have a transition you’re making toward higher acuity procedures that it’s helping on the revenue per case side but hitting a little on the volume side. Are you still in the midst of that? And what’s the path to get back to 2% to 3%. And then I just want to ask on your capital deployment. Thanks for laying out the priorities there. But obviously, you’re at a point where you’ve got strong free cash flow now, your debt is down to a pretty low level. So we’re flipping around the discussion away from paying down more debt would say is there any opportunity to accelerate the pace of development in USPI to consider accelerate the buyback pace or even consider possibly a dividend or a larger deal out there? Saum Sutaria: Yes. Thanks, A.J. Just in terms of the clarification point, as we said at the beginning of the year, given the extraordinary comps from 2023, we thought we would move into positive volume territory later in the year, and that’s kind of the pattern that you’ve seen, right, from Q1, Q2, Q3. We’ll see what happens with Q4, given the point that I made in the prior question related to the hurricane impact. And yes, we continue to focus on growing higher acuity, which drives net revenue per case. It also drives extraordinary value in the system from an overall lowering the cost of care standpoint. And we continue to look for opportunities where those transitions can happen in an orderly fashion to migrate certain lower acuity, higher volume type of activities out of the ASCs. I think that will continue for the next couple of years. As we’ve had said from the beginning, it was a multiyear plan to kind of move some of those things out. Look, you’re right about capital deployment. Obviously, we’re very cognizant of the free cash flow generation looking forward. One clarification, obviously, given the cash we have on our balance sheet, we’ve delevered, but the debt paydown opportunities are still ahead of us, which Sun and team will structure in very much the right way. The second point I would make is despite our guidance, if you look at our history for the last five or six years, even before being in this position, we’ve deployed more than our "$200 million to $250 million" in capital into USPI given the larger deals that we’ve done, including the deal that we did in the first quarter of this year for 45 ASCs, plus what we’ve done otherwise. And so we continue to believe accelerating spend at USPI is the single most accretive thing to creating value within the company. And of course, as I noted in my comments and Sun did in his, we have, in fact, accelerated relative to the trend over the last few years, given our deleveraging and cash positions our ability to return value back to shareholders. So I think they’re very consistent. Your points are very consistent with our comments with the helpful added nuance that we have the flexibility to be more proactive and aggressive on each one of those dimensions at this point looking forward. A.J. Rice: Okay. Thanks a lot. Operator: Our next question comes from Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: Yes. Hi. Thanks. I wanted to ask another one about the fourth quarter. I guess the hospital earnings cadence is a little different this year than we probably would have expected. Usually, hospital EBITDA is generally up in the fourth quarter versus the third quarter. It seems like you guys are guiding to a bit of a different cadence. So just wondering if you could help us ridge that. And then if there’s anything unusual in the third quarter either positive or negative in the hospital business that we should be keeping in mind? Thank you. Saum Sutaria: I mean, Sun can go through the numbers. But look, first of all, I think it’s a very small change. I mean, first, we have a divestiture in there. That’s the biggest thing. And the second thing is just from a seasonality standpoint, that’s less pronounced in the hospitals than you would see in the USPI ambulatory surgery business. But look guys, there’s a range there for a reason with upside to the range. And let’s look at the trajectory of this year, it is obviously our goal on what may be a bit conservative there to continue to outperform. But I don’t know if you want to address specific numbers. Sun Park: Yes, I’ll do a little bit. I think, Steve, last year, if you kind of look at our quarterly progression, our Q4 was up. But if you recall, we had about a $52 million out-of-period Medicaid from California and Texas that we called out. Once you kind of normalize for that, it was fairly steady throughout the quarters. This year, if you look at our quarterly progression, we again had obviously, the HRA from Michigan out-of-period piece in Q1. We also called out an out-of-period $30 million from Texas in Q2. So there’s a bit of lumpiness in that. But we think our Q4 guidance is pretty consistent with our overall commentary on good margins, very well-managed operating cost and a good demand environment. And then the last part of your question, in Q3, we did not have any out-of-period or kind of one-time things that we are calling out. Thanks for your question. Operator: Our next question comes from Ann Hynes with Mizuho. Please proceed with your question. Ann Hynes: Good morning. Thank you. Can you let us know just a supplemental payment amount in Q3 this year versus last year? And heading into 2025, you called out $187 million of EBITDA you have to come – overcome, but I believe you said you’ve – can you just confirm that you think you can offset that? And I think you said partly because of some of the Medicaid programs and strong volume growth and maybe highlight what you think could be incremental Medicaid payments in 2025. Thanks. Sun Park: Ann, it’s Sun. Year-to-date in 2024, we’ll be at about almost $900 million of Medicaid supplemental fees year-to-date. The comparison to 2023 becomes a little bit tricky because of all the divestitures in same-store hospital metrics. So we can maybe work with you off-line on that? And then, yes, in my commentary, we called out $113 million plus another $74 million from hospital divestitures and out-of-period Medicaid payments that we believe currently at this stage that we can more than offset at a consolidated level through all the various things that we discussed. On your question about supplemental payments for next year. I think it's too early to have specific comments. We're all aware of potential new programs in certain markets that we're all monitoring closely, and we're awaiting final decisions. So we'll obviously update as we find out more about that. Saum Sutaria: Answered your question? Ann Hynes: Thanks. Operator: Our next question comes from Michael Ha with Baird. Please proceed with your question. Michael Ha: Hi, thank you. So I see your hospital average on the day, I think it's the first time you've improved below five days number of three years. I was wondering if you could talk about what it will take to operationally get back to sort of pre-COVID mid four [ph] levels, your expected time line, how we should think about the earnings benefit for Hospital segment growth and margin expansion. And then in terms of the inpatient admin strength, I was wondering if you could sort of parse out the sources of that strength and the durability of that going forward. Thank you. Saum Sutaria: Well, on the length of stay piece, I appreciate you're calling out the improvements that we've made. This has been our initiatives in length of stay management, which started in a new fresh form in 2022 and 2023 in order to manage contract labor, excess contract labor costs have continued in this environment because we think it's important, and we're pleased with the results we're getting there. But I would make a comment similar to kind of my comments in the past about we don't spend a lot of time trying to chase the exact mix and volume that we had pre-COVID. I mean the same thing is true in length of stay, right? As our acuity goes up, you would expect length of stay to increase a bit from pre-COVID acuity levels and therefore, lengths of stay that were a bit lower. So our fundamental driver strategically in the business is to continue to build our high acuity business, which we think is uniquely suited and sustainable to get to your second point, from a demand standpoint, durable in terms of inpatient admissions. And within the context of taking care of those patients appropriately, we look to optimize length of stay relative to metrics that are out there like geometric mean and other things. Look, on the broader comment, I will just echo what I said earlier in the call, which is we're pleased with the demand environment today. We feel positive about it looking forward and even into 2025. As I said, I don't – we're not planning differently for the first quarter next year versus the last quarter of this year in terms of a robust demand environment. We're not seeing signs or signals that we should stop looking to add capacity selectively in markets where that demand could be serviced in an appropriate cost structure, et cetera. So I feel pretty good about that. The inpatient and hospital-based demand strength is really – it's both emergent and we're seeing nice success in some of our critical service lines, cardiovascular and other, in particular, specialty surgical areas. So the drivers are both emergent and elective business. Payer mix obviously has been very helpful this year driven very much so by commercial and even more significantly by exchange strength. And that goes to not only the market, but our contracting strategy, which has been very inclusive of being in a broad range of exchange networks. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey good morning. Medical admissions continued to outpace surgical admissions. So how durable do you think that is? Or is it get past a Medicaid redetermination [ph], do you think that surgical admissions normalize next year as comps get easier. And then a quick verification on hurricanes. You talked about the facilities impacted. Did you quantify a revenue impact from hurricanes in the fourth quarter? Thank you. Saum Sutaria: Yes, Pito, we're going to have to ask you to repeat the first question in a second. But I would just – rather than us spending time focused on the details of the hurricane impact. Look, we had 148 centers affected. We've got all but one running. We're expecting fourth quarter, higher acuity, better mix, therefore, better margins, and we're maintaining our commitment to our guidance that we raised at the end of the second quarter. The first question got – it's either the connection or something, it was a little bit jumbled. Do you mind repeating that one more time for us? Pito Chickering: Yes. You bet. Apologies. I'm in a hotel room. Medical admissions continue to outpace surgical admissions this quarter. How durable is that? Or do you think as we get past Medicaid redetermination, do you think that surgical admissions accelerate next year as comps get easier after this year's Medicaid redetermination? Saum Sutaria: Yes. Got it. Okay. Well, yes, the medical admissions are reflective of two things. Obviously, one is just our continued commitment to emergency department excellence in terms of services, wait times and receiving ability from that standpoint, including how we manage our house to avoid our facilities ever being on diversion as a commitment to the community. We also have improved our ability to receive transfers from other hospitals for sick patients, intensive care patients, which result in medical admissions oftentimes from outlying hospitals. And so we're not surprised by that. I mean this is – again, fundamentally, these priorities are part of our strategy to continue to build and grow high acuity, elective and emergent care, including in the medical cases. I would also point out that medical admissions, not just surgical admissions have been pretty strong in the commercial environment, including for exchange participants. And of course, that raises the question of both the exchange growth impact, but also some utilization benefit that comes from exchange – new exchange participants picking up more attractive coverage. Pito Chickering: Great. Thank you so much. Nice quarter. Operator: Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks, good morning. First, a quick follow-up on 2025. I just want to make sure I heard correctly that with all the puts and takes and the headwinds in terms of the year-over-year comp, you still expect to grow EBITDA year-over-year? And then my real question is on leverage. Now that you've completed the deal, I was wondering if you could share a target leverage ratio you expect to get to once you deploy the capital? And if you aren't ready to share that now, any thoughts on when you might be able to communicate that number. Thanks. Saum Sutaria: Yes. Justin, just two real quick answers. The first is, yes, I think Sun's comments that we expect to more than offset normalized numbers. And we'll go through a full description of the puts and takes, obviously, when we provide guidance. But at this stage, our work indicates that we should more than offset that. We're not ready to – I mean, I think my comments in the leverage section around we are pleased with where we are from a leverage standpoint is probably the most that we're going to say at this stage rather than having a formal guidance number, but I think you can read into that, that we're pleased with where we are from that standpoint. And again, our – my commentary on debt paydown still stands, which is working through the best ways to do that is something that we're actively in the midst of doing. Operator: Our next question comes from Joanna Gajuk with Bank of America. Please proceed with your question. Joanna Gajuk: Hi good morning. Thanks so much for taking the question. I guess the follow-up I would have on capital deployment comments around the ASC acquisitions. Any commentary there in terms of multiples? Or is there more competition or less in terms of what you end up paying for these deals when it comes to multiples? And are there still larger assets to be acquired? I mean, it sounds like maybe there will be there. But the other actual question, I guess, on the guidance for this year. The hospital revenue guidance was reduced by $100 million, call it, the midpoint. So I assume this is the Alabama Hospital. So – but there's also higher, I guess, same-store inpatient admissions. And I don't want to bring up the hurricanes again, but just to make sure, was there any impact from hurricanes in Q4 that you had assuming here, too? Thank you. Saum Sutaria: We'll split up the questions here. The ASC business capital deployment and really the question being about multiples I would just step back and remind the audience, we're focused on our post-synergy multiples. And because of our ability, collectively, in the organization to drive to better management, more efficiency, network inclusion, supply chain efficiencies, et cetera, we often are able to buy assets and reduce the effective multiple within the first couple of years from that standpoint. And we're – again, we're focused on what the effective multiple is at the end of that period rather than what we're paying for it. Now actually speaking, we have not seen changes in the purchasing multiples of any note recently. I know this question comes up from time to time. We have not seen any type of changes. And so we are consistently guiding to the same pre and post acquisition multiples that we have in the past. And that's a good thing in terms of the availability of attractive high-quality assets that are choosing to become part of the USPI portfolio. Do you want to cover the hospital, hurricane? Sun Park: Hey, Joanna, on our hospital revenues, we still believe good demand environment, good pricing environment, high equity, all those things that we've talked about. Our Q4 revenue guidance, the reduction is all primarily driven by the divested hospitals, and we don't have any material impact in there for any hurricanes. Operator: Our next question is from Whit Mayo with Leerink Partners. Please proceed with your question. Whit Mayo: Thanks. So I'm just curious with the size of the acute care portfolio, obviously, much smaller than in the past. How are you thinking about the underlying infrastructure and cost that you need to support the business going forward? And I had just one other quick one, you didn't call out any of the ongoing accretion to Conifer from the hospital sales as an offset in 2025. So I just was hoping you could address that. Thanks. Saum Sutaria: Okay. With one more time, the second part of that, the offset? Whit Mayo: Well, the accretion that you're getting to Conifer from the hospital sales considering you don't eliminate the earnings and the reporting going forward. Just to say an ongoing offset as we think about 2025. Saum Sutaria: Right. Yes. Okay. Got it. So let's start with the size of the acute care portfolio. Obviously, it's been reduced, and we would typically, on an ongoing basis, make adjustments, obviously, to the corporation from that perspective. Remember, in the period after divestitures, we tend to have transition service agreements that support the divested hospitals for a significant period of time. And so the way we think about these things is that we ought to support those transition to hospitals with our sales partners very thoroughly and differently than if we were owning them and that's not the least of which because we also have some longer-term Conifer relationships with these folks. So out of respect to what we do there, we take that job very seriously. And again, I would just reiterate that we are cognizant of the opportunity there overall from that standpoint. Obviously, there are costs that are simply direct allocations to these markets that go away as part of what we sold. I mean, that's not surprising, the chassis certain purchase services contracts and other things would come down naturally as you would expect with asset sales. On the offset, Sun? Sun Park: Yes. Hey – on Conifer, yes, as you noted, and as Saum has discussed several times before, we have long-term revenue cycle relationships with a lot of our divested sites. Going to 2025, we do expect those to be a benefit to us. In terms of actual specifics, again, we'll have more information when we give our guidance to 2025, but that is part of our overall expectations. Whit Mayo: Okay. Thanks. Operator: Our next question is from Andrew Mok with Barclays. Please proceed with your question. Andrew Mok: Hi. Maybe if I could just follow up on that last question first. I understand that in cases where you expand the relationship of Conifer, there would be an incremental contribution to EBITDA. But if you do not expand the relationship, are you saying that there's still an incremental enterprise EBITDA contribution from those divestitures? Sun Park: Yes. Andrew, no, you're right. It's the expanded opportunities that we're mostly referencing in terms of 2025 factors. Saum Sutaria: Yes. And the other thing, I don't mind calling out, look, there's – we've talked about some of the expansion opportunities. One of them in particular will be larger than others, which will require us to take on a significant amount. So I would think about that almost as a new customer acquisition in terms of what the margin profile would look like for Conifer in the outside market and again, as Sun said, we'll put more detail to that as we give 2025 guidance. But we will make investments in order to onboard that business in 2025 before getting to our overall typical performance with Conifer over time. I would say, for the rest of the divestitures, the expansions that we've done are a little bit more straightforward to onboard from that perspective. But it's a great story for Conifer in terms of these expansions. Andrew Mok: Great. Thank you. Operator: Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Hey, good morning, guys, and congrats on the quarter. Saum Sutaria: Thank you. Brian Tanquilut: Saum, in your prepared remarks, you talked a little bit about efficiency opportunities that you still see in the business. So as we think about the Hospital segment and where margins stand today and with the divestitures that you've done, how much runway do you think you have left for margins? Or is it right to think that 15% segment level EBITDA is about the right spot? Saum Sutaria: Well, I think without getting into specific numbers, I mean, from an efficiency opportunity standpoint, one of the things that we are focused on including being a little bit different than some others is capacity utilization, especially in high-value real estate in the hospitals, right? And our ability to continue to improve the capacity utilization of our facilities for us represents – just to give you one example, represents how we think about that ongoing efficiency opportunity. And so we're not – again, our mindset is not, whatever the number is, to be satisfied with what the margins look like today. Obviously, ongoing improvements in labor supplies and other expenses, third-party purchase services, et cetera, stabilization of the staffing environment, the physician staffing environment, et cetera, all present opportunities looking forward to continue to try to optimize the business. But I would say that, as an example, that area of capacity utilization is still an important one to us from the standpoint of finding more efficiency. Brian Tanquilut: Thank you. Operator: Our next question comes from Matthew Gillmor with KeyBanc Capital Markets. Please proceed with your question. Matthew Gillmor: Hey, thanks. I wanted to hit on the total joint replacement growth at USPI. I think you're up 19% this quarter and if we look at your disclosures, there was sort of an acceleration into the sort of 20% range starting last year and sustaining. So just wanted to see if you have any perspective to share with respect to the sustainability of that level of growth and maybe how that ties into your development pipeline on the USPI side. Saum Sutaria: Well, I think that – I mean it's no secret that sometime around 2020, we – or even before, we made a decision that we wanted to be the unquestionable leaders in outpatient bone and joint care, more broadly, bone, joint, spine, et cetera, with a full range of outpatient-based services. We believe and I think what we're seeing is that we can provide those services in a high-quality manner at a lower cost than in other settings. And I think that the industry has moved pretty heavily towards outpatient-based care. Some of that care is still in the hospital outpatient-based environment versus in the freestanding environment. We still think there's migration opportunity over the next few years into the freestanding environment. Obviously, with the burden of chronic illness that we see in the country today, there are people that will need hospital-based outpatient services simply because of chronic condition management and appropriately providing those services. But the reality is with all of these things that move into a lower cost, higher service setting, it's not a direct cannibalization. The market expands and the market has been expanding for these services when you can offer it in an ambulatory setting. And so we're focused on that more than anything else is continuing to expand the marketplace, continuing to get younger and younger orthopedic surgeons who aren't exposed to ASCs in their training exposed to ASCs earlier in their careers to show them that this is a very viable place to practice. Matthew Gillmor: Got it. Thank you. Saum Sutaria: Thanks. Operator: Our next question comes from Sarah James with Cantor Fitzgerald. Please proceed with your question. Sarah James: Thank you. Ambulatory 2024 guide shifted about 100 to 150 basis points to be more revenue per case than volume compared to the 2Q 2024 guide. So is this how we should think about mix going forward with revenue per case being the larger driver compared to volume given your comments on the durability of trends around commercial mix and migration of low acuity out of ASC. And then just a quick clarification. On the year-to-date DPP, what's the mix between ambulatory and hospital? We're just trying to get to a clean revenue per case number? Thanks. Saum Sutaria: Yes. Thanks for the question. We'll split them up again. But I think on the first question, look, there's a couple of things here that are important to put into perspective. First of all, I think that guidance is relevant for the rest of 2024, right? We haven't said anything about 2025 and how we're thinking about that with respect to our business planning. And I understand there's a lot of puts and takes. I mean one of the reasons we're really pleased with the net revenue per case growth in the acuity growth USPI is because remember, we added 45 centers and more than that this year, but that 45 center tranche that was heavily nonorthopedic at the beginning of the year, and therefore, had lower average net revenues per case than in a truly orthopedic dedicated center. And yet, we – and we haven't gone into that detail because we're not breaking out different segments of USPI. But the concept is important that we're outperforming our expectations in that acuity growth even as we continue to add centers from a – especially when they come in large chunks like that from a more modest acuity standpoint. So I would think about the guidance for the rest of 2024, we'll get to 2025. But again, I would echo the answer to the question about tailwinds in this part of the business around we see a healthy long-term growth rate in bone and joint care and ASCs. Sun Park: And Sarah, hey this is Sun. Just on your second question. I would consider virtually all of the DPP amounts related to the hospital segment, just given the different patient mix and payment mix in across the two segments. Sarah James: Thank you. Operator: Our next question is from John Ransom with Raymond James. Please proceed with your question. John Ransom: Hey, I'm going to take a shot at too, and you guys just pick your journey since that seems to be the – what people are doing. So the first one is when we look at the expansion in the health exchanges this year, can you quantify the effect of that on USPI, if any? And then secondly, I mean, Saum, you're probably tired of answering this, but are you saying that on a same-store basis in 2025, we should expect total state directed payments to increase over 2024? Are you not quite prepared to say that? Thanks. Saum Sutaria: Yes. We haven't made any forecast for 2025 on state directed payments on a relative basis to 2024. Obviously, if you compare to 2023, we would expect that 2025 is going to end up being higher than what it was back then. But the year-over-year, we haven't gotten to – in the 2023 to 2025 step up is obviously more structural from that standpoint. Do you want to cover the HICs [ph]? Sun Park: Yes, sure. John, on HICs, the broader trends, I think, are certainly applicable across hospitals and our ambulatory space. We haven't really quantified the USPI component of it. I do think it is probably smaller, relatively speaking, impact on ambulatory versus what we see in hospitals. And while we're talking about it, I can just remind everyone on Q3 for hospitals, we continue to see about a 58% increase in exchange volume year-over-year for Q3. So still very significant for us. Saum Sutaria: It's been a benefit to the business all year absolutely. Sun Park: Absolutely. Saum Sutaria: Especially because of our contracting strategy being inclusive in the networks. John Ransom: Thank you. Saum Sutaria: Thanks. Operator: Our next question is from Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse: Hey, thank you. Good morning. Can you talk a little bit about the unconsolidated ASC portfolio for a minute? Just looking for an update on where some of those facilities are at from a development and ramp perspective and how you're thinking about potential increases in ownership of those facilities going forward? Saum Sutaria: Yes. No, Jamie, we have – we've cut out of the bit of reporting exact numbers and other things on this as we've kind of gotten into a more stable environment after the 2022 discussion there. But yes, we continue to have buy-up opportunities. We continue to execute on buy-up opportunities within the portfolio. And it's a small, but at least on a consolidated basis, additive part of our ongoing work. Obviously, sometimes when we do that, we unlock the ability to add new business development resources for growth or other types of synergies from that perspective. But yes, it's a small, but it's not as big an opportunity as it was in the past because a lot of that stuff has been executed on. Operator: We reached the end of the question-and-answer session. I'd now like to turn the call back over to management for closing comments. Will McDowell: That's all for today. Thank you all very much. If you have any follow-up questions, certainly feel free to reach out to me, and thank you very much for joining our call today. Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

Operator: Good morning. Welcome to Tenet Healthcare's Second Quarter 2024 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] Tenet respectfully asks that analysts limit themselves to one question each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good morning everyone and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's second quarter 2024 results, as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our Web site, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. And with that, I'll turn the call over to Saum. Saum Sutaria: Thank you, Will, and good morning everyone. Our second quarter performance exceeded our expectations, and extends our track record of consistently strong operating results, driven by fundamental growth and disciplined operations. In the second quarter, we reported net operating revenues of $5.1 billion, consolidated adjusted EBITDA was $945 million, representing growth of 12% over second quarter 2023, with an adjusted EBITDA margin of 18.5%. USPI produced another very strong quarter, with $447 million in adjusted EBITDA, representing 21% growth over second quarter 2023. Same-facility revenues grew 7.1%, and adjusted EBITDA margins remain robust. Orthopedic volumes were strong, with total joint replacements in the ASCs up 23% over prior year, coupled with ongoing growth in urology and GI procedures. Acuity and payer mix were strong. During the quarter, we expanded our reach by adding 11 new centers, including a new partnership with the Florida Orthopedic Institute in three surgery centers that perform over 15,000 cases annually. You may recall that we acquired a larger number of centers in the first quarter of this year. The integration of those centers is on track, and the operating performance of the acquired centers has been in line with our expectations. We continue to be pleased with USPI's de novo development activity with nearly 25 centers currently in syndication stages or under construction. Turning to our Hospital segment, adjusted EBITDA was $498 million in the second quarter of 2024. Same-store hospital admissions grew 5.2% as we are taking advantage of a strong utilization environment by opening up capacity. Second quarter 2024 revenue per adjusted admission was up 5.7% over the prior year, reflecting continued strength in acuity and payer mix. Cost control was excellent. We're making significant investments to expand our network to support growth in our markets. Soon, we will open our new hospital in Westover Hills, near San Antonio. This hospital will expand capacity in a geography that is growing at six times the national average. The hospital will focus on procedural services with state-of-the-art operating rooms and cath labs, large emergency department, and an entire floor devoted to women's services. I'd like to take a moment to thank again the Tenet and Conifer colleagues who worked to respond to the cybersecurity attack that took place at Change Healthcare earlier this year. In addition, I would note that Conifer continues to deliver outstanding cash collection and AR days results. Turning to our full-year guidance, at this point in the year, due to organic outperformance in both of our business units and our optimism about the rest of the year based upon fundamental strengths, we are raising our full-year 2024 adjusted EBITDA guidance to a range of $3.825 billion to $3.975 billion which represents an increase of $300 million or another 8% at the midpoint of the range over our prior guidance increase announced after Q1. Before turning the call over to Sun, I'd like to spend some time discussing our capital deployment framework. As we fully emerge from the pandemic, our repositioned portfolio of businesses is generating stronger results with attractive margins and strong free cash flow generation. The mix of businesses can thrive in any variety of political and regulatory environments as the fundamental tailwinds in the ambulatory demand for USPI, the high acuity program needs for our hospitals in growing markets and the need for efficient, effective healthcare services like those from Conifer are strong in the marketplace. In terms of capital deployment going forward, our top capital priority remains the expansion of low cost, high quality ambulatory surgical centers for the communities around the country. This is a very fragmented marketplace and we will use our disciplined approach to improve access, patient care and performance for our physician partners to create value. Due to our strength in cash flow profile, we have increased our planned 2024 capital spend per available hospital bed above recent levels. These investments will fuel future organic growth. We've built a data driven culture and will continue to invest to improve patient experience and clinical quality. Just as we were one of the industry's early movers in capturing savings in our offshore captive global business center, we are now investing in selected AI enabled technologies to enhance our clinical and administrative efficiency. We embrace the opportunity for change that can ultimately improve our future earnings and cash flows. We have an ongoing commitment to deleverage the balance sheet and have retired $2.1 billion of debt so far in 2024. Our current leverage ratio on an EBITDA minus NCI basis is 3.27 as of June 30, 2024, demonstrating our focus in this area. And finally, we will return capital to shareholders via share repurchase. We've repurchased approximately $550 million through June 30 this year at competitively attractive trading multiples, which completed our prior repurchase authorization. We're pleased to announce that our board has authorized a new $1.5 billion share repurchase program. With a strong and proven management team, a highly flexible balance sheet and a low trading multiple, each of these capital deployment priorities positions us to drive value for shareholders, and we will continue to demonstrate discipline in our capital deployment. And with that, Sun will now provide a more detailed review of our financial results. Sun? Sun Park: Thank you, Saum, and good morning, everyone. Our results in the second quarter continued a positive start to the year with adjusted EBITDA coming in well above our guidance range. In the second quarter, we generated total net operating revenues of $5.1 billion and consolidated adjusted EBITDA of $945 million, a 12% increase over second quarter of 2023. These results were driven by strong same-store revenues, continued high patient acuity, favorable payer mix and effective cost controls. I would like to highlight some key items for each of our segments beginning with USPI which again delivered strong operating results in the second quarter. USPI's second quarter adjusted EBITDA grew 21% over last year, with adjusted EBITDA margin at 39.2%. On a same facility system-wide basis, USPI delivered a 7.1% increase in revenues over last year, with net revenue per case up 6.8%, driven by high levels of acuity. Surgical case volume grew slightly as well in line with our expectations. Turning now to our Hospital segment, second quarter hospital adjusted EBITDA grew 5.3% with adjusted EBITDA margins up 120 basis points over last year at 12.6. Same hospital inpatient admissions increased 5.2% and revenue per adjusted admissions grew 5.7%. Again, demonstrating favorable pair and mix and continued high acuity levels. Our consolidated salary, wages and benefits were 42.5% of net revenues in the second quarter. And our consolidated contract labor expense was 2.6% of SWB, both substantially lower than the 45% and the 4.3% respectively that we had in second quarter 2023. Our second quarter results also include a favorable adjustment of $30 million from additional Medicaid supplemental revenues in Texas related to prior years. Our USPI and hospital segments continue to deliver outstanding performance in the second quarter, reflecting strong fundamental same-store revenue growth and disciplined expense management. Next, we will discuss our cash flows, balance sheet, and capital structure. We generated $602 million of free cash flow in the second quarter, and as of June 30, 2024, we had nearly $2.9 billion of cash on hand, with no borrowings outstanding under our $1.5 billion line of credit facility. We also invested $61 million for USPI acquisitions in the second quarter at attractive multiples. And finally, during the second quarter, we repurchased 2 million shares of our stock for $270 million. Year-to-date, through June 30, we have repurchased 4.8 million shares for $548 million. Our leverage ratio as of June 30 was 2.61 times EBITDA or 3.27 times EBITDA less NCI, a substantial improvement from year-end, reflecting the proceeds that we received from our hospital divestitures as well as our outstanding operational performance. I would note that we have not yet made most of the tax payments and the gains from the hospital sales. The impact of these payments would increase our current leverage ratios by about 15 to 20 basis points based on our current 2024 adjusted EBITDA guidance. Finally, we have no significant debt maturities until 2027, and all of our outstanding senior secured and unsecured notes have fixed interest rates. We have made substantial progress transforming our balance sheet and capital structure, and we are well-positioned with a high degree of financial flexibility and cash flow generation to support our capital allocation priorities. Let me now turn to our outlook for 2024. For 2024, we now expect consolidated net operating revenues in the range of $20.6 billion to $21 billion, an increase of $600 million over prior expectations. As Saum mentioned, we are raising our 2024 adjusted EBITDA outlook by $300 million to $3.825 billion to $3.975 billion, reflecting the strong fundamental performance of our businesses. At the midpoint of our range, we now expect our full-year 2024 adjusted EBITDA to grow 10% over '23, or 18% when taking into account the impact of reduced EBITDA from divested facilities. At USPI, we are now expecting 2024 adjusted EBITDA of $1.75 billion to $1.81 billion, a $100 million increase over prior expectations. In addition, we have increased our assumption for same-facility net revenue per case growth by 250 basis points to 4.5% to 5.5% range for 2024. This is partially offset by a 50 basis point reduction in our assumption for same facility surgical case growth to 1% to 2% for 2024. In hospitals, we are raising our '24 adjusted EBITDA outlook range by $200 million to $2.075 billion to $2.165 billion. We have increased our assumption for growth in hospital inpatient admissions to 3% to 4% for full-year '24, a 150 basis point increase over our prior expectations. Finally, we would expect third quarter consolidated adjusted EBITDA to be in the range of $900 million to $950 million. And we anticipate that USPI's EBITDA in the third quarter will be about 24% of our full-year USPI EBITDA guidance at the midpoint. Turning to our cash flows, we now expect free cash flows in the range of $1.1 billion to $1.35 billion, an increase of $150 million at the midpoint. This range includes the payment of about $700 million in net taxes related to our completed divestitures. Adjusting for these tax payments, this represents $1.925 billion of free cash flow at the midpoint of our 2024 outlook, which reflects the continued strong cash performance even after the loss of EBITDA from our divested hospitals. The continued improvement in our cash flow performance has allowed us to deleverage our balance sheet while making disciplined investments in our business, delivering value for our shareholders. And finally, as a reminder, our capital deployment priorities have not changed for 2024. First, we will continue to prioritize capital investments to grow USPI through M&A. Second, we expect to invest in key hospital growth opportunities, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll have a balance approach to share repurchases depending on market conditions and other investment opportunities. As Saum noted, our Board of Directors has recently authorized a $1.5 billion share repurchase program as we have completed the prior program. We are pleased with our strong performance thus far this year and the significant progress we have made with this portfolio. We're confident in our ability to deliver on our increased outlook for 2024 as we continue to provide high-quality care for those in the communities we serve. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Hey, good morning, guys, and congrats on a solid quarter. I guess my question, as I think about the ASC revenue per -- the revenue adjustment on the same-store side and looking at your adjustment as well on surgical case volume, how should we be thinking about that, is that mostly acuity-driven? And then, maybe as a follow-up to that, how do you think about the runway left to expand joint replacements, 23% growth this quarter, what's the runway there? Thank you. Saum Sutaria: Hey, Brian, thanks, and appreciate it. On the net revenue per case, yes, I would think of that as a combination of acuity and mix. I mean, a lot of it, obviously as we build higher acuity activity into the ASC portfolio, both in some of the standard service lines by expanding or increasing the range of procedures we perform there, and then obviously in newer segments, like orthopedics, cardiac, urology, et cetera, robotics, you see that type of increase. And the mix has been strong. So, both of those in combination give us a lot of optimism about the ability to sustain net revenue per case increases over prior year. The ASCs are quite busy. Last year was an incredibly busy year. This year is a very busy year from that perspective. But the acuity continuing to increase is a good fundamental marker of strength. I've said this before, my view on the orthopedics area is it is the number one growth vector in this segment for the next, could be five to seven, 10 years. I mean there's just so much more that can be done in expanding the market, but also hospital outpatient-based work that moves into a freestanding setting. So, it's a combination of the two. That's how it's always been in the ambulatory surgery environment. First, you get migration, then you get market expansion with more qualified patients who choose to go into a simpler, cheaper, easier service setting. And I think both of those things will provide a tailwind. So, I continue to believe that the orthopedics arena will dwarf all of the other service opportunities in this area over the next five years. Brian Tanquilut: Thanks, Saum. Operator: Our next question comes from Ann Hynes with Mizuho. Please proceed with your question. Ann Hynes: Great. Thank you, good morning. I just want to ask about supplemental payments. Can you remind us how many states currently have programs, and maybe what is the opportunity, going forward, for states that might not have programs to introduce program or maybe existing states that actually have programs that could have potential for enhancements? Thanks. Sun Park: Hey, Ann. Thanks for your question. Six of our current hospital markets participate in supplemental programs. And as we all have seen, there is discussions around potential expansions that hopefully will come through pending final approval. I think in your second question about potential enhancements, I would use, obviously, Michigan as a good example. For a long time, Michigan, while participating in the supplemental programs, was under-reimbursing providers for the important accidental care that we provide to this population. Over a long period of effort and lobbying and coordination with the payers, we were finally able to, as you know, this year get approved a enhancement to the HRA program. And that made a significant impact to our economics in that market. Now, as I think Saum had mentioned before, that enhancement this year basically takes us up to an acceptable for average reimbursement rate for the Medicaid population, or a sustainable piece, which enables us to invest in the market going forward which enables us to continue these important services. So, I think that's kind of where we are. Now in terms of other states, I think we feel good about the sustainability of these programs. There's a good mix of, if you will, red and blue states that are providing these programs to, again, support the important access that we provide. So, I think this is a very positive and sustainable piece for the providers. Operator: Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. Wanted to ask about the hospital business, how did it look relative to your estimates in the second quarter or your expectations, I should say, relative to the -- in the second quarter ex of $30 million of unexpected tech, I think with the Florida payment or Texas payment? And looking at the back-half of the year, your implied guidance for the third quarter seems to be about $500 million, which might be up about 25% ex divestitures in the hospital business. Obviously you took up your hospital expectations. Just curious as to what's driving that strong second-half performance, given, by at least my estimates, the second quarter was generally in line ex that $30 million? Thanks. Saum Sutaria: Yes. Hey, Justin, it's Saum. Look, I think fundamentally, at least you asked relative to our own expectations. The second quarter ex Texas was still strong and above our expectations, and mostly on the basis of strong volumes, success in opening up capacity that we choose to start to open up in the early part of the year, and also really, really good cost control. If you look at it, contract labor was strong. Overall SWB was strong. We felt very good about our supply expenses. And where the supply expenses increased, it was all on the basis of acuity and volume. So, just the fundamentals look very clean. And we still think that, given the mix and the demand that we're seeing, we have the opportunity to build over the course of this year. So, we felt like the guidance that we put forward for the rest of the year should reflect that optimism as we look forward. Every month has been different in the first-half of the year, some months stronger than others, and that's okay. But in totality, the strength in the Hospital segment has been significant. So, when we look at the second-half of the year, we recognized that an individual month may go one way or another, but in totality we feel optimism about the demand that we see, our ability to service it at a very efficient or a good cost structure, and the mix. Justin Lake: Okay. Operator: Our next question comes from Whit Mayo with SVB Leerink. Please proceed with your question. Whit Mayo: Hey, thanks. Saum, any way to quantify the capacity additions that you guys are adding? You have enough, Saum, as you said. Now you're kind of setting that up. Is it contributing to the growth now? I presume not. And just any way to maybe quantify the number of beds, units, anything to help us think about the amount of capacity that you're going to be adding? Thanks. Saum Sutaria: Yes. No, Whit, it's a good question. And we haven't done that in the past, partially because for us, the capacity openings tend to be selective in markets that were as we have a diversity of markets that have been lagging a bit in recovery from a COVID perspective. But I would say that if you look at our volumes, this quarter, this past quarter, capacity expansion that we undertook from the first quarter got it staffed up appropriately. Initially, you typically staff these things with a little bit of contract labor and move to permanent labor worked effectively. And so, we're continuing to make those investments in order to support the back half. Whit Mayo: Maybe just to follow-up on that, as you think about turning these services back, how different are the service lines today versus what you turned off with COVID? Thanks. Saum Sutaria: Yes. Actually, most of the service line expansion recovery, however you want to look at it, is less about reinstating things that we may have closed prior. It's more about increasing demand in the areas that we already chose to serve. I mean, decisions that we made to exit service lines, we're not going to revisit those unless there's some more fundamental change in the market. Decisions we made to deemphasize certain things or capacity in favor of acuity or focused acuity are certainly things that we would look at expanding. And so, when you look at the nature of some of that capacity expansion, it tends to be more Med Surg because we feel like we can adequately staff the ICUs, the trauma, the elective higher end surgery effectively and still be able to hire and retain effectively staff to expand in that Med Surg arena. And so, it is oftentimes servicing the same area that we would have been servicing, plus obviously opening up capacity for more throughput in general, Med Surg. Operator: Our next question comes from John Ransom with Raymond James. Please proceed with your question. John Ransom: Hey, good morning. And I never thought I'd say Tenet with 3.3 turns of leverage. I thought that was going to happen after they fired me years from now. So, congratulations on the rep at deleveraging. My question just if we step back and take the long-term view of the ASC division, the volume numbers have kind of bounced around a little bit for a lot of reasons, mix shift and some decisions you guys have made. But as you look in the out years, what's a good number as we think about sort of the steady state ASC volume growth? Thanks. Saum Sutaria: Yes. Thanks, John. And appreciate the point on the leverage. And I think probably it's a good thing for me too that we've delevered the company. So, look, our algorithm on the ASC organic growth volumes of long-term 1% to 3% is right. I mean, 2% to 3% is right. This year, obviously, we had started the year 1% to 3% because of the incredible comp from last year, which was multiples above normal. And this is the thing about the ASC business, which is again, if you go back and look and we've done this very carefully over the last 10 to 15 years, both pre and post Tenet being a participant with USPI, the volumes can be lumpy. There are years, where the growth is significantly outperforms the typical range and then there are years where it's at or below the lower end of the range. But from a long-term perspective, it's an incredibly consistent business. And I think the reason for that is the fundamental tailwind of demand of moving things into a lower cost setting in the better service environment that you see there. And the drivers ultimately of that expansion are the ability of course to take what are often single specialty centers that start with more capacity than they need for that specialty and then get them into a hands of a USPI that has expertise and making single specialty centers, multispecialty or taking single specialty and expanding with appropriate clinical protocols via acuity that can be performed in those centers. And so there's a management competency there that's important. And then, of course, as centers mature, the ability to be ahead of the challenge of recruiting and refreshing the medical staff in advance of potential volume declines as all centers mature and being able to renew their kind of ability to build and grow with a new and diversified medical staff. And USPI is really, really good at both of those things. And so, that's why I think we feel good about the long-term volume algorithm at USPI. Obviously, when you couple that with the fact that the reimbursement trends in this area tend to be favorable, regulatory trends increasing the number of procedures that are appropriate for an ASC tend to be favorable, you get more confident in the revenue growth range that we put forward from a USPI standpoint. And then, of course, it's all about cost control and just maintaining the margin profile that we have. And so, then the EBITDA guidance in that range becomes more predictable over a longer period of time. So, long way to maybe say the growth algorithm in this segment, I think, is actually more predictable over the long-term than it is in other health care service segments. John Ransom: Thanks for that. And then, just as a follow-up, I mean, SCD, long time ago, there were some short-term challenges, you had a lot of de novo sites, you had a lot of recent indications you had to do. Is all of that in the rearview mirror and the de novo sites that you thought you had, did that pan out in terms of opportunity that ended up being bigger or smaller? Saum Sutaria: The SCD portfolio, in particular, again, it goes back this kind of tailwind in Orthopedics, we feel good about. I would say this, it's sort of it's kind of we don't think about SCD USPI anymore. I mean, it's within our markets. The assets have been distributed into our geographic management model fully with our field operators. So, it's not like there's a separate segment or a separate management team or a separate recruiting pipeline or anything like that. And that we've done more buy ups. I mean, we've stopped sort of reporting on it, so we feel good about the way that that's been integrated. On the de novo piece, that's a good reminder. We should update on that in the future. Yes, we have had de novo centers that have come through that pipeline. I don't know that it's been an average of 10 per year, which is what we estimated before. But I don't think it's been that far from that. We're in the third year, I believe of this arrangement. And we'll update on that more specifically in the future if that's of interest. Operator: [Operator Instructions] Our next question comes from Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin, are you muted? You're live with the speaker. Kevin Fischbeck: Sorry about that. Operator: It's okay. Kevin Fischbeck: Yes, I was wondering if you could provide some color on your volume outlook. I guess first on the hospital side, you're taking up the inpatient volume number, but not the adjusted admission number. Usually we think about outpatient volume growing at least as well as inpatient volume. So, just trying to understand, obviously, you've outperformed so far year-to-date in that direction, but just trying to understand the drivers to that. And then, second, the lower USPI volume outlook, could you just provide a little more color about what is driving that? Is that just decisions about service lines or is there something else going on driving that? Thanks. Saum Sutaria: Yes. Let me maybe I'll start with the first and you want to take the second. So, I mean, on the second and we'll come back to the first. Look, as I said, the ASCs are incredibly busy. I mean, last year was a very busy year in the ASCs and in some cases really pushing the envelope on volumes that these ASCs have seen before and we're kind of tracking in that same area. We always thought the volume would build a little bit as the year went on this year, given just given the nature of the comps and the kind of volumes. And we are always cognizant of the fact that ASCs are designed to stretch. That's what the fourth quarter is defined by, right? So our view is even if it may feel busy, you always can figure out how to stretch them given we always do that in every fourth quarter, that we see. I think what's playing out in the ASC industry this year is after a really strong year of recovery, and there was last year, of course, some one-time recovery work that happened, the actual organic growth is just making up for that one-time recovery. And so, we're seeing new cases, new patients, new doctors perform activity in the ASCs. It's replacing some of that one-time growth from the prior year. And therefore, the total numbers are just sort of growing very slowly over prior year. But the ASCs are incredibly busy. And if you look at the margins, they're busy at a level where the operating leverage is actually creating very, very strong margins. The business doesn't have a lot of fixed costs at the center level. And so, when there's that type of throughput, the margins look really good. And they do all this year, which is why we, again, feel good about it. Our recruiting activity that I just described feels strong. And so, again, we think about this long-term and getting back to a normal growth algorithm over the coming year and potentially into next year. So, that's really how I would describe the ASCs. Look, changing the volume guidance at USPI, it's simply a recognition of math. I don't think it's anything more than that, no differently than us taking up the acuity and mix impact in the net revenue per case. The volume and revenue per case guidance still translates into really strong overall revenue guidance. And so, we feel pretty good about that. Sun Park: Thanks, Saum. And Kevin, on your questions about the hospital piece, so on the inpatient admissions, yes, I mean, we saw 4.2% and 5.2% admissions growth in Q1 and Q2 of this year, respectively. Plus, we are seeing a, again, like we said, a favorable utilization environment. We're working hard to selectively open up capacity and invest. So, all those things, I think we thought it was appropriate to bring up our inpatient admission output for the year up to 3% to 4%. On the adjusted admissions piece, that's where it gets a little bit less predictable with the mix of in and out patient, when we look at our Q1 and Q2 trends, we're in the 1.8% and 2.4% levels for the first two quarters. So, we thought, based on current data, it's appropriate to stay at our 1.3 to -- 1% to 3% range. So, again, it sounds a little bit kind of data and trend driven. Operator: Our next question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Hi, thanks. Good morning. What percentage of revenues for both segments come from patients with exchange-based coverage? And should we assume those patients are generating margins, somewhere between what you earn on a typical commercial or Medicare, maybe even slightly closer to commercial? Sun Park: So, hey, Josh, it's Sun. I think on the hospital side, what I can tell you is that, we are seeing, continue to see admissions growth on exchange. So, this year, it's about, this quarter, excuse me, is up 62% on exchange admissions. From a revenue perspective, what I have for you here is about 6.5% of hospital revenues is from exchange as a percent of our total consolidated revenues. We can do some algebra and get back to you on what it may be for the hospital side, but hopefully that piece still -- that piece helps. On the USPI side, I mean, I think the increase in exchange volume is there as well, but not as pronounced as it is in the hospitals. And I -- we'll have to get back to you on the revenue proportion in the USPI space. Josh Raskin: And margins? Sun Park: And margins, I think that's, I think it's fair, it's favorable than government-paid programs, obviously. I think what we've said is it's close or comparable, obviously, a little bit less to our book of commercial paired business. Saum Sutaria: Yes. I mean, the overall exchange acuity is also important, to know. I mean, the exchange volume is up. Overall exchange acuity tends to be lower than, for example, Medicare, but that's probably not surprising to you, but obviously margins are a combination of the revenue contracted rate and the acuity. Josh Raskin: Understood. Thanks. Saum Sutaria: Thanks. Operator: Our next question comes from A.J. Rice with UBS. Please proceed with your question. A.J. Rice: Hi, everybody. Thanks. Maybe one point of clarification, and then the broader question, the $300 million raise for the year versus first quarter guidance, how much of that is what you've seen year-to-date? And in your mind, how much are you raising your expectations for the back half of the year? And then my more business question would be on managed care pricing. I know we've been in this period where I think you were getting a little bump or at least toward the higher end of historic trend as they were compensating you for maybe some of the labor pressures and not just you, but the industry. Where are we at in those discussions? Do we have one more year? How much visibility do you have on 2025 at this point in your contract negotiations in the rest of this year, if you could give us some thoughts there? Saum Sutaria: Yes. Thanks, A.J. So, look on the first point it's a niche comment in more detail. Obviously, as we thought about our guidance and similar to my comments in the first quarter, you kind of have to take the first and second quarter raises together because some of the first quarter raise obviously was forward-looking and not what was booked for the first quarter and the out-of-period increases. So, we can answer the question for the second quarter raise, but from our perspective, you kind of have to take -- and I realize that we've complicated the situation in hopes of in some ways making it clear by separating our guidance raises from first quarter being mostly related to booked and ongoing changes in supplemental payments and then now more cleanly addressing the fundamental outperformance of our business in the second quarter. But both of them had forward-looking components. So, I'll pass that. Just on the managed care, I'll pass that over for more detail in a second. On the managed care side, yes, you're right about that. I mean, I think that -- I would just characterize that, generally speaking, contract negotiations have more or less normalized in terms of the way in which they're working and discussing. I mean, there isn't really as much discussion about highly acute inflation. That being said, contracts that haven't been renegotiated over the last few years, we're still very much in discussions about, the opportunity to catch up, if you will, from what's happened in the last few years from an inflationary perspective. Sun Park: And just to provide a little more detail on the first piece, A.J., on the $300 million estimating guidance increase, about $200 million I would view as performance in first-half. And then, the $100 million would be projecting that out into the second-half. And then, as Saum said, when we raised guidance in the prior quarter, a big component of that was from our Medicaid HRA payments. If you recall, we raised guidance on that by $209 million, but $88 million of that was recognized in Q1. Some of that was for prior period, but recognized in Q1. And then, the remainder, of that was expected to come through in, Q -- quarter second to the fourth. So, those are the different pieces. Yes. A.J. Rice: Thanks. Operator: Our next question comes from Andrew Mok with Barclays. Please proceed with your question. Andrew Mok: Hi, good morning. Through the first-half of the year, there's a pretty wide spread between your inpatient surgical growth up 4% and hospital outpatient surgical growth down 3%. So, just curious what's driving that spread. I don't think there was anything unusual going on from a comp perspective, but would love more color there. Thanks. Saum Sutaria: Yes. So, a couple things, I mean, one is, obviously inpatient surgical tends to reflect some of the acuity, both emergent and elective acuity in the programs that we've been focused on building. And so, I would think of it as no more than that. And the inpatient surgical takes up OR capacity, obviously, significantly, and so, for us, obviously, outpatient -- hospital outpatient surgeries, as we've talked about in a more general sense, also have this kind of trend of moving into the freestanding setting, right? And so you got both dynamics going on at the same time. Andrew Mok: Is that shift in the outpatient setting accelerating, or is it pretty steady from your perspective? Saum Sutaria: I don't know if it's accelerating. I mean, we noticed it too. I mean, it's hard to say it's a long-term trend right now in terms of what's going on, especially because you have the confounding aspect of the mix shift, right? I mean, Medicare and Medicare advantage utilization is up. Obviously, the commercial side is strong. The exchange side is even stronger as a subset of the commercial book, et cetera. So, there's a significant payer shift. Medicaid is down a bit. And so, there's a, there's a mix shift going on that confounds it. So, I don't want to draw any long-term conclusions yet on the basis of what we've seen. Andrew Mok: Got it. Thanks for all the color. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey, good morning. Thanks for taking my question. Another question on ASC volumes, can you talk a little more about urology and potential for that to provide a multi-year tailwind as robotic procedures move out of the hospital and ASC? And on the other side, can you talk about the interplay between the weaker areas like pain and ophthalmology, or are there other areas that we should be thinking about from a sort of case headwind? And when did this segment stop being a headwind to cervical volumes and ASC? Saum Sutaria: Yes. Well, a couple of things. I mean, I think, in terms of urology, this is a specialty where it has largely been divided by acute care hospitals and in-office procedures. And so, we're in very early innings of, and really being driven by innovative urologists and their organized groups looking to move some of those surgical procedures into a more freestanding, convenient setting, and our work in that arena, accelerating it by providing good ASC management of higher acuity procedures as part of what they're doing. And so, I think there's a lot of room for not only growth, but also expansion of the range of services that can be offered in the ambulatory surgery setting. You're right, robotics and other things will increasingly be a part of that. And, one of the things, right now we're doing a lot of this work mostly on a single specialty basis in the ASCs. Over time as it grows and penetrates into the marketplace in the next three to five years, I suspect that you'll see it in multi-specialty centers too. But right now, the efficiencies that come from piloting these programs in single specialty centers, seems to make a lot more sense. The ophthalmology business actually these days is strong, partially because of recovery of utilization. It's just not as strong as certain other areas. And remember, with pain procedures, it's not about eliminating pain procedures from the environment. It is about changing the mix to include more invasive and higher acuity type of pain procedures in the ASC setting, so that there's a diverse range of procedures, many of which requires sedation and operating room time and other things versus what could be done in another environment. And so, I don't think that headwind, so to speak, goes away anytime soon because there's a nice mix that exists today. And, we've been focused on trying to either diversify or selectively upscale our acuity in certain places where all we had was low acuity pain. And with the idea that if we weren't able to diversify or move up the acuity chain, we were better off moving up the acuity chain in different service lines. And that's, again, as I said in the past, we will do that in a more measured fashion over time at this stage. Operator: Our next question comes from Jason Cassorla with Citi. Please proceed with your question. Jason Cassorla: Great. Thanks. Good morning. Maybe a couple more on USPI, I mean, first, you've done a number of acquisitions over the past few years, the 45 earlier this year, the STD transactions and others, the de novo activity that's ramping. Can you maybe help frame the USPI facility mix between the centers that you would consider are running at a fully mature run rate compared to maybe more immature centers that have a bit more EBITDA maturation to be had? And then maybe just as a follow-up, can you just remind us what percent of USPI facilities are in a partnership with an external hospital and maybe just what the pipeline or outlook is for incremental hospital partnerships down the line? Thanks. Saum Sutaria: Yes. So, I mean both of these areas, I would say, make a few higher level comments. I mean, first of all, our recent M&A including in the first quarter, the objective is always to get these centers fully incorporated into the USPI operating platform integrated with the Tenet systems, supplies, managed care, et cetera, as quickly as possible because you want them to operate under the USPI management framework, which is very effective. So, again, we're not looking to keep them in separate segments from that perspective. Even one-off acquisitions, I mean, we have a separate and disciplined integration process from that perspective. De novos, of course, you have the runway to start them out in setting up the framework over the 18 months that they're built and put them straight into the USPI, straight into the USPI platform. In terms of the percentage of centers that are running at full capacity or not, we don't really disclose that. As I said, my philosophy is the fourth quarter's reminder that you can always stretch the capacity of an ASC for incremental doctors and incremental cases as long as they're performed at high quality with good patient safety. And so, even if we feel busy during the year, again, we remind ourselves that we managed to stretch in the fourth quarter and therefore there's room in these things for growth. A lot of times, it's the nature of the partnership, single versus multispecialty, the different technologies that are needed, expansion of operating room capacity for different types of procedures, nursing capacity that limits instantaneous ability to expand from a growth standpoint. Sun Park: And Jason, just on the mix with hospital partners, it's around 30% to 40%. Operator: Okay. Our next question comes from Sarah James with Cantor Fitzgerald. Please proceed with your question. Sarah James: Thank you. Inpatient admissions are running above historical average. How do you think about the sustainability of that? And maybe you can help us with orders of magnitude on the drivers between share gain and growing catchment area versus two midnight, the temporary utilization management suspension by United or capacity increases? Thanks. Saum Sutaria: Yes, well, I think inpatient utilization is building and growing, primarily because of two fundamental things in the marketplace. One is just the consistent growth in the aging population and especially with respect to those that have chronic diseases. I mean, that trend hasn't stopped. And it's a fundamental tailwind for the hospital sector in my belief, at least into the early part of the next decade, if you just look at the demographics. And then, you have the second issue, which it's kind of the unfortunate consequence that happened with COVID where you had a million premature deaths that actuarially would have in their last five years of life, most of those people would have ended up succumbing to some other disease over a five year period, but they all died up front. And the number is probably even larger than that. And so, what's happening is, I think every year you have more people aging into that, "That last five years of life." So, you would just naturally expect five years of recovery after the beginning of COVID. I mean, that's just mathematically and actuarially seems pretty simple to me to understand. It's a question of how you then as a provider manage your physician, staffing physical capacity in order to service that demand. And I think that's what we're seeing right now. I don't see the utilization dropping over time. I just see it kind of reaching steady state at some point. And then, we build from there mostly just on the population growth side. I do think that there are a few things that are outsized effects currently. And that's primarily, in my view, driven by Medicaid redetermination. And the impact of that Medicaid down, exchange up from a volume perspective, I'm not sure I could quantify it perfectly is less profound than from an earnings perspective because obviously, the reimbursement rates on the exchange book in that conversion are more attractive than what you would have seen on the Medicaid side. And so, it's helping, obviously, improve the earnings profile in the acute care hospitals. We see less of this whole effect, by the way, at USPI. And again, that goes back to why we believe the diversification of our business units. I mean, it was -- I'm purposely looking ahead and frankly looking at the uncertainty in the environment, political and regulatory. I like the diversification of the business units because, the ability to figure out a way to succeed in almost any environment in the next three years, four years, is something we're going to have to figure out how to do. Sarah James: Thank you. Operator: Our next question comes from Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: Yes, hey, thanks for fitting in. Just another question on the hospital capacity commentary you're making. Especially when you think about the potential margin impact of the capacity coming back online, it sounds like maybe it's higher acuity capacity than maybe what you idled during COVID. Is that something that comes back online as margin additive, or is it a bit of a drag as you kind of ramp it up and make investments? I just wonder how you think about that. Thanks. Saum Sutaria: Yes, well, two things. Additional capacity that we bring online, given our ability to manage cost on a marginal basis, we're not going to do it if it's not margin accretive. That being said, in the early phases, months of opening up new capacity, especially if you have to do it, you start out with contract labor and other things until you ultimately recruit and staff up your unit. The margins can grow over time, to where you want them to be, as opposed to what you do instantly. But it's generally not the case that we're saying, oh, let's go find some totally margin diluted, margin negative service and figure out how we might ultimately flip that. And that, again, that's our degree of confidence and whatnot in what we're doing around these service lines in terms of how we think about them, but that's generally our algorithm, is we like to see the incremental volume produce at least a contribution margin up front. I will repeat, I am not, we are not chasing, mimicking 2019. It's not even part of our algorithm to think that way in the acute care business. We have deliberately and permanently shifted our mix in certain ways in our acute care portfolio, and the revenue and margin profile that we're generating suggests that has been a good decision, at least for Tenet's acute care hospital portfolio. Operator: Our next question comes from [Michael Hoff] (ph) with Baird. Please proceed with your question. Unidentified Analyst: Thank you. So, as I think about your first-half margin performance, arguably one of the strongest first-half margin performances in the company's history, if I'm not mistaken, I looked across your metrics, it seems like there's still room to get back to pre-COVID levels on hospital occupancy and average length of stay, which optically, to me appears to provide more line of sight to maybe sustain strength of performance going forward. So, my question specifically in occupancy levels, one of your peers has reached near mid-70s, and as I think about where a tenant is around 50%, how should we think about the directional view of this moving over time? Is there a path to 60s or 70s, and what's necessary to happen in order to accomplish this? And I know you've mentioned adding capacity, but curious to specifically hear your thoughts on occupancy level. Thank you. Saum Sutaria: Yes, well, I think there's a few things. First of all, I'm not sure those statistics are truly apples-to-apples in the way that we each may define them in terms of how we think about our capacity. I would say that given that our collection of markets, market dynamics and mix are different also than the peer that you reference, we probably take a more measured view of capacity and service lines that we're going to participate in. And so, in some markets, our capacity utilization will be higher than in other markets. So, that's generally how I would answer the question. I will say that as a macro point, we do internally, as we've made so many different changes and improvements in our acute care segment over the last five years in terms of what we've been doing, both strategically, operationally, and how we deploy capital, we definitely take notice of the fact that in this industry, the gold standard here and the way in which they manage capacity, capacity utilization in particular, is a gap between what we have been able to achieve at Tenet and otherwise. And so, that is a constant source of discussion and opportunity for us. So, don't take the comments in the beginning to mean, we're looking for structurally different numbers. I don't know that they're apples-to-apples, but at the same time, we are very cognizant of the fact that we have improvement opportunity, just like we've made improvement opportunities come to fruition in other areas relative to the gold standard peer here in cost control, supply control, et cetera, et cetera. Operator: We have reached the end of the question-and-answer session, and this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Operator: Good morning. Welcome to Tenet Healthcare's First Quarter 2024 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to your host, Mr. William McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. William McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's first quarter 2024 results as well as a discussion of our financial outlook. Tenant senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Saumya Sutaria: Thank you, Will, and good morning, everyone. We have significantly accelerated the strategic transformation of our portfolio. In the first quarter of 2024, we closed the sale of 9 hospitals for pretax proceeds of $4 billion. This enabled us to retire debt and substantially lower our leverage ratio while continuing to invest in our leading ambulatory cure program. As a result, Tenet is more capital-efficient, profitable and value-based care enterprise. We are well positioned to deliver high-quality specialty care in the communities we serve and to deliver exceptional shareholder value. Importantly, with our strong core performance and the anticipated contributions from completed ambulatory M&A, we expect to essentially replace the lost EBITDA from the hospital asset sales in our run rate expectations. I'll spend more time on our portfolio transformation in a minute. But first, a quick review of our quarterly results. We carried significant momentum through the first quarter of 2024. Strong revenue growth supported by the continued recovery of utilization as well as high acuity levels and favorable payer mix drove performance well in excess of our initial guidance. In the first quarter, we delivered net operating revenues of $5.4 billion. Consolidated adjusted EBITDA was $1.02 billion, which represents a 23% increase over the first quarter in 2023 and an adjusted EBITDA margin of 19.1%. In terms of performance, let's start with USPI. We had a great quarter with $394 million in adjusted EBITDA, representing 16% growth over first quarter 2023. Service plan expansion, elevated acuity and favorable payer mix all drove the strong organic growth. Joint replacement surgeries continue to be an excellent source of growth for us and were up 21% over prior year. We also had an active start to the year in terms of our USPI development pipeline. We are proud to have grown USPI to over 535 centers in what is still a highly fragmented market with meaningful new additions this past quarter. We expect these newly acquired centers to deliver approximately $80 million of EBITDA in the first 12 months of ownership. In addition, we expect to ultimately realize the synergized EBITDA minus NCI multiple of 6 to 7 by year 3 for those centers. USPI's de novo development activity also continues strong with nearly 30 centers currently in syndication stages or in construction. We are pleased to deploy capital to provide more lower cost access points for the communities in which we operate that also generate very attractive returns. Turning to our hospital segment. Adjusted EBITDA grew 28% to $630 million in the first quarter of 2024. Same-store hospital admissions grew 4.2%, demonstrating the continued recovery of utilization that we saw last year. Acuity levels remained strong within the first quarter of 2024 with revenue per adjusted admission up 8.8% over prior year. We have opened up capacity to meet demand in a number of our markets. In addition to the ongoing investment in our frontline workforce, we are proud to have recognized our many field supervisors, managers, directors and other leaders with incremental financial and professional development rewards for their contributions to our post-pandemic recovery in 2023. We strongly believe that these management layers are critical to successful recruiting and retention initiatives. Additionally, we continue to invest in our high acuity specialty services. Our plans to open a new hospital in Westover Hills, San Antonio near the end of the second quarter, remain on track this year. Over the balance of the year, we plan to allocate more capital into our existing markets for high acuity service line development to further drive organic growth with strong returns on capital. I'd like to take a moment to thank the special team of Tenet and Conifer colleagues who have worked tirelessly to respond to the cybersecurity attack that took place at Change Healthcare in the early part of this year. We utilized Change in some, but not all of our own and our Conifer client hospitals, and we do not utilize it at USPI or with our physician business. As a result of the incident, the Clearinghouse function and Change impacted the ability to send claims to many payers. We have experienced some delays in near-term billings and estimate that this will only have a temporary impact to our cash flows that we expect to resolve over the course of 2024. All in all, our hospitals have had a very strong start to the year. Looking forward, we are raising our full year 2024 adjusted EBITDA guidance to a range of $3.5 billion to $3.7 billion, which represents an increase of $215 million or 6% at the midpoint of our range over our prior guidance, which was already quite attractive. In order to ensure that we are clear, our increase in guidance reflects the structural increases in revenue reimbursement that we have earned that were not in our original assumptions for 2024, additions to our ASC portfolio and the impact of reductions in our hospital sales -- hospital asset sales. We are not addressing but obviously acknowledge the underlying organic outperformance in our business units during Q1 in our increased guidance at this stage. We are early in the year. We are very pleased with the demand that we are seeing in our network, and we'll address this component of our expectations for the full year in the future. We're confident in our ability to deliver on these increased expectations. Before I turn the call over to Sun, I'd like to spend some time discussing the progress we have made in our portfolio transformation. As I mentioned previously, the transactions that we have executed on have established the dawn of a new era for Tenet. We have completed 3 very attractive hospital sale transactions, which have generated $4 billion in gross proceeds. Within these sales, we have maintained, and in most cases, enhanced a commercial service provision relationship with the buyer. We expect these relationships will be an attractive contributor to earnings for years to come. We have a commitment to deleverage the balance sheet and have retired $2.1 billion in debt in the first quarter alone. At the end of the first quarter, our EBITDA minus NCI leverage ratio was approximately 3.5x, a significant decrease from approximately 7x that we had at the start of 2018. We've demonstrated capital and financial flexibility this year by allocating $450 million of capital towards our top priority, attractive expansion of our ambulatory business. Additionally, we have returned almost $280 million in capital to shareholders via repurchases in the first quarter alone. While our mission to provide quality, compassionate care in the communities we serve has not changed, we are essentially a new company. Our repositioned portfolio of businesses is more predictable and capital-efficient with attractive margins and free cash flow. The operational discipline that we've instilled in each of our facilities enabled by an analytics-driven culture is producing differentiated results. Our balance sheet, which was once a challenged part of the Tenet's story has been deleveraged. This provides us with a strong foundation and a significant amount of capital and financial flexibility for the future. We feel well positioned to drive enduring value for our patients, our business partners and in turn, our shareholders. And with that, Sun will now provide a more detailed review of our financial results. Sun? Sun Park: Thank you, Saum, and good morning, everyone. Our financial results in the first quarter represent a strong start to the year with adjusted EBITDA coming in well above our guidance range. In the first quarter, we generated total net operating revenues of $5.4 billion and consolidated adjusted EBITDA of $1.02 billion, a 23% increase over first quarter 2023. These results were driven by strong same-store revenues, continued high patient acuity, favorable payer mix and effective cost controls. Now I'd like to highlight some key items for each of our segments, beginning with USPI, which again delivered strong operating results in the first quarter. USPI's first quarter adjusted EBITDA grew 16% compared to last year, and its adjusted EBITDA margin continues to be very strong at 39.6%. USPI delivered a 6.4% increase in same-facility system-wide revenues compared to first quarter of 2023, with same-facility system-wide net revenue per case, up 6.8%, driven by high levels of acuity. This was partially offset by a modest decrease in surgical case volume of 0.4%, in line with our expectations. As we noted last quarter, we are expecting growth in cases to build over the year, due to the significant volume performance we saw in the first quarter of 2023. Now turning to our hospital segment. First quarter hospital adjusted EBITDA grew 28% with adjusted EBITDA margins up 240 basis points over last year at 14.4%. First quarter same-hospital inpatient admissions increased 4.2% and revenue per adjusted admission grew 8.8%, demonstrating strong payer mix and continued high acuity levels. In terms of continued expense management, our consolidated salary, wages and benefits were 43.2% of net revenues in the first quarter, which was substantially lower than 45% in the first quarter of '23. And our consolidated contract labor expense was 2.9% of SWNB, a material reduction from 6% in the first quarter of '23. These reductions in costs reflect the disciplined approach that we take towards labor management. In addition to the strong operating performance in our hospital segment, our first quarter results also include $88 million of additional revenues associated with CMS' approval of increased funding for the Michigan Medicaid Hospital Rate Adjustment Program, or HRA, for short. About half of this amount is related to the fourth quarter of 2023. We are the leading safety net provider of healthcare services for the people of Southeast Michigan and the greater Detroit area. And these funds will support the care that we provide to this community. Excluding this additional funding, revenue per adjusted admissions still grew 6.1%, a very attractive result. We've had a strong start to the year in both USPI and hospitals, reflecting strong fundamental same-store revenue growth and disciplined expense management. Next, we will discuss our cash flow, balance sheet and capital structure. We generated $346 million of free cash flow in the first quarter. And as of March 31, we had nearly $2.5 billion of cash on hand with no borrowings outstanding on our $1.5 billion line of credit facility. We had an active first quarter on the M&A front as well. We invested $450 million for USPI acquisitions at attractive multiples. And as Saum mentioned, we expect to deliver enhanced post-synergy returns on these acquisitions over the next few years. And finally, during the first quarter, we retired $2.1 billion of senior secured first-lien notes that were previously due in 2026 and repurchased 2.8 million shares of our stock for $278 million. Our leverage ratio as of March 31, 2024, was 2.79x EBITDA or 3.46x EBITDA less NCI, a substantial improvement from year-end. Reflecting the proceeds that we received from our hospital divestitures as well as our outstanding operational performance. I would note that we have not yet made tax payments on the gains from the hospital sales and the impact of these tax payments are not reflected in our current leverage ratios. Finally, we have no significant debt maturities until 2027 and all of our outstanding senior secured and unsecured notes have fixed interest rates. In the aggregate, we have made substantial progress transforming our balance sheet and capital structure. We are well positioned with a high degree of financial flexibility and cash flow generation to support our capital allocation priorities in the years to come. Now let me turn to our outlook for 2024. For 2024, we now expect consolidated net operating revenue in the range of $20 billion to $20.4 billion. As Saum mentioned, we are raising our '24 adjusted EBITDA outlook range by $250 million to $3.5 billion to $3.7 billion, reflecting the strong start of the year. The $250 million increase is driven by the following structural changes to our guidance. First, $209 million of incremental net revenues associated with the Michigan Medicaid HRA program. Second, $30 million of incremental EBITDA from ASC acquisitions that we made in the first quarter, above what we had previously assumed in guidance. And finally, a year-over-year headwind of $24 million in the sale of 2 California hospitals to Adventist, which was not previously reflected in our guidance. On a normalized basis, our full year '24 adjusted EBITDA is now expected to grow 13% over last year at the midpoint of our range. Finally, we would expect second quarter consolidated adjusted EBITDA to be in the range of $835 million to $885 million and we anticipate that USPI's EBITDA in the second quarter will be 23.5% to 25% of our full year USPI EBITDA guidance at the midpoint. Turning to our cash flows. We now expect free cash flow in the range of $950 million to $1.2 billion, an increase of $75 million at the midpoint. This range includes the payment of $687 million in net taxes related to our announced divestitures. Adjusting for these tax payments, this represents $1.762 billion of free cash flow at the midpoint of our outlook which demonstrates continued strong performance even after the loss of EBITDA from the divested hospitals. As we stated last quarter, our cash flow performance has improved substantially over the past several years and we continued to demonstrate the ability to generate this cash flow while also deleveraging our balance sheet, making investments in our businesses and executing on key growth plans. And finally, as a reminder, our capital deployment priorities have not changed for 2024. First, we will continue to prioritize capital investments to grow USPI through M&A. Second, we expect investing in key hospital growth opportunities, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt and finally, a balanced approach to share repurchases, depending on market conditions and other investment opportunities. We are pleased with our strong start to the year and the significant progress we have made with the portfolio. We are confident in our ability to deliver on our increased outlook for 2024 as we continue to provide high-quality care for those in the communities we serve. And with that, we're ready to begin the Q&A. Operator? Operator: [Operator Instructions] Our first question comes from the line of Kevin Fischbeck with Bank of America. Kevin Fischbeck: So overall, I guess, quarter looks really good. These are numbers that still kind of looks a little bit off to me is just the same-store case growth within USPI. I know you guys had a tough comp. But is there anything that you would point to that kind of indicates that return on volume as the year goes on? You guys sound confident in building. Is there anything on case for surgical day or trends in the quarter or something that you would point to that kind of say we've got good visibility that, that volume will accelerate and build as the year goes on? Saumya Sutaria: So first of all, let me just address the quarter. I mean this is what we expected, right? I think in the past, I had said pretty clearly that we expect the volume to build through the year or as the year goes on. So this is no different than what we expected. It's not worth it. It's a footnote, so I'll just be brief about it. I mean, there are a couple of centers -- handful of centers that were shut down due to weather issues. We were essentially flat at the end of the day when you really look at what was same-store operating, which drove that number. But the longer-term implication of the result is actually very important in our minds in the way we were looking at the year because with last year's volume growth being so strong, I think they were all -- and by the way, even for us in the business doing this bottoms up, there were always questions about, was this volume simply deferred care that was going to be onetime and then actually there would be a rebasing significantly downwards? And we didn't think that based upon our planning in the business last year when we went through the bottoms-up planning. And we're delighted that, that's correct, which is to say that having the business after a year where we grew more than twice what our typical growth rate would be, remain flat and have an opportunity to build off that floor suggests significant fundamental strength and tailwind in the demand for USPI type of services as opposed to 2023 having just been a catch-up year that was going to go away. When you look under the surface of our volumes, all of the major service lines that we focus on, including the strength we saw in GI experienced a bit of further growth. So the volume that was down a little bit was more in low acuity pain type procedures. But we saw orthopedics, ENT, GI, other bone and joint care that we're focused on, shoulders obviously, the attractive urology partnership we have, all growing. So I think the fundamentals look good. The comps are hard through the year. We think they get a little bit better as the year goes on. But our fundamental belief is that the ability to grow off of last year is really what the first quarter affirmed as opposed to that have been just purely onetime deferred activity in '23. We view it as a good news story. Operator: Our next question comes from the line of Justin Lake with Wolfe Research. Justin Lake: Just a couple of quick numbers questions. First, the first quarter, obviously, was really strong, and I appreciate the conservatism on not kind of assuming that continues through the year. But just want to make sure we understand how much better was it versus your internal forecast? When you adjust for everything going on in terms of deals and the ASC purchase and the asset sales? And then secondly, post the asset sales, I think you had said that you were going to pay down debt with those proceeds. Is that the only intent? And if so, can you give us an idea of where you think those leverage ratios kind of -- would be on a normalized basis at the end of the year post the debt repayments? Saumya Sutaria: Justin, it's Saum. I'll take the first one. And Sun -- I'll pass to Sun. The results -- the quarter results were significantly better than our expectations for the quarter, and that's true in the hospital segment and the USPI segment, both demonstrated. So if you just start with USPI and even building off Kevin's question, the net revenue strength was substantial. And that is related to acuity and pricing, obviously, which drove a net revenue result above what our typical guidance expectations would be. So we felt pretty good about that, and I think I've covered that piece of it. On the hospital side, similarly, the volume strength was good, the mix was good. The acuity was up again over this period of time. And I'm referring to it in the absence of some of the reimbursement or supplemental payment changes, in the absence of that, it was strong across the board. So we thought the core performance was quite a bit better than we expected for the quarter. Sun Park: Thanks, Saum. And then, Justin, on your second question around debt and leverage, maybe I'll take it in reverse order. So you're right, as I mentioned in my script, the leverage ratio is as of March 31, we'll have to -- will probably change, right, as you add -- as we pay down debt, and we mentioned about $687 million related to that -- of tax, excuse me. And then in terms of your range ratios, we're not prepared to address that specifically yet. But as you can imagine, based on our guidance, we feel comfortable with the ranges that we're expecting. It will depend ultimately on the eventual capital allocation decisions that we made throughout the course of the year. And as I said in my prepared remarks as well, our capital allocation strategies and priorities have not changed. And then finally, in terms of debt paydown, our hospital divestitures, as Saum mentioned, have done a great job of deleveraging Tenet. In terms of actual tax, the paying down debt, we paid down our '26 note, as we just mentioned. And then our next note is really February 2027, which is almost actually 3 years from now, right? So we'll -- obviously, we'll stay committed to paying down debt but we'll take our time and look at the optimal way to execute on that. Operator: Our next question comes from the line of Stephen Baxter with Wells Fargo. Stephen Baxter: For the hospital business, it'd be great to get some more color on the sources of acuity and payer mix in the quarter. I guess what's driving that? And maybe how much of it is coming from the exchanges, any kind of quantification on where your exchange meets after the significant growth we've seen over the past couple of years would be great. Saumya Sutaria: Yes, sure. A few thoughts for you. One is that I think it's important to note that the volume strength was very broad-based, different markets. We've obviously talked historically about markets that recovered more quickly and less quickly from COVID, but the volume strength was pretty broad-based. I also indicated that we are now beginning to add some capacity back thoughtfully in different markets, which we're pleased to see that we can accommodate without eroding our cost performance. So an important part of our story for the quarter was maintaining our cost discipline even as we added the capacity, which helped with the margin expansion. The service line acuity, especially the procedure-based work was good. We saw a lot of strength in a number of markets in high acuity kind of ICU care type of medical admissions. And then to your last point, which I'll spend a minute on, we did see significant strength in the exchange population over prior year. And I think this is probably, and by the way, the Medicaid business was down a little bit. So I think some of this is related, obviously, to the short-term phenomenon that we're probably seeing a bit from redeterminations and the effect they're having. Now for us, I've pointed out before, we've had a broad-based contracting strategy to be in network with exchange plans around the country in our markets. And so I think that probably helps us with respect to the ability to serve those patients for those that pick up exchange coverage. Operator: Our next question comes from the line of Pito Chickering with Deutsche Bank. Pito Chickering: Great job on the quarter. On the hospital segment, margins on the last quarter were guided to be about 10.9% at the midpoint. And now it guided to be 12.1%. So excluding the 60 basis points of margin improvement from Michigan, can you help bridge what sort of made those margins sort of go up? Was it the asset sales in California? Just help bridge us sort of that margin delta. And then a quick numbers question for you. You talked about the EBITDA coming from these asset sales. What was the revenue contribution from these ASCs for the year? Saumya Sutaria: I'll take the first one. Pito, and thanks for the support. I -- the margin strength is -- I mean, it's multiple-fold. I think you covered many of the areas there. Obviously, I would start with the importance of maintaining cost discipline, which we have done. The second is just volume and improvement in capacity utilization improves margins. The third is related to the mix and the payer mix, in particular, both Medicare and commercial business, including commercial exchanges being stronger in the quarter. And then obviously, there are the service line opportunities where we're focused, which for obvious reasons, can be accretive to margins given some of the high acuity work that falls into those categories. So those are the things that really drove the performance. Because of the balance on the asset sales, higher significantly, some of them being significantly higher-margin markets than others. I'm not actually sure that the -- and to be honest with you, would have to go look for sure. But my general impression from what I looked in the past is, I'm not actually sure the divestitures where that accretive to margin. Go ahead, Sun. Sun Park: Yes, that's correct. And Pito, on your second question about the ASC-acquired revenues. As Saum mentioned, the first 12-month equivalent of EBITDA is about $80 million. We obviously in our guidance have 9 months of that in fiscal '24. And I would assume sort of standard USPI EBITDA margins for that book of business. Operator: Our next question comes from the line of Jason Cassorla from Citi. Jason Cassorla: I just wanted to really quickly ask about the free cash flow expectations, EBITDA up $200 million. The cash flow seems only to be up $100 million. What's driving that differing outlook? Is it just related to the divestiture and the nuances that move with that or timing elements, just to make sure we're good on that on the free cash flow side. Sun Park: This is Sun. Yes, I would say with the EBITDA, we obviously tax-effect that addition. And then as we mentioned, we have additional taxes that we expect to pay on the California 2 hospital divestitures as well. So those are probably the 2 most important factors there. Thanks for your question. Operator: Our next question comes from the line of Ben Hendrix with RBC Capital Markets. Benjamin Hendrix: Just a quick question on the medical fee headwind that you called out. Just wanted to see how that has trended quarter-to-quarter, trended versus your expectations and how we should think about that through the -- after the end of the year. Sun Park: Thanks for your question on the professional fees. So as we said before, for full year '24, we're pleased to see moderation in the rate of growth and change here. We're still assuming about 8% to 10% range for fiscal '24 guidance. I will also add that in Q1, we saw it be flat sequentially versus our last quarter. And then for Q1 '24 versus Q1 of '23, we saw about 9% to 10% increase. So thanks for your question. Operator: Our next question comes from the line of Josh Raskin with Nephron Research LLC. Joshua Raskin: Can you talk about Detroit Medical Center and specifically of the new sub payment program changes the way you think about that market? I think it might be helpful to hear about capital projects that have come online for DMC and then if your plans change going forward in terms of investment? And then just lastly, on the numbers, is that still low to billions in terms of revenue? Saumya Sutaria: So the Detroit Medical Center is a very large multi-asset complex academic health science center that kind of goes all the way from the center of Detroit all the way out into the suburbs with multiple hospitals and includes the Children's Hospital of Michigan and the Rehabilitation Institute of Michigan, both of which are facilities that have not just statewide, but regional draw. So it's a large complex academic health science center across a pretty broad geography, multiple trauma programs, et cetera. Now the other thing that the Detroit Medical Center is importantly for that community is the largest safety net provider in Southeast Michigan in Detroit, in particular, both for the under and uninsured in that community. So there, the Detroit Medical Center has always had multiple objectives in terms of the patient population that it needs to continue to serve on a broad basis. And our strategy there has been to invest in accomplishing all of those missions together. We've been working on improvements in the supplemental payment programs in the state for years. This doesn't really come out of the blue, if you will, for us in the sense that a lot of effort has gone in among multiple stakeholders, including the leaders at the DMC and working with the state on finding ways in order to help the portion of the mission that provides increasing access and access to care for the under and uninsured portion of the mission at the DMC. And I think what we see here in the improvements essentially brings Michigan to par with the way other states have managed ensuring that, that access continues to be made available for that population. So your question on how we look forward at the DMC is one that we'll address in the market over time. But again, I would point you back to the comment that I made that we have always operated the DMC and made investments to focus on being successful in the multiple missions. I think what changes is more the return that we generate from those investments improves more so than there's going to be some wholesale change in our strategy. Joshua Raskin: And the revenue side? Saumya Sutaria: We don't report on the revenue side of our individual markets, and I'm not sure that there's any reason to do that here. Operator: Our next question comes from the line of Whit Mayo with Leerink Partners. Benjamin Mayo: Maybe you hit on some of this, but the 45 centers that were acquired, can we just maybe get a little bit more color on those, not sure if there's a back story, I presume this is a larger transaction? Are these in hospital markets, potential JV partners, the mix? Just any additional color would be helpful. Saumya Sutaria: Yes, the 45 centers comprise centers all across the nation. The vast majority of them are new markets to USPI, places where we don't have necessarily centers today, a broad base of -- there's orthopedics, there's GI, there's ophthalmology. I mean typical service lines that you would end up seeing in the ambulatory space. I would say that some of the centers have tightly affiliated partnerships with physicians, some of the centers are -- and in some cases, health systems. And some of the centers are more, what I would describe as stand-alone centers with independent groups that have over the time -- over periods of time come together, bought equity and created a partnership that we bought into. I believe in all of the centers we bought up to consolidating positions. So there's no "buy up" strategy that will be required in these centers in the future. I don't know, I'll stop there. I think that covers it. Operator: Our next question comes from the line of A.J. Rice with UBS. Albert Rice: It looks like in your bridge that you're assuming organic growth in the ambulatory business of about -- EBITDA growth of about 4%. Obviously, as you said, you've got a little tougher comp perhaps this year on the case line side, which you're still expecting that to be slightly positive. I guess just given the strength of the revenue per case that you saw in the first quarter, is there any reason -- is that a conservative number? Is there any reason to think that your revenue per case, given the investment and mix, et cetera, that you've done would start to moderate? And then I might also on the USPI ask, a lot of the peers are talking about this calendar effect at the end of the first quarter, Easter spring break that maybe hit in late March and affected some of the elective outpatient-oriented procedures. Did you see that? And did you have any early read on April, if you did? Saumya Sutaria: Just a couple of things. Look, we have a lot of moving parts and pieces this quarter, including things impacting our guidance. So what we ended up doing was increasing our guidance to be consistent with the structural revenue and asset ownership, both additions and subtractions to the portfolio that we could forecast looking ahead to 2024. Look, as I said, we're really pleased with the demand we're seeing across the board in the businesses. We recognize the core underlying outperformance, net of all those other items. And we haven't really touched our guidance to acknowledge that performance yet. Again, lots of moving parts and pieces. I think with the underlying performance, we'll come back and address that on future calls. We'll hopefully be in a position where we really need to address that on future calls. But there's nothing in the environment right now that we're seeing that's concerning. And again, I would say, up to today, we're pleased with the demand we're seeing in the business. The calendar effect question, I don't know if you want to address that. I mean -- yes, I mean, of course, we spend a lot of time, in particular, because USPI functions on a workday -- weekday workday type of schedule focused on those issues from year-to-year. It does cause some effect on the business and the volumes that are there. So we're -- I guess, I would say we're a little bit used to it that, that happens. And yes, this year, it did have some effect in that arena. I would reiterate the longer-term message around the volumes. We are really pleased with the fact that what we saw in the first quarter helped to give us even more confidence that '23 was not just a onetime rebound year. It was a year in which we can build upon that volume strength, unnaturally high volume strength from last year. And as the year progresses, look to build volume growth off of what were some very tough comps from '23. But again, fundamentally, the first quarter gives us a great sense of relief that we've established that there is strength and the tailwinds for this business are real. Operator: And our next question comes from the line of Andrew Mok with Barclays. Andrew Mok: Just wanted to follow up on the 45 ASCs that you acquired in the quarter. I think you said in your prepared remarks that you're expecting $80 million of EBITDA contribution from these centers. When I look at the acquisition and development activity line in your ASC bridge, I think the revision was closer to $30 million over 3 quarters. I'm not sure if there was any contribution in the quarter. So if so, that implies a pretty material step-up in 1Q '25. Just want to make sure I'm understanding about this business and the cadence of synergies that should materialize in 2025. Is that the right way to think about it? Sun Park: Andrew, I'll try to address the different parts of your question. So first of all, in Saum's comments, he mentioned $80 million that is a first 12 months of ownership number. So in our '24 guidance, we had 9 months contribution. And I would assume that as happening in Q2 through Q4. The other piece I would say is that when we posted original guidance in our last call of $71 million of acquisition and development activity for USPI, obviously, some of the activity that we accomplished in Q1 goes towards that. So what you're seeing with our new number of 101 in acquisition development activity for USPI calculates that and assumes that in parts, a lot of the acquisition in Q1 goes towards the original guidance. So that's part one. Part 2 is we won't comment on 2025 impact yet. But what we feel confident in is that over the long term, over the next 3-year outlook that we will work hard to achieve 6 to 7x multiple EBITDA minus NCI for that acquisition. Thanks for your question. Saumya Sutaria: Yes. This is an attractive portfolio of assets. Again, diversity of service lines, nice opportunities to realize improvement in performance over the first 3 years that will build and grow earnings and importantly, EBITDA minus NCI as well. And as I indicated, all consolidated from the beginning, not creating a buy up -- a work plan set related to buy up. So we like the portfolio of assets that we picked up and will digest over the course of the year. Operator: Our next question comes from the line of Sarah James with Cantor Fitzgerald. Sarah James: So a couple of times today, you've touched on your strategy of growing off of a new higher base for USPI volume. I'm wondering if you've done any analysis on that to see were there just stronger market trends? Or did you guys gain share? And if it is share gain, are you able to tell, was that due to partnerships and referrals or growing catchment area or sort of what was behind it? Saumya Sutaria: So a couple of things. I mean, the ASC environment is not necessarily as a general market as data-rich as some of what you see on the hospital side, right? So we, too, have to use proxies to understand and forecast where we're going with the business. Obviously, the number one thing we do is we do bottoms-up center-by-center business planning every year that is built upon our understanding of our strategies, how successful they are, pulling the physician partners, et cetera. I mean it's a pretty simple but relatively comprehensive process. And when you look at that, and then you also, as I indicated in our fourth quarter call, just simply measure how busy some of these individual physicians were in 2023. I think I may have even noted some of these people worked incredibly hard to take care of patients at a level of productivity that we have not seen them deliver in prior years. Of course, you're left with the question despite our best efforts at forecasting, whether or not a significant portion of what we saw last year, especially being post-pandemic was simply onetime deferred care. So that's why I elaborate on it because in the first quarter, we sort of knew from our bottoms-up planning that we believe volume growth would build over the year. Of course, there is always a risk that planning wasn't entirely accurate. And there would be a volume retreat based upon deferred care being the real reason for the growth last year. And that's why I commented on it because I'm not as focused on quarters individually. I'm focused on the broad-based tailwinds that drive USPI and our ability to drive earnings' growth over a longer period of time. And that's maybe why I elaborate on that point a few times as it gives us more confidence that we are building solidly for the long term. The only other statistic that we're able to look at across the board is our rate of addition of new physicians and being able to measure how they ramp up. And so one of the reasons we had a little bit of confidence this year that we would see growth as the year went on was despite the busy year last year, we did add physicians to the USPI portfolio. And it usually takes them 9 to 18 months to ramp into their comfort level in an ASC. And so we thought, okay, based upon those additions, we ought to see some growth above and beyond where we were in the latter part of the year. So I don't know, maybe that's more color than you wanted. But that's kind of how this -- how the planning for this business shapes up. Operator: Our next question comes from the line of Cal Sternick with JPMorgan Chase & Company. Calvin Sternick: I wanted to ask about the 45 centers. Were there any large portfolio deals in that quarter in that part of the 45? I know you mentioned that the additions were pretty broad-based across markets. And just any other color on sort of what the acuity or case mix is for those centers. And maybe more broadly, just what you're seeing in terms of the M&A pipeline? Saumya Sutaria: So a few things. One, the centers were, in fact, as I said, broad-based graphically. Majority of the centers did come through a single transaction for multiple centers. We just closed the deal, right? So assessing the case mix and the acuity and all that stuff, other than what we learned in diligence that gave us comfort is not really something I'm prepared to talk about in any great detail. Our priority and focus, of course, is continuing to acquire assets at attractive multiples, adding value to them from a quality, safety, compliance, growth standpoint to increase access to lower-cost care in the communities in which we acquire them using the USPI management skills and ultimately improving the returns to the levels that Sun and I described in a typical fashion by year 3. We think these things will be very nice additions to the earnings for USPI. In terms of the broader M&A pipeline and de novo pipeline, they both remain strong. We anticipate continuing to progress through that agenda as the year goes on. Operator: Our next question comes from the line of Brian Tanquilut with Jefferies. Brian Tanquilut: Congrats on a solid quarter. Maybe some -- my question for you. As I think about revenue per case related to all the comments you made on USPI, right? I mean, obviously, it was strong this quarter, but if we think about the mix of ortho continue to grow, the impact of the new ASCs that you just acquired, and maybe the comment you made on payer rate bumps, how should we be thinking about your view on the sustainability of -- or the right level of revenue per case growth, number one. And maybe some color you can share with us on the payer rate bumps, comment you made earlier in your prepared remarks. Saumya Sutaria: Yes, sure. Well, I mean I think the number one driver of revenue per case is obviously the mix acuity, right? I mean it's the case mix and acuity and strategically, our objective is to grow that. It's also important just because the more that we grow in that dimension, the more we're creating value for the system by reducing the cost of similar care that could be done in a more expensive setting, which is obviously important to our payer and government reimbursement stakeholders so that's how we think about that and why we are focused on that. The exit of low acuity business helps that statistic in net revenue per case. But it also, over time, helps us create some more capacity in our ASCs. As I've talked about, it's always a headwind to same-store growth. When you lose or move out or whatever, low acuity pain cases where you can do 10 of them at the same time, you can do 1 joint surgery that is what it is and we obviously are going to continue down the path of our service line mix improvements that we believe in, regardless of the impact on same-store, it's obviously our objective to continue to build the same store, however, as we've said in our guidance. From a mix perspective, even in the ASC business, I think that some of the benefit of the exchange population growth, we're seeing that flowthrough. It's not just the hospitals. We're seeing that flowthrough in the ASC business. What's different in the ASC business is there isn't as much Medicaid. So you're not seeing the reduction necessarily like you would in the hospital segment and the growth in the exchange business, but you are seeing the exchange segment growth on the ASC side. Brian Tanquilut: And it's not just the impact of the acquisitions? Does that dilute it? Or how should we be thinking about that? Saumya Sutaria: Yes, that's a good question. And I mean other than providing the numbers around, I mean, again, we just closed on a lot of these centers in the past quarter, and most of them, frankly, were towards the end of the quarter, to Sun's point around, they really are an impact in Q2 through Q4 as opposed to having had any impact in Q1. The centers we acquire, generally speaking, will be lower-margin and dilutive to earnings from a margin standpoint until USPI fully implements its program of improvements, which is how the year 3 multiples can be forecast over time. That obviously comes with earnings' improvement and therefore, margin improvement. And so that's definitely the case. We haven't gotten into them enough to know whether there's some that we're going to need to do some partnership restructuring or other things. We'll provide more visibility as we get into it next quarter in terms of what impact it may have on volumes, earnings, any refinement to the earnings. But we feel pretty good about the projection that we've given on these centers for the first 12 months of EBITDA and also what the long-term impact or benefit to the company will be. Operator: And our next question comes from the line of Ann Hynes with Mizuho Securities. Ann Hynes: So I just want to focus on divestitures. Obviously, they've been a very nice source of debt repayment on the acuity side. How do you view divestitures going forward? And can you remind us what goes into decision-making on whether to strategically keep or divest a hospital or a market? Saumya Sutaria: Yes. I mean -- so -- and I appreciate the question. I think that strategically, our choices about divestitures are dependent upon a few different things. Obviously, one is, does it impact our overall corporate strategy in a positive or negative way or do we have the ability to provide leadership and ongoing growth in the markets that we were serving based upon our business model, capital needs and other things that those assets may have and what we might forecast the return on those capital investments may be versus other things that we could spend the money on. And then finally, the ability to generate proceeds that fully value what we've built in these assets, which is, again, what we were focused on because these assets underwent a lot of work over the last 5 years and we wanted to ensure that we captured full value for them in our transaction. That's how we think about -- those are the criteria that we've thought about. We're -- as I've said before, we're very comfortable with the portfolio we have today and the positions that we hold today and our ability to build and grow in the markets that we're in. Operator: And we have reached the end of the question-and-answer session. And this also concludes today's conference, and we do thank you for your participation, and you may disconnect your lines at this time.

Operator: Good afternoon. Welcome to Tenet Healthcare's Fourth Quarter 2023 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] Tenet respectfully asks that analysts limit themselves to one question each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good afternoon everyone and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's fourth quarter 2023 results as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. One item that I would like to bring to your attention related to our disclosures is a change in our segment reporting. Effective in the fourth quarter of 2023, we have combined Conifer and the hospital operations into one reportable operating segment, Hospital Operations and Services. This change was made to reflect recent updates to the organizational and management structure of Conifer and hospital operations. This change has no impact on Tenet’s consolidated revenues, EBITDA, net income, margins or cash flows. The Conifer business will continue to support and expand relationships with existing clients and generate new business, both for comprehensive end-to-end services, endpoint solutions. To ease the transition for investors and analysts, we have included historical financial information under the new segment reporting structure on Page 4 of our fourth quarter 2023 financial supplement. And with that, I turn the call over to Saum. Saum Sutaria: Thank you, Will, and good morning, everyone. 2023 was an exceptional year for Tenet. We recorded net operating revenues of $20.5 billion and consolidated adjusted EBITDA of $3.54 billion, which translates into an attractive 17.2% adjusted EBITDA margin, underscoring our ability to drive profitability while maintaining our commitment to quality and innovation. We finished the year strong and delivered results in the fourth quarter that were well above the expectations we set. This was driven by continued volume strength as well as cost and utilization management. Each quarter in 2023, we exceeded our performance expectations. As important as our performance in 2023, we advanced our business transformation towards a more profitable value based care enterprise, building a leading specialty care platform and furthering our corporate priorities to position us with lower leverage and enhance free cash flow opportunities looking forward. Let's start with USPI, where we had a phenomenal 2023, a year where we finally escaped COVID disruption to the business. USPI generated $1.54 billion in EBITDA, which represented 16.4% growth over 2022 and margins of 40%. USPI had 9.2% growth in same facility revenues in 2023, substantially above our long-term goal of 4% to 6% top line growth. Joint replacement surgeries were up nearly 20% in the fourth quarter and over 15% for the year. Throughout the year, we saw ongoing strength and recovery in GI, urology and ENT procedures. This organic growth was driven by continued expansion of service lines and growth in our population of partnered and affiliated physicians, as well as the fundamental tailwinds of patient demand for safe and convenient surgical care options. In 2023, we added 30 centers to the portfolio, furthering our goal of creating additional lower cost sites of care for patients and physicians while delivering superior value for our stakeholders. Turning to our hospital segment, we generated $2 billion of adjusted EBITDA in 2023, which represents a 12% EBITDA margin. Acuity remains strong with fourth quarter 2023 revenue per adjusted admission up 6.5% over prior year. Additionally, non-COVID same-store inpatient admissions were up 2.6% in the quarter and 6.2% for all of 2023. Our investments in nurse recruitment and retention have paid dividends as we have strengthened our workforce and effectively reduced contract labor spend throughout the year. By the fourth quarter of 2023, contract labor accounted for just 2.8% of consolidated salaries, wages and benefits, a 62% reduction from fourth quarter 2022. This best-in-class contract labor cost management performance helped drive strong results in 2023 and we expect to continue to benefit from our operational discipline in the future. In summary, we are very pleased with the performance of our teams in 2023 and believe that we will carry the momentum into the New Year. Let me transition to 2024 guidance. We are projecting full year 2024 adjusted EBITDA of $3.825 billion to $3.485 billion, which is an attractive 7% growth rate at the midpoint on a normalized basis. In addition, during our third quarter earnings call, we said that we would overcome various reimbursement headwinds to grow EBITDA in 2024, which this guidance reflects. First, in our industry leading ambulatory surgery business, we anticipate adjusted EBITDA growth of approximately 9% at the midpoint of our guidance in 2024 based on our expectations of ongoing strength in demand coupled with great visibility into our pricing, 3% to 6% growth in same facility revenue, continuous improvement in our operating efficiency and additional sites of care joining the portfolio. As we have noted, we believe that in 2023 we saw recovery in demand that included some impact from deferred volume, particularly in GI and ENT services. Our initial assumption for volume growth assumes that volume will build as the year progresses, reflecting the historically high same-store case growth that we saw in the first quarter of 2023. We are very confident in the long-term growth rates of this business. USPI will continue its commitment to expanding its family of lower cost ambulatory surgery centers. We have consistently acquired centers at attractive valuations and achieved post synergy multiples to below five times while improving our quality and delivering a 96.6% overall patient experience score under our management. We intend to invest approximately $200 million to $250 million each year and have a robust pipeline to support that level of investment. We also have a healthy de novo development pipeline of more than 30 centers currently in the syndication stages or under construction. We believe adding centers with strong margins and attractive post synergy multiples remains the most effective use of our cash for investments to enhance Tenet’s earnings and free cash flow. Turning to our Hospital segment, we are expecting adjusted EBITDA growth of approximately 5% on a normalized basis at the midpoint for 2024. This projected growth is expected to be driven by 1% to 3% adjusted admissions growth and continued operating discipline. Having captured much of the value from contract labor rationalization last year in 2024, we plan to continue to strategically open up capacity to meet growing demand in a number of our markets, leveraging our previous capital investments. Additionally, our hospitals continue to enhance access to higher acuity services for the benefits of our patients and communities that we serve. For example, our Abrazo Arrowhead Hospital just opened its new neonatal intensive care unit. This state of the art expansion increases our bed capacity to support services for preterm babies and high risk pregnancies by 75% at this facility. We are also particularly excited about the progress of our new Westover Hills Hospital in San Antonio, a project that reflects our strategic and disciplined approach to expansion. We expect that this facility will be completed and begin to serve patients in the second half of 2024. Located in a highly attractive and growing market, Westover Hills is another example of our thoughtful expansion strategy that we have been executing for a number of years. This 100 bed facility will focus on higher acuity services such as cardiovascular and surgical care for the people in that community. Finally, Conifer recently announced the continuation of our partnership with Dartmouth Health through a new multi-year agreement. Conifer will continue to serve as the exclusive provider of end-to-end revenue cycle management services for Dartmouth Health's hospitals, physician services and other related entities. We also added a new partnership with Conifer's value-based care business unit, which will be providing analytics and operational support services for capitated risk arrangements. All in all, our full year 2024 adjusted EBITDA guidance of $3.285 billion to $3.485 billion represents attractive growth following a very successful 2023. Before I turn the call over to Sun, I'd like to highlight the continued progress that we have made transforming our portfolio of businesses, building upon the highly successful and accretive sale of the Miami hospitals in 2021. In the past few months, we have announced the following transactions that demonstrate our agility in optimizing our businesses. First, the completed $2.4 billion sale of three Coastal South Carolina hospitals and expansion of our Conifer services to Novant Health. Next, the formation of a joint venture with Nextcare [ph], which operates dozens of high quality urgent care locations and a telehealth operation in Arizona. This immediately increases patient access to our network in this geography with low cost sites of care that are complementary to our health system footprint. And finally, the $975 million sale of four hospitals and related operations in Orange County and LA County to UCI Health that we expect to close in the spring of 2024, subject to customary regulatory approvals, clearances and closing conditions. This deal will also include a contract for Conifer services. It is important to note that these sales were completed at very attractive EBITDA multiples, evidencing the strength of our assets and the quality of care they provide in their communities. Collectively, these transactions will substantially improve our leverage position. On a pro forma basis, proceeds from these recent transactions have the potential to lower our leverage ratios by approximately 0.6 turns, resulting in a debt-to-EBITDA ratio of approximately 3.3 times or 4.2 times on an EBITDA minus NCI basis. This is on top of post-tax proceeds of $1.1 billion from our Miami Hospital transaction in 2021 that we used to pay down debt. Tenet is entering a new era with a greater proportion of our performance coming from our highly efficient ambulatory surgical business and a reduced debt profile; we are well positioned to continue to expand free cash flow further over time. We are mindful of what got us here in the last five years operating excellence, disciplined capital allocation with a focus on ROIC, an analytics-driven culture and a continuous improvement mindset. As a result, we will have significant financial and capital flexibility to increase shareholder value over the long-term. And with that, I will turn the call over to Sun to provide a more detailed review of our financial results and 2024 guidance. Sun? Sun Park: Thank you, Saum, and good morning, everyone. We are very pleased with the strong finish of our fiscal 2023, with fourth quarter adjusted EBITDA coming in well above the high end of our most recent guidance ranges for both the USPI and the Hospital segments. In the fourth quarter, we generated total net operating revenues of $5.4 billion and consolidated adjusted EBITDA of $1.012 billion. For full year 2023, we generated $20.5 billion of total net operating revenues and consolidated adjusted EBITDA of $3.54 billion. These results were driven by strong growth in USPI's same-store volumes and net revenue per case, strong patient acuity and overall revenue growth in the hospitals and very effective expense controls throughout the businesses, with the management of contract labor costs as a notable example. Now I'd like to highlight some key items for each of our segments, beginning with USPI, which again delivered strong operating results in the fourth quarter. USPI's fourth quarter adjusted EBITDA grew 14% compared to last year, and its adjusted EBITDA margin continues to be very strong at 43%. USPI delivered a 9.5% increase in same-facility system-wide revenues compared to fourth quarter of 2022, with same-facility system-wide surgical case volume up by 3.9% and net revenue per case up 5.4%. Turning to our Hospital segment. Fourth quarter same hospital inpatient admissions increased 1%, with non-COVID inpatient admissions up 2.6%. Revenue per adjusted admissions grew 6.5%, demonstrating strong payer mix and continued high acuity levels. Our fourth quarter results also reflect $52 million of favorable adjustments associated with Medicaid supplemental revenue programs in California and Texas. In terms of strong expense management, our consolidated SWB was 43% of net revenues in the fourth quarter which was substantially lower than the 46.2% we saw in fourth quarter of 2022, and our consolidated contract labor rate was 2.8% of SWB, a material reduction from 7.3% in the fourth quarter of 2022. On a per adjusted admission basis, fourth quarter Hospital SWB was 160 basis points lower than fourth quarter 2022. These reductions over the course of the year reflect the disciplined approach that we take towards labor management. And finally, fourth quarter medical fees were up $16 million sequentially, and $40 million higher than fourth quarter of 2022, consistent with our expectations. Overall, these costs were up about 15% for full year 2023. Next, we will discuss our cash flow, balance sheet and capital structure. Our cash flow performance was very strong in 2023, with $1.6 billion of free cash flow for the year. We finished the year with over $1.2 billion of cash, with no borrowings outstanding under our $1.5 billion line of credit facility. During the fourth quarter, we repurchased 1.6 million shares of our stock for $110 million, and for full year 2023, we repurchased 3.1 million shares of our stock for $200 million. Our year-end 2023 leverage ratio was 3.89 times EBITDA or 4.85 times EBITDA less NCI. It is important to note that these ratios do not reflect the $2.55 billion in after-tax proceeds and $190 million of associated tax benefits from our announced divestitures, which collectively will support our goals to deleverage the balance sheet. Also as of year-end 2023, we have no significant debt maturities until the first quarter of 2026, and all of our outstanding senior secured and unsecured notes have fixed interest rates. In the aggregate, we believe we have significant financial flexibility and cash flow generation to support our capital allocation priorities. Now let me turn to our outlook for 2024. For 2024, we expect consolidated net operating revenues in the range of $19.9 billion to $20.3 billion. Our projected consolidated adjusted EBITDA for 2024 is in the range of $3.285 billion to $3.485 billion. For clarity, these revenue and adjusted EBITDA figures for full year 2024 reflect the completion of the sale of our coastal South Carolina hospitals on January 31, 2024, and it assumes that the sale of our four California hospitals will be completed on March 31, 2024. Now as we discussed previously, there are a number of items that impact the comparison of our 2023 results to our 2024 outlook, which are outlined on Slide 8 of our investor presentation. Let me summarize the primary drivers as follows: First, we recognized $16 million of grant income in 2023; and second, we recorded income of $34 million associated with cybersecurity insurance proceeds in 2023; third, there are $98 million of headwinds for 2024 arising from the termination of COVID-related government funding programs in 2023, new regulations related to workers' compensation and personal injury reimbursement in Florida, and changes to health care wages due to the recent minimum wage loss in California; fourth, the closing of our South Carolina hospital sale on January 31st creates a year-over-year EBITDA headwind of $140 million; and finally, our California hospital sale is assumed to create a year-over-year EBITDA headwind of $55 million. After normalizing for these items, our full-year 2024 adjusted EBITDA is expected to grow 7% over 2023 at the midpoint of our range. Our 2024 outlook assumes continued organic volume growth, strong patient acuity, better than historical contract negotiations and effective cost management, with the specific expectations for additional contract labor savings on a full year basis, partially offset by incremental medical fees. We also assume that we will have contributions from M&A and de novo center openings at USPI given its robust pipeline. In addition, for 2024, we're also assuming the following: same-hospital admissions growth of 1% to 3%, adjusted admissions growth of 1% to 3%, same facility USPI surgical case growth of 1% to 3% and USPI net revenue per case growth of 2% to 3%. At a segment level, we expect adjusted EBITDA to grow 8.7% at USPI and 4.5% for our Hospital segment at the respective midpoints of our guidance ranges on a normalized basis. As Saum stated, we believe our guidance range represents attractive growth for Tenet following a very strong 2023. Finally, we would expect first quarter of 2024 consolidated adjusted EBITDA to be in the range of $800 million to $850 million. And we anticipate that USPI's EBITDA in the first quarter this year will be 20.5% to 22% of our full year 2024 USPI EBITDA guidance at the midpoint. Turning to our cash flows for 2024. We expect free cash flows in the range of $875 million to $1.125 billion, which includes the payment of $635 million in net taxes related to our announced divestitures. Before these tax payments, this represents $1.635 billion of free cash flow at the midpoint of our 2024 outlook, which demonstrates continued strong performance from 2023 even after the loss of EBITDA from the divested hospitals in 2024. We also note the $635 million of taxes paid is comprised of $825 million of taxes associated with the gains on sales, partially offset by $190 million of tax benefits due to a reduction in interest expense limitations. In addition for 2024, we're also assuming capital expenditures in the range of $775 million to $875 million, distributions to non-controlling interests in the range of $650 million to $700 million, and our intention to retire the $2.1 billion of senior secured first lien notes due in 2026 in the first quarter of 2024. Our cash flow performance has improved substantially over the past several years, and we continue to demonstrate the ability to generate this cash flow while also deleveraging our balance sheet, maintaining investments in our business and executing on key growth plans. We expect this performance to continue in 2024, which will create additional opportunities to delever and grow our business. And finally, as a reminder, our capital deployment priorities have not changed. First, we plan to allocate $250 million of capital annually to grow USPI. Second, we expect to invest in key hospital growth opportunities, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt and finally, a balanced approach to share repurchases, depending on market conditions and other investment opportunities. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. [Operator Instructions] Our first question comes from the line of Cal Sternick with JPMorgan Chase & Company. Please proceed with your question. Cal Sternick: Good morning and thanks for the question and congrats on a really strong 2023. I want to dig into the 1% to 3% case growth for USPI. It sounds like demand is still strong and this is more of a comp headwind just given the strong growth in 2023. Is that the right way to think about it? Or is there anything else in terms of mix or demand that's influencing your 2024 outlook? And then if you could also give some color on the level of demand you're anticipating across categories like ortho, cardiac, GI and some of the others, just compared to what you saw in 2023 that would be really helpful? Saum Sutaria: Yes. Hey it's Saum. Thanks for the question Cal. No, your interpretation is right. I mean we anticipate continued strong growth in the ambulatory surgery segment. I mean, 2023 was a very strong year, and it was across service lines, as I pointed out, GI, urology, ENT, orthopedics, ophthalmology. I mean we had strength across the board. We had physician additions across the board. Total joint surgeries grew significantly in the fourth quarter, even above what we were running during the course of the year. So we feel very good about that going forward. Yes. Look, I would say that first of all, the comp in the first quarter is really, really strong based upon the recovery we saw. And we're very analytically driven in the way we look at this. I mean our GI positions over the course of 2023 performed more than 15% more procedures than they did in the prior year as individuals. That's a pretty big leap and we think it's sustainable. I mean, one of the things that we're doing with some of our more innovative GI physician group partners is focusing on how we hardwire our operating efficiency in the ASCs to allow them to be more productive on a sustainable basis going forward so that, that recovery volume, whatever proportion of that may be becomes their norm. And that's a really, really good lesson learned from 2023, about our ability to actually deliver case volumes at that high level of productivity. The fact is, if you look back over time, long periods of time, 15, 20 years, when you have notably strong growth years, you often have just based on comps some slightly lower volume rates. But look, we've developed a pattern now of being mindful of what we see in the environment. But if the business outperforms raising our guidance just like we did in 2023, if in fact, it's warranted. Again, I'm very optimistic about 2024, and there's really no other way to interpret that other than what we just talked about. Cal Sternick: Great. Thanks. Operator: Our next question comes from the line of A.J. Rice with UBS. Please proceed with your question. A.J. Rice: Thanks. Hi everybody. Obviously, the headlines around the last couple of divestitures grabbed some headlines. Maybe I thought I'd ask you about two aspects of that. The price tags on the deals, I know these are growth areas once you're selling these hospitals, but seem unusually high by historic standards. Is there any dynamic in the marketplace that you see that non-profits are bringing to bear. I don't know whether it would be their ability to implement a 340B program or something like that that's causing them to be willing to pay these relatively high valuations? And then second to that is your national strategy of contracting hospitals getting the leverage of both hospitals and the surgery centers, do you think there's any issues with divesting hospitals that would lessen your ability to get the pricing you want on the surgery centers? Or that's not really a question mark. Saum Sutaria: Yes. A.J. Thanks for the question. Look, on the first point, I would say that – and I can't put myself in the shoes of not-for-profit health system partners who are looking to acquire assets, but what I would say is that these two transactions demonstrate that the work we've done over the last five years to generate high-quality, well-performing, solid, quality safety service hospitals with a higher-acuity procedure-based platform can generate a premium because it's a lot of work to get them into that position of not only having a high degree of profitability, but also having a quality service profile that's attractive from a starting standpoint. So they're high-quality assets. The other factor, of course, would be that these assets are coming forward in as multiple assets in a market, which, again are relatively rare. And our point of view is that we recognize that value and we hold out for that type of value in order to ensure that we're doing the right thing from the standpoint of our capital structure and shareholders. Remember, we've said all along, we're very comfortable operating the entirety of this portfolio and doing well with it, and we still are, that doesn't change. On your second question, all of our divestiture activity that we would entertain would be consistent with our strategy of remaining very high on the list of being a value-based care contributor to the stakeholders, whether government or private pay that engage with our system. And that's definitely the case based upon our lower-cost ambulatory profile. It's also definitely the case based upon the very desirable high-quality acute care assets that we have. So our point of view is that we will remain consistent with our stated strategy on the portfolio, but we also will continue to put effort into making sure that we are delivering solid value for our payer stakeholders, again, both government and private. A.J. Rice: Okay. Sounds good. Saum Sutaria: Thank you. Operator: Thank you. Our next question comes from the line of Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Hey good morning guys and congrats on the quarter. Saum, just to follow up on the divestiture question, right? I mean this seems to be more opportunistic than not in terms of the assets that you've sold. So how are you thinking about maybe longer-term leverage targets or your willingness or interest to look for other opportunities, such as South Carolina and Southern Cal? Saum Sutaria: Yes, they're – both of these opportunities we're opportunistic as you say, we were not in the marketplace looking for those, although as I just mentioned to A.J., we have a strategic sense of what we would entertain at what values. And again, we remain opportunistic. But most importantly, we remain committed to the portfolio that we have and running it at a high quality with solid earnings from that standpoint that we can deliver. So I mean, I'm not sure how to answer the question on a go-forward basis other than to say we have demonstrated thoughtful divestiture activity in a way that remains consistent with our strategy and enhances not just our leverage position, but our belief in our ability to generate free cash flow going forward. Brian Tanquilut: Okay. Thank you. Operator: Thank you. Our next question comes from the line of Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. Appreciate all the detail and consolidating Conifer, I think was a good idea. I appreciate that, too. The – my questions were, one, the bigger question is just that there's been some discussion out there that ahead of the two-midnight rule, a bunch of hospitals might have tightened up how they report observation versus inpatient? Curious if you've seen any of that internally? How have you prepared? Did you see any benefit this year? What do you think the benefit is next year? And then just a quick numbers question, how many de novo openings this year? Do you expect – I apologize if I missed that previously. Thanks. Saum Sutaria: Thanks Justin. Well, obviously, we're very cognizant of the impact of CMS's commentary on the two-midnight rule, Medicare Advantage is very important to us and being a good partner to our Medicare Advantage health plans and also our medical groups and organized medical groups that participate in Medicare Advantage is something we actually are quite focused on operationally because we are focused on delivering good throughput. We only admit patients through the emergency department when appropriate. We have high standards for that. So we end up being in a position where being focused on MA is important. Now look, we also believe strongly that when people are in the hospital and are sick enough and their condition warrants it based upon the admitting physician's judgment to be inpatients versus an alternative outpatient-based status that is the appropriate thing to do. And we very much agree with the guidance from CMS that that should be tightened up. So operationally, we're focused on it. Remember, we also, through Conifer, have the ability to focus on it for us and our clients in terms of ensuring that we have the appropriate documentation in order to defend that position. So we're going to keep at that. We haven't quantified any potential upside from that, although we have considered it, obviously in our guidance, but we haven't specifically called out anything from that perspective. The de novo number for 2024, I'd have to -- yes, I'd have to go take a look at an exact number, but it's north of 10, potentially approaching 15. I'm sorry that I don't have an exact number for you. Justin Lake: Thanks. Operator: Thank you. Our next question comes from the line of Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin Fischbeck: Great, thanks. I just wanted to dig in a little bit into the view about the Hospital business guidance for 2024. Were you talking about 4.5% normalized performance and 3.6% organic growth there, which seems a little bit low based upon – it looks like you're looking for a pretty solid volume growth as you get pricing. But based solid volume growth, I view that labor is going to continue to improve, I'm just trying to figure out if there's any other offsets that you're already kind of backing out the rate pressure and labor changes in there. I would have thought that number would have been higher than the 3% to 4%. Saum Sutaria: Yes. Hey Kevin, it's Saum. Let me start. Look, I think a couple of points that I made. First of all, we had an outstanding year in the hospital segment. As you know, every quarter, we exceeded our expectations there. Look, for us, I mean, we took a lot of the benefit from contract labor reduction in 2023. Now don't get me wrong, there's an annualization effect that will improve in the coming year. The volume strength was also very good during the year. And so I think that we believe that we'll continue to see acute care recovery in 2024, like we saw in 2023. And if we're able to open up capacity effectively to service the demand that we want, which again is consistent with our high acuity strategy, I think that's what gets us to the upper end of our guidance, right? It's really the volume potential there. And then we're mindful of the fact that there are some things in the operating environment to think about. We did very well, but did have cost increases in 2023 in medical fees. We're anticipating some impact of that again, but we think manageable and in the guidance from that perspective. Sun, I don't know if you want to add anything. Sun Park: Yes. Saum. Just on your last point, I would also add on the medical fees, we did see about 15% total increase in fiscal 2023. For 2024 we are assuming some moderation in the rate of growth here. So our 2024 assumption is in the 8% to 10% range for net fees. Operator: Thank you. Our next question comes from the line of Whit Mayo with Leerink Partners. Please proceed with your question. Whit Mayo: Hey thanks. Good morning. I just was curious on how you feel about the target for 575 to 600 centers for 2025 you need about 15 centers a year over the next two years to get there, about a 20% increase. So I just wanted to take your temperature on how you're feeling about that target? Thanks. Saum Sutaria: Yes. Thanks Whit. I mean, first of all the pipeline is very robust at this stage and healthy, inclusive of both single centers and platforms that have multiple centers within it, a good mix of acuity across different services, meaning orthopedics and other things. In addition so look, I mean the 575 to 600 is a range that we put out there as a target by that standpoint. One of the things that we're going to be disciplined about is we're going to do good deals, high-quality assets, attractive multiples, not overpaying and ultimately being able to deliver earnings growth in those facilities and organic growth in those facilities in a way that we got it. So we're not going to chase a number, but our pipeline at this point makes me feel good about the fact that if things come together the right way, we could reach that target by the end of 2025. Whit Mayo: Yes. Thanks. Operator: Thank you. Our next question comes from the line of Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix: Hey. Thank you very much. Your ambulatory net revenue per surgical case outlook, 2% to 3%, seems consistent with what we think of longer-term steady-state growth, just wondering if there's potential for upside there from continued acuity migration within the same-store base? Or is acuity something you're pursuing through just more through a function of new development? Thank you. Saum Sutaria: Yes. Hey a couple of thoughts, yes. I mean 2% to 3% is kind of our long-term estimate. We have, obviously, as I indicated somewhat purposefully a very high degree of visibility into our managed care pricing and obviously, the Medicare pricing for 2024. The acuity and mix potentially represents some upside there. If you think about 2023 where we saw a lot of recovery in GI and ENT cases, even a relative mix shift could impact the acuity in 2024. And that's got pluses and minuses associated with it, right, if the mix shifts from that perspective. But strategically, our plan is to continue to increase our high acuity services. Look, we're also mindful of the fact, and we don't spend a lot of time talking about it anymore, but we are still doing some work to move slightly higher volume, very, very low acuity work out of our ASCs into other settings in order to make room for higher acuity, we're doing it in a more measured way than we perhaps did in 2022, but we're still doing it. And so that also presents upside if we're successful in refreshing those partnerships. But we think that will serve us well for the longer term. Ben Hendrix: Thank you. Operator: Thank you. Our next question comes from the line of Josh Raskin with Nephron Research LLC. Please proceed with your question. Josh Raskin: Thanks. Good morning. I want to stick with USPI. Can you speak to the revenue per case growth in the ASC segment that we saw in 4Q? It seems like the same-store revenues were more case-driven earlier in the year. So I'm just curious if 4Q was higher acuity cases or mix related as you were just talking about? And then I'm just curious relatedly, are there any differences in the trends on the same-store is relative to those that have been acquired or newly consolidated versus those that you've had a little bit longer? I'm thinking about some of the SCD assets that may not have been as mature and thinking about as those move into the same-store revenue number, is that going to keep that sort of total same-store revenue number growth higher? Saum Sutaria: Yes. Hey, Josh, thanks for the question. Let me start with your second question and then pass over to Sun for the first one. I don’t think we see a major difference across the board. I mean, there look – there’s a lot of centers, obviously, some are more mature than others, and it’s a portfolio, right. So some are off, of course, there’s a bell curve, and some are growing faster than others, of course, from that standpoint. But I wouldn’t necessarily say or break it down by particular segments. I think the most important segmentation in 2023 was that you could clearly see the GI only centers grew faster than others on average. But the growth was pretty strong in segments beyond GI, but it was definitely faster in the GI only centers. That’s probably the most obvious trend that I’ve noticed. Your first question… Sun Park: Yes, thank you, Saum. Hey, Josh, this is Sun. Thanks for the question on the net revenue per case. In the ambulatory space in Q4 of 2023, I think you’re right, we did see elevated net revenue per case, it was about 5.4% higher than the previous Q4 in 2022. But if you take a step back and look to the rest of 2023, those rates were a little bit lower, right. So that for fiscal 2023 overall, our NRPC was about 3.4% higher than 2022. So I think it’s partly what Saum mentioned, mix of different procedures, gastro, ortho, some of the other ones, and I don’t know that I would read too much more into that. And then, as we said, our guidance for fiscal 2024 assumes a 2% to 3% range, which compares reasonably well to the 3.4% that I just mentioned for all of fiscal 2023. Josh Raskin: All right. Thanks. Operator: Thank you. Our next question comes from the line of Sarah James with Cantor Fitzgerald. Please proceed with your question. Sarah James: Thank you. As we move past the pandemic, most of the providers have been talking about kind of repricing on the commercial side in the mid-single digit range for hospitals. Can you give us an idea, given the timing of your repricing, how much of that – how much of your book was already at this higher rate in 4Q? How much do you expect to be in the rate for 2024? And is there any aspect of that includes covering some of the unreimbursed physician fees for the third party anesthesiologist. So is that being worked into the rates at this point? Saum Sutaria: Yes. Hey, it’s Saum. Thanks for the question. Again, in a little bit of reverse order, I mean, obviously, we take into consideration all aspects of inflationary pressures, whether that be contract labor, physician partnerships, supply, I mean, all of it, right I mean into the way in which we approach our negotiations with our health plans. And I mean that – as we’ve indicated in the past, it’s not like somebody’s come forward in the last few years, government or private pay and just offered up CPI, right. But the thing is, we have annual escalators in all of our contracts. We’re mindful of the fact that to deliver value, obviously, we need to have annual escalators given inflation, but it is also partially our responsibility to continue to find efficiencies in our business in order to remain valued partners to our stakeholders, again, both government and private pay. So that’s how we think about it, and that’s how we’ve been able to expand our margins over this period of time. Look, my view is we’re generally pretty well contracted for 2024, and the bit of tailwind that we see from the recent higher than average contract negotiations should be and is part of our guidance in 2024. And my guess is it’ll flow a bit into 2025 as well, right. And then we’ll see when the next round of negotiations come up, how that goes. It’s really important to understand that part of our strategy in our net revenue per case improvement over time also relies on our ability to continue our acuity of case mix in our hospitals, so that together we’re giving ourselves an opportunity to generate that net revenue per case improvement over time. And I think the fourth quarter represented a lot of acuity that we saw in the quarter, which is why the number was so attractive. Sun? Sun Park: Yes, Saum. I would just to confirm kind of what you said, we said, historically we’re seeing commercial rate increases in the 3% to 5% range, and going into 2024, we’re about 90% contracted. I wouldn’t try to segment that too much deeper than that, only to say that those rates are kind of what’s embedded into our 2024 guidance that we provided. Sarah James: Thank you. Operator: Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey, good morning, guys. On the hospital labor side, what are you guys modeling for full time wage inflation for 2024? And how much more savings can we get from contract labor? And because you’re including Conifer in that segment now, can you tell us what revenue per just admission is guided to be for this year? And is it safe to think about Conifer EBITDA growing faster than hospital EBITDA for 2024? Sun Park: Hey, Pito, this is Sun. Let me try to take some of those. From a base wage standpoint, obviously, we’ve been managing base wages efficiently overall, as evidenced by our SWB metrics. I would say 2023 was still elevated compared to our historical rates. That’s more in the 2% to 3% range. We are assuming more normalized rates in fiscal 2024 guidance, but probably not fully back to those historical rates yet. I would just add we’re continuing to make investments into our workforce in the right areas on our base wages. And then on contract labor, to your point, I think Saum mentioned earlier, we do still expect some savings from contract labor going into fiscal 2024 guidance. That would primarily be in the first half of 2024, because if you look at our Q3 and Q4 rates of 2023, they were about 3% and 2.8%. So I think the room for improvement in the second half of the year for 2024 is much lower. Saum Sutaria: And then, I’m sorry, your question on Conifer. Yes, now that we’ve changed our reporting segment methodology. I don’t know that we will provide that level of detail. Pito Chickering: All right, great. Thanks so much. Sun Park: Thank you. Operator: Thank you. Our next question comes from the line of Jason Cassorla with Citi. Please proceed with your question. Jason Cassorla: Great, thanks. And congrats on the quarter. Maybe a question on cash flow. It looks like you’ll still generate enough free cash flow, less NCI cash distributions to self-fund that $250 million investment target in the ASCs for 2024, even with the tax payment from the divestiture. But I guess moving beyond this year, Tenet should be in a position to generate well north of $1 billion free cash flow, less cash NCI. And you have meaningfully reduced your leverage profile. So I guess as you think about the capital deployment priorities, right. Do you think you’ll be in a position to increase that $250 million ASC target as it does from the divestiture settles down, or how would you frame that? Thanks. Saum Sutaria: Yes, no, listen, I think the – first of all, the capital allocation priorities in terms of the four categories that we’ve talked about, obviously USPI, again, I can’t emphasize enough, being importantly supportive of our acute care hospital portfolio to maintain them strong and very desirable assets by all stakeholders is really critical to our overall strategy. The deleveraging that we’ve talked about, and then obviously, the share buyback program that we have authorized, all remain absolutely important priorities to us as we look forward. Now, you point out really, it’s a really important point, which is a little bit of my commentary at the end of my prepared comments about we’re entering a new era for us, which is important for us to collectively think about. And if you think about on this call and what I’ve alluded to, it has raised the question about where are we thinking about leverage targets which we have not given specifically in the past, what are our capital deployment priorities going to look like and how will they be different? There are some people that would ask, and we certainly would consider, are there enhancements in our capital allocation, into our acute care portfolio, in our more high return markets that we still have with us that make sense. And then obviously, the USPI question of deploying additional capital into that segment, and I think we’ll have more to say about that as the year goes on, frankly. But those things are all on our mind. Look, specifically on USPI, we talk about historically $200 million to $250 million, now closer to $250 million in capital allocation every year. But the fact is, if you go back over the last five years and just look at what we’ve spent and average it out over those five years, it’s been quite a bit, quite a bit higher than $200 million to $250 million. We will continue to seek opportunities to add high quality ASCs to our platform, and obviously are comfortable going above the $200 million to $250 million if those opportunities exist. Jason Cassorla: Great. Thank you. Operator: Thank you. Our next question comes from the line of Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: Yes, hi. Thanks. I was hoping you could talk about your expectations for payer mix in 2024 and how that’s been factored into your guidance. It obviously looks like there’s significant growth coming on the exchanges, so I’m wondering if that’s something you’ve explicitly considered either from a volume growth perspective or inside of your payer mix guidance and kind of how you think about better payer mix could materialize in your guidance range? Thanks. Sun Park: Hey, Stephen. Good morning. It’s Sun. Thank you for the question. Yes, for 2024, first of all, in 2023, our payer mix remains quite strong, as we said previously, with managed care steady around 70%. And that’s what we’re sort of expecting in our 2024 guidance to stay pretty steady. Your question on the exchange volume, yes, we are tracking that as well, and could potentially be a tailwind or an opportunity in 2024, but we’re not assuming anything material from that in our 2024 guidance. Saum Sutaria: I mean, the other thing I would say in particular with the exchange growth is that I just would remind the group that we feel pretty good about how well we’re contracted in the exchange environment in the states that we operate in. Both applicable by the way to the acute care portfolio, of course, but also applicable to our USPI platform. So just as a note on that. Operator: Thank you. Our next question comes from the line of Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse: Hey, thank you. Good morning. I wanted to get your assessment just of the current ASC landscape in terms of competitive activity and new competition in states as well as on the funnel, just new procedure categories that are moving in, moving off the inpatient only list, and eventually out to ASCs. Just any perspectives on what you’re seeing in the market and sustainability of ASC over the medium term. And then just any comment on if there was a surgical day impact in the fourth quarter? Thank you. Saum Sutaria: Okay. I’ll leave the surgical day question till the end, because I honestly don’t know. Look, on your first set of questions, a few things. Okay. So, one is that we have been – obviously, we spend a lot of time talking about orthopedics, generally speaking, and obviously, the more traditional things like GI and ENT and things of that nature, ophthalmology. But the fact is, we have been focused on diversification of our platform for a long time. I mean, take as an example, shoulder surgeries. We have had for over a year now, an innovative program that has helped us grow and develop all the protocols for our ASCs, where we do orthopedics, to add shoulder surgery to that. Now, the numbers are not as big as hips and knees, for example, but we’re well prepared to do that. And part of our physician recruitment strategy has been to focus on physicians with shoulder – interest in shoulder surgeries in the ASC setting. Just as an example, I think you guys are well aware of our urology strategy, where we think there’s a very nice opportunity, especially with high quality groups, to move further into the ambulatory surgery setting. We had been growing and expanding some of our bariatrics capability there, which, again, in the ASC setting, has been reasonably stable despite the GLP hoopla over the last year. And so – and then obviously growing and expanding some of what one might consider vascular or cardiovascular. But in a measured way, as we look forward from that standpoint. So I feel pretty good about the fact that our business development and strategic teams are thinking steps ahead. From a clinical standpoint, what we want to do. The competitive landscape in the ASC segment is active and intense, and I think that will certainly continue. Look, we think we have a lot of advantages based upon our scale, our physician relationships, our ability to deliver synergies, and also just the consistent, demonstrated operating excellence over a long period of time. And now we add to that what we think is a best-in-class revenue cycle capability that we’ve built inside of USPI, separate from Conifer, inside of USPI, that is starting to do work even for non USPI centers, which is an exciting development. So we’re doing a lot to innovate in that business to continue to maintain our leadership position. So I feel very good about where we are competitively there. Sun Park: And Jamie, just on your final question. Yes, there was no impact from a surgical day basis on our growth in Q4. It was 3.9% overall case growth. Jamie Perse: Okay, great. Thank you. Operator: Thank you. And we have reached the end of the question-and-answer session, and this also concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Good afternoon. Welcome to Tenet Healthcare's Third Quarter 2023 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good afternoon everyone and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's third quarter 2023 results as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; Dan Cancelmi, Executive Vice President and Chief Financial Officer; and Sun Park, Executive Vice President. Our webcast this afternoon includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Saum Sutaria: Thank you, Will and good afternoon everyone. We continue to deliver strong results in 2023. In the third quarter, we generated net operating revenues of $5.1 billion and consolidated adjusted EBITDA of $854 million. This translates into an attractive, almost 17% margin. These results were driven by sustained volume growth and effective cost control across each of our businesses. USPI had another very strong quarter with $370 million of adjusted EBITDA, which represents 16% growth compared with third quarter 2022. Same-facility revenues grew 7.9% and adjusted EBITDA margins remained robust. USPI had attractive volume growth in high acuity service lines, including mid-teens growth in total joint replacements in the ASCs over third quarter 2022. We also delivered ongoing strength in GI, urology, and ENT procedures. We remain focused on attracting high-quality physicians who choose to practice in our low-cost, high patient satisfaction setting of care. This, coupled with tailwinds from increased patient demand for ambulatory surgery care will support continued organic growth. We also remain committed to scaling our portfolio. During the quarter, we added 6 new centers, the majority of which were focused on higher-acuity orthopedic services. These included centers in Nevada, Maryland, Texas, and Florida, all with leading regional musculoskeletal specialists. Our acquisition pipeline remains robust with attractive opportunities. We also have a healthy de novo development pipeline of more than 30 centers currently in the syndication stages all the way to being under construction. Notably, de novo centers have effective EBITDA multiples in the low single-digits, making them a very attractive use of capital that further advances the site of service value-based care, which USPI uniquely delivers. Turning to our Hospital segment, we generated $401 million of adjusted EBITDA in the third quarter 2023. Our patient acuity levels remained strong with revenue per adjusted admission up 3.2% over third quarter 2022. Additionally, on a non-COVID basis, same-store inpatient admissions increased 4.5%. Our hospitals continue to enhance access to higher-acuity services for the benefit of our patients. For example, our Arizona Heart Hospital was the first in Arizona to implant a new device to reduce stroke risk and our Palm Beach Gardens Medical Center expanded its robotic surgical capabilities. We will continue to increase patient access to cutting-edge specialty care across the communities we serve. Our third quarter results lend further credence to our hospital strategy of being focused on acuity rather than all things to all people. We continue to make significant progress improving nurse retention and accelerating hiring. This has resulted in a substantial reduction in contract labor usage to 3.1% of consolidated SW&B, which is the high end of pre-pandemic levels. Given our progress in hiring and retention, the reductions in contract labor did not come at the expense of further capacity reductions. We reached these levels in advance of our own projections through disciplined data-driven processes. We will balance the utilization of contract labor for nurses with our targeted strategies to increase capacity to support patient demand for high acuity services. In the fourth quarter, as demand rises, it is possible we will invest additional resources to ensure access, continuing to employ the same discipline we have used in contract labor utilization over the past two years. We continue to manage cost pressures from medical fees. Medical fees, while higher than last year, remained relatively flat from Q2 to Q3 2023. As I noted through the pandemic, we began a process of restructuring our staffing contracts market-by-market, which includes decisions on in-sourcing services where that is most beneficial. This has helped to mitigate the magnitude of expense increases in our business. Again, as patient demand rises into the winter, we anticipate some increases in costs from our current run rate to ensure access to our specialty services, but this will not change our longer term discipline nor our make versus buy strategy. Finally, I want to point out that over the last two years, we have successfully settled over 30 labor union contract negotiations. These require a delicate balance between understanding our employees' needs and our ability to have a cost structure to deliver affordable care for our patients. We will continue with our strategy to balance those two aspects. Before I turn my attention to Conifer, I'll make a few comments about our views on the GLP-1 receptor agonist potential impact on our business. These products are very early in their life cycle of impact. They have extraordinarily high costs, an expanding list of side effects, patient tolerance issues and concerns about lean muscle loss, which translates into an unknown long-term safety profile. We believe that this means adoption among populations which could benefit is still, and likely to be for some time, low. Additionally, these products require sustained consumption. The underlying conditions of diabetes or the related root causes of obesity are not cured. Given this, we see no reason to alter our current focus on taking care of patients with multiple chronic illnesses, and we see no reason to alter our capital plans in moving care into convenient ambulatory settings. The high acuity strategy in the hospitals is subject to less demand elasticity and the capital-efficient business model we've designed to take care of the most complex needs of patients will endure. The aging of the population, the growing burden of chronic illness, the population shifts into many of our markets, and the continued impacts of service and technology innovation that occur outside of the pharmaceutical sector provide a significant tailwind for the important role that hospitals and ASCs will continue to play. Turning to Conifer. Our Conifer business continues to deliver strong margins and provide high-quality services to its clients. This performance has been supported by ongoing automation and offshoring initiatives and third quarter EBITDA margins were over 26%. We recently renewed our long-standing relationship with one of our larger physician revenue cycle management clients and are slated for additional renewals by the end of the year. Before I turn the call over to Dan, I want to reiterate the strength of our portfolio of businesses and the ongoing performance they have produced. While we continue to navigate a challenging environment, our strategic focus on higher-acuity services, agile approach to managing operating expenses, and effective capacity management all play a pivotal role in delivering these durable results. As a result, we are again raising our full year 2023 adjusted EBITDA guidance to a range of $3.365 billion to $3.465 billion. We're still formulating plans for 2024 and we'll take the time to see what a fourth quarter looks like in the post-pandemic environment before getting specific about our guidance for next year. From a capital deployment perspective, our priorities are consistent; USPI expansion at very attractive post-synergy multiples and investments in the growth of our high acuity strategy in the acute care segment. Those two priorities help to reduce leverage through earnings growth and free cash flow generation. We maintain an opportunistic balance in this public market trading environment between our desire to pay down debt more directly and the very attractive valuation of our equity. I will remind you that we have all fixed rate debt and no maturities due until 2026, providing a great deal of predictability relative to other companies that may have a similar level of leverage. And with that, Dan will now provide a more detailed review of our financial results. Dan? Daniel Cancelmi: Thanks Saum and hello everyone. Our financial results in the third quarter were strong with USPI and our Hospital's adjusted EBITDA well above our expectations. In the quarter, we generated consolidated adjusted EBITDA of $854 million, above the high end of our third quarter guidance range. Our results were driven by strong same-store revenues and volumes, high patient acuity, and very effective cost control. Now, I'd like to highlight a few key items for each of our segments. Let's start with USPI, which delivered strong volume and earnings growth. In the third quarter, USPI produced a 7.9% increase in same-facility system-wide revenues compared to last year, with case volumes up 4.1% and net revenue per case up 3.7%. And USPI's adjusted EBITDA grew 16% compared to the third quarter of last year. Adjusted EBITDA minus NCI expense increased 12% and its EBITDA margin continues to be very strong at 39.3%. We are pleased with the continued strength of USPI's performance as we grow this business, both organically and inorganically in attractive markets across the country. Turning to our acute care hospital business. Same-hospital inpatient admissions increased 0.6% compared to the third quarter last year, while non-COVID admissions increased 4.5%. In fact, year-to-date, non-COVID admissions are up 7.6% over last year. Our labor management continues to be very effective, especially temporary contract nurse staffing costs. On a consolidated basis, contract labor costs were just 3.1% of SW&B in the quarter, a significant decline from 4.3% in the second quarter of this year and 7.4% in the third quarter of last year, a year-over-year decline of almost 60%. Our consolidated SW&B costs as a percent of revenue were just 45.2% in the quarter compared to 46.4% in the third quarter last year and 250 basis points lower than the 47.6% reported in Q3 2019 before the pandemic despite the significant inflationary pressures since then. Medical fees were flat sequentially compared to the second quarter of this year and were $34 million higher than the third quarter of 2022, consistent with our expectations. Overall, these costs are up 15% year-to-date. And finally, our case mix and revenue yield remain strong as we continue our strategic focus on investments in higher-acuity, higher margin service lines. I want to reiterate what we've communicated previously, our hospital strategy has focused on growing higher-acuity volumes, which is working, better margins, stronger ability to manage costs, and more capital-efficient to generate the earnings growth. Let's now turn to Conifer, which again delivered a solid quarter. Conifer produced third quarter adjusted EBITDA of $83 million and a strong margin of 26.3% and continued its strong revenue cycle performance for our hospitals and its other clients. Now, let's review our cash flows, balance sheet, and capital structure. At the end of the quarter, we had over $1 billion of cash on hand and no borrowings outstanding under our $1.5 billion line of credit facility. We generated $327 million of free cash flow in the third quarter and just over $1 billion year-to-date, bolstered by Conifer's strong cash collection performance. Our September 30th leverage ratio was 4.08 times EBITDA. As a reminder, all of our outstanding senior secured and unsecured notes have fixed interest rates and we have no significant debt maturities until 2026. We believe our strong free cash flow generation and capital deployment actions will continue to provide us financial flexibility to support our growth initiatives and further deleverage the balance sheet. Let me now turn to our increased outlook for this year. As Saum mentioned, we are raising our 2023 adjusted EBITDA outlook range by $30 million to $3.415 billion at the midpoint of our range, reflecting our continued strong performance. This $30 million increase includes a $10 million raise for USPI and a $20 million raise for our Hospitals. This is the third time we've raised our EBITDA guidance this year, which is now $155 million or 5% higher than our initial guidance we shared at the beginning of the year. Additionally, we now expect net operating revenues to be in the range of $20.3 billion to $20.5 billion, an increase of $100 million at the midpoint over previous expectations. Turning to our cash flows for 2023. We now expect free cash flow to be in the range of $1.125 billion to $1.350 billion. Now, I'd like to spend a minute discussing 2024. We are still conducting our 2024 business planning processes and evaluating key assumptions, and therefore, it is premature at this point for us to provide specifics on 2024 guidance. However, we do want to give you some context for our current thinking about next year. Our starting point assumes that we will continue to produce organic volume growth in our key service lines, increase patient acuity, benefit from better than historical contract negotiations, and effectively manage costs with a specific expectation for full year additional contract labor savings. And given the robust pipelines at USPI, we will have further contributions from M&A and de novo development center openings. These factors, in addition to an ongoing post-pandemic recovery for health care services provide tailwinds into next year. Our starting point also assumes some rather obvious points in this year's results, such as the absence of further grant income and cybersecurity proceeds. In addition, we anticipate completing our sale of the San Ramon Hospital, subject to regulatory approvals. The termination of COVID-related government funding programs as well as the new regulations related to workers' compensation and personal injury reimbursement in Florida, and health care wages in California represent around $100 million in headwinds in aggregate. However, thus far in our planning, we expect our earnings growth opportunities will more than offset these headwinds. I would reiterate Saum's point that the current environment for recovery in health care services is positive and we feel well-positioned to continue our success. We look forward to completing the planning and sharing guidance with you for 2024 in February on our earnings call. We are pleased with our strong performance so far this year and have confidence in our ability to deliver on our increased 2023 adjusted EBITDA guidance of $3.415 billion at the midpoint of the range. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Josh Raskin from Nephron Research. Your line is now live. Josh Raskin: Thanks. Good evening. Just a quick clarification, Dan. When you say earnings growth will more than make up those headwinds, are you just suggesting EBITDA will be up for 2024 and we can figure out magnitude in February? And then my real question just has to do with the ASC segment, specifically seeing same-store growth moderate a little bit, while pricing is picking up, some cases moderate a little bit, while pricing picks up. So, -- and same-store revenues are still at very high single-digit range each quarter. Is that simply just more complex cases to the outpatient setting? Is that the focus on higher-acuity specialties or some of the new centers you're opening more multi-specialty? Is there something else in there? And then it sounds like you expect that to persist into 2024. Is that the sort of run rate that you're seeing in sort of high single-digit same-store revenue growth? Is that a fair assumption for next year? Daniel Cancelmi: Hey Josh, it's Dan. I'll take the first part about 2024 and then Saum will address the USPI points. Yes, we are assuming EBITDA growth in 2024 compared to this year. Obviously, you just heard some of my remarks outlined some of the various positives as we think about next year, also taking into consideration some of the other items that will go the other way just because the reduction in government COVID funding. We're not anticipating any additional grant income next year or cyber income. We're obviously still pursuing cyber insurance proceeds. We feel we're certainly entitled to additional proceeds, but we're not -- at this point, we're not going to assume anything for the guidance next year. And as we talked about, in the past, there's some reimbursement headwinds in Florida and then as well as the new wage regulations in California. So, all those items -- all the headwinds, so to speak, are roughly $100 million in aggregate or in total. Saum Sutaria: Hey Josh, it's Saum. On the ASC growth, we're obviously quite pleased with continued growth rates well above our long-term projections for the business of 2% to 3% organic growth. And so while there may be moderation from the first part of the year to the third quarter, it's still incredibly robust growth, so I'm very pleased with that continuing strength. And obviously, we continue to build acuity into our ASCs and see that in the net revenue per case at the same time. So, we feel pretty good about what the business is achieving right now with so much momentum so far for the full year. And as you know, the Q4 ramp for USPI is real and it's something that we're really interested in seeing and we're well-prepared for as the first kind of post-pandemic Q4 to see how that goes. We haven't really formulated 2024 guidance on that so I'll defer the 2024 guidance question. Operator: Thank you. Next question is coming from Stephen Baxter from Wells Fargo. Your line is now live. Stephen Baxter: Yes hi. Thanks. Wanted to ask about the revised guidance and the implied fourth quarter in there. So, for the Hospital segment, it does look like your guidance EBITDA, that's a little bit lower sequentially at the midpoint, especially if we're going to adjust out the incremental insurance proceeds you had in the third quarter. Normally, we'd expect EBITDA to grow in the fourth quarter as volume picks up. We also understand that your guidance here is a bit better. And then I think you mentioned again like something kind of a wait-and-see approach around Q4 performance post-COVID. Just wanted to clarify, have you seen something different at this point in Q4? Just trying to understand whether that's more prudence or something you're actually seeing in the results today as we're most through October? Thanks. Saum Sutaria: Yes. Let me start and I'll pass to Dan. Just going in reverse order, we're not seeing anything different at this stage, although we are cognizant of the fact that there are lots of reports out there about COVID spreading and the penetration of the vaccine that is supposedly effective against this strain being at somewhere around 7%, I think, in the US population. So, this is a little bit of post-traumatic stress, right, in the sense that we've been through surprise COVID spikes before. We're hopeful that, that doesn't happen again. We're certainly not seeing evidence of it in our hospitals at this point in time. But I've said from the beginning of the year and even late last year that we're really looking forward to seeing and digging into a Q4 without COVID to understand how the business and the demand environment performs from that perspective. Daniel Cancelmi: Hey Stephen, it's Dan. In terms of the sequential walk from Q3 to Q4, so in -- obviously, looking at our USPI business, we are expecting sequential growth there consistent with what we have seen in the past. So, we're -- we've -- obviously, the performance has been strong this year, and everything we're seeing so far would suggest we'll see sequential growth in the USPI business. Listen, on the hospitals, there were some items there in the third quarter, whether it's grant income or cyber proceeds, we're assuming they won't be there in Q4. There will be some additional reimbursement reductions related to COVID funding, in particular, FMAP phasing down further. And then as Saum pointed out in his remarks, we're -- when we think about contract labor, maybe we might invest some more in the fourth quarter, if necessary, to meet the volume demand. And we also built into our assumptions of some additional medical fees in the fourth quarter. Operator: Thank you. Our next question is coming from Whit Mayo from Leerink Partners. Your line is now live. Whit Mayo: Yes, I was just curious on Slide 10 of the PowerPoint presentation. The 103 new service lines added year-to-date for USPI, just to confirm, does that include de novos from this year? And just any common themes around that? Just is this all joints? Any cardio? Just what are the service lines, maybe how that 103 number compares to the new services last year? Thanks. Saum Sutaria: Yes, hey Whit, this does not include de novos, service line additions or expansions of services in existing ambulatory surgery centers. And obviously, consistent with our priorities, what we're looking to do is add higher-acuity services, in many cases, orthopedics into existing centers that may be single specialty but have additional capacity, or if they're multi-specialty centers, that don't have orthopedics work going on in them, looking to add orthopedics in those settings. Operator: Thank you. Next question is coming from Justin Lake from Wolfe Research. Your line is now live. Justin Lake: Thanks. As far as my question, I just want to say I'm not sure if this is Dan's last earnings call, but if it is, it's been a pleasure to work with you and congrats on the retirement. My question is around the surgery center business. So, Saum, a couple of things. One, there's been some discussion out there that MedPAC is talking about volumes kind of moderating a bit September into October. Just curious if you're hearing that out there, seeing anything in your business that would imply a bit of a slowdown? And then can you flesh out a little bit. The last time we were together, the -- you did mention the excitement. It feels like there's been a pickup in the M&A pipeline, the de novo pipeline. Maybe give us a little bit of color in terms of how that's shaping up going into next year versus how it's looked the last two or three years? Thanks. Saum Sutaria: Yes. Hey thanks, Justin. I don't -- I haven't seen the MedPAC report and I'm not going to comment on October or early fourth quarter volumes other than to say, reiterate what I said before, which is this is shaping up to be a terrific year for volume growth at USPI. The M&A environment is consistently positive. We don't see that we're -- we don't see that there's higher multiples required as centers recover on their own that might have been up for sale over the last couple of years. We have a lot of opportunities in diligence from that perspective. And at the same time, given where interest rates are, we've actually gone through a process internally of raising our bar on the assessment process that we use, in particular, around the financial returns and the ability to drive the post-synergy multiples down to where we've said they would go. On the de novo opportunities, those have a lead time, obviously, once you start moving of around 18 months or more. But having this many in the pipeline is great because two things happen from that perspective. One is that you're usually building new higher-acuity orthopedics-focused centers in markets where physicians haven't really been in the ASC setting before so it's a net increase of activity. And two, by moving things into a lower-cost setting, it continues to enhance the value-based care proposition of USPI. And we're kind of focused on both of those. So, I feel pretty good about both areas at this point heading into 2024. Dan? Daniel Cancelmi: Hey Justin, it's Dan. This will be my last earnings call, but thanks for remembering that. I really appreciate that. It's been really an honor representing the company. And I just want to say thanks to all of the company's employees, the physicians, all the caregivers, and our volunteers at our hospitals and facilities. They really do amazing things every day. If you spend any time at the hospital, you see that very quickly. So, I just want to thank all of them. Operator: Thank you. Next question today is coming from Kevin Fischbeck from Bank of America. Your line is now live. Kevin Fischbeck: Great. Thanks. And I guess I'll add my thanks to Dan as well. But I guess as far as my question goes, when you were talking about the potential tailwinds into next year, one of the things you spiked out was the post-pandemic recovery from COVID, providing a good operating backdrop into next year. I guess where do you think we are today in that recovery? And I guess I'm interpreting that as a volume comment, but if there's something else you would also be specing out not quite back to normal on the cost side or whatever it is. Would love to kind of get a sense of where we are in that recovery in your view today? Saum Sutaria: It's both. I mean -- it's both. It's -- I mean, the volume recovery, especially in the acute care business and related services on an elective basis will continue to grow. And I think that part of this is, obviously, we had a lot of premature mortality from COVID way back in the beginning, 2020-ish, early 2020 to 2021 and I think as the population continues to age in, despite that premature mortality, we'll see a tailwind of demand. Now, look, the cost side, whether it be in labor, which is the most obvious or supply chain side still has room to go to normalize. I mean, our performance this year in the Hospital business has been a combination of volume in the high acuity area that we focused on, but also beating our expectations on how much expensive contract labor we would be able to reduce from the business. And as I said, in this quarter, it came without any cost to capacity because of our hiring efforts. But I still think there's room -- there's still room to move from a normalization standpoint over the next couple of years. And certainly, that's the basis of the comment for 2024. Operator: Thank you. Next question is coming from A.J. Rice from UBS. Your line is now live. A.J. Rice: Thanks. Hi everybody and best wishes, Dan, as well. Have been struggling a lot about managed care on the call. Where are you at with your contracting for 2024 and 2025? I know you've got a lot of national contracts. What kind of increases are you seeing? Are you still getting some incremental bump for the labor challenges that the industry has faced or is it starting to sort of normalize as you look out for the next year or two in rates, any thoughts there? Sun Park: Hey A.J., this is actually Sun Park speaking on. Thanks for your question. And as I've slowly gotten to learn the business here, obviously, managed care is a critical component. Dan mentioned it as part of the tailwind that we do expect to continue to see into 2024. And then as we've said historically, we do see commercial rate increases kind of mid-single-digits. And I think more recently, we are seeing some rates at or at the high range of that. And I think that reflects the current inflationary environment that we're all seeing. So, I think that's what we'll say. Thank you. Operator: Our next question today is coming from Jamie Perse from Goldman Sachs. Your line is now live. Jamie Perse: Hey, thank you. I'll add my congrats and thanks to Dan as well. My question is just on the labor environment. There were some headlines around some union contracts during the quarter. You mentioned it earlier. There's also the California minimum wage. Just wondering if you can give us an update on what you're seeing broadly with labor, if something structural has changed, if you're thinking about the next few years any different from rate of increase of labor? And then just if you can size anything on the California minimum wage in 2024 and then 2025 once that gets fully implemented? Thank you. Saum Sutaria: Yes, hey it's Saum. On the California minimum wage piece and the impacts of that that was covered in Dan's commentary around headwinds. We haven't called out what it is specifically. We may do that in the future, but it was kind of covered within that broad category of headwinds. In terms of ongoing contract negotiations, I'm not going to comment on those, but we're obviously aware of them and deeply engaged in them. And I wouldn't say the environment has changed tremendously. I did note, we've worked on and settled 30 labor union contract negotiations relatively peacefully over the last couple of years, and we continue to work in good faith on all the contract negotiations we have. Obviously, there are things that complicate that environment in the middle of the wage bill in California being passed. But that's just something that we're going to work on with our employees and the union and we'll move past that at some point. Operator: Thank you. Next question is coming from Calvin Sternick from JPMorgan. Your line is now live. Calvin Sternick: Is there any way to quantify how much capacity you've added so far this year? What the impact on volumes has been? And then going to next year when you talk about organic growth, how should we think about order of magnitude from further capacity expansions? And then any color on which markets or service lines are the biggest growth opportunities there? And when we think about California minimum wage, I mean, I think that should be manageable for you guys, but just wondering if that impacts how you think about the capacity expansions in those buckets? Thanks. Saum Sutaria: Well, so there's a few different things to unpack in your question, but let me start with probably the most salient point around how we think about the hospital capacity. We're very cognizant of the service lines that we have prioritized market-by-market and maintain access for those service lines. And we have, even through this strategy of reducing our exposure or access, in some cases, in markets because of the contract labor expense. So, through this year, I would say that we have maintained capacity or added a little bit back, but it has not been a significant change in our strategy this year with respect to managing contract labor. And by the way, the consequence of that is the contract labor reductions have been steady and progressive and now the basis of them has changed from reducing capacity to succeeding in hiring and retention. So, that's -- and at the beginning of the year, I think we said the basis of the labor environment in 2023 must change, in our view, towards hiring and retention away from capacity reduction. So, we feel pretty good about having achieved that and selectively, as I noted, adding certain service lines. That's why I try to highlight them in every quarterly update at three or four of our hospitals, service lines that we're adding, where we're adding that capacity and putting that investment to work in things that we believe we'll want to do. I don't know if -- I think the question was largely focused on the hospitals, but at USPI, we don't have as much of an impact of contract labor impacting our capacity. And so we have continued to expand access in centers across the country as the demand has risen. And the nice thing is that in a robust demand year, we've proven the ability to staff, staff it appropriately and maintain our margins with the growth that we have been able to deliver this year without creating a bunch of extraordinary expense in contract labor. So, for USPI, I see the environment differently and we feel like this won't be as significant an issue going into 2024. Operator: Thank you. Next question is coming from Pito Chickering from Deutsche Bank. Your line is now live. Pito Chickering: Hey good afternoon. And again, adding the thanks to Dan. It's a pleasure working with you for like all these years. On 2024 commentary, a quick clarification and a question. For clarification, if you take the midpoint of the guidance of $3.415 billion and pull out $10 million for Ramon and $14 million grant income and $34 million in cyber security, is $3.357 billion the right launchpad for 2024? And then the question is on the $100 million of headwinds you talked about, contract labor year-to-date is about $300 million. So, if I add another $100 million in the fourth quarter, it's about $400 million of contract labor in 2023. The reduction in the last two quarters there have been about 28% or so. So, while you aren't guiding for 2024, could we think about contract labor settings -- contract labor savings offsetting those $100 million of headwinds you identified? Daniel Cancelmi: Hey Pito, it's Dan. I'm not going to get into specifics in terms of the guidance for next year and what the launching point is, but we wanted to give you some high-level overview of those numbers. And again, roughly $100 million for the government funding type of reductions and the wage matter as well. And then grant income, you obviously see the grant income on a year-to-date basis of about $14 million and the cyber income year-to-date is about $34 million. And in terms of Q3 to Q4, as we mentioned a few minutes ago, when we think about the sequential walk from Q3 to Q4 for the hospitals as we talked about. We'll probably see some additional medical fees sequentially. And we're being cautious and when we think about contract labor in the fourth quarter and whether we need to potentially invest more to meet volume demands. Operator: Thank you. Next question is coming from John Ransom from Raymond James. Your line is now live. John Ransom: Hey, good afternoon. On the hot topic in your sector but not for you, professional fees, could you just, in plain and simple English, tell us what professional fee expense looks like for calendar 2023 in your guidance versus calendar 2022? Daniel Cancelmi: Hey John, it's Dan. In terms of our medical fee costs so far this year, they're up around 15% compared to last year. And that's generally -- that's in line with what our expectations were this year. And basically, as we said a couple of times, we do anticipate some additional costs sequentially in Q4. John Ransom: Dan, is that the same number kind of two or three quarters up 15% or are you expecting it to be higher in the fourth quarter so making it higher for the year? Daniel Cancelmi: It would be -- we wouldn't anticipate going up from 15% in Q3 -- or sorry, Q4. Operator: Thank you. Next question is coming from Ben Hendrix from RBC Capital Markets. Your line is now live. Ben Hendrix: Thank you very much. And apologies if I missed this earlier, but I was wondering if you could provide some commentary on growth, specifically within some of the USPI specialties, musculoskeletal, and hips and knees, in particular, how that grew? And then all of the other specialties, I know you've made some investments in urology recently, just how those -- if those areas are growing in line with your expectations? Thanks. Saum Sutaria: Yes, hips and knees grew in the mid-teens over prior year year-over-year and our collaboration and work with United Urology Group is growing faster than our expectations in terms of when the deal was done. And we continue to have attractive recovery in other areas like GI and ENT. So the growth is broad-based but the fastest growth is coming in joint surgeries. Operator: Thank you. Next question is coming from Jason Cassorla from Citigroup. Your line is now live. Jason Cassorla: Great. Thanks. I just wanted to ask about the updated USPI guidance. Just curious on the margins. You have the ranges out there, but the midpoint would suggest slightly lower margins versus where you previously were, stronger revenue than EBITDA dollars. I guess can you give us an idea on how you're seeing margin progression from the newer de novos and M&A you've done over the past 12 months, maybe against the margin headwinds but bigger gross profit dollars that come with higher-acuity cases as you focus growth there? Just any help there would be great. Would appreciate it. Saum Sutaria: Well, yes, let me make a couple of comments just contextually. I mean, one is we work to maintain our USPI margins based upon longer term business decisions we make around service lines that we choose to be in, what we think the mix will be with the physicians that we work with, et cetera. But make no mistake about it, there are many things that we could do to grow the business within that range that may move the margins up or sometimes down a bit, but they're still highly accretive to the business, given the types of post-synergy multiples that we deliver. So, I just want to provide that backdrop because we focus on a range that we want to be in for the ROIs that we want to have. Now, specifically to your question around service lines, remember, the government mix in different service lines can be different. And obviously, the government mix will have a lower margin. That doesn't necessarily mean that avoiding the service lines that have a little bit more government mix, like for example, joint replacements or other orthopedic-type procedures is the right answer because they add net revenue intensity. But when those service lines scale up to their full potential, they meet USPI's margins, right? So, when you're scaling up a new service line and you're running at subscale in 60, 70 centers as you introduce ortho into those centers, of course, the margins will be lower until you get them up to scale. And you're finally correct to point out that as we increase the number of de novos, obviously, those are operating expenses that are, in our environment, not contributing to the revenue and margin profile of existing centers. And as we've moved from having a handful three or four de novos to 30, we are obviously cognizant of the fact that we need to overcome those operating expenses to maintain the margins that we've outlined in our range. And the good news is we're doing that. We don't talk about it much because it has not been an issue. Daniel Cancelmi: Yes, Jason, the USPI's full year margin for this year is roughly 40%, 39.8%. That's where we're guiding to. In the fourth quarter, we're assuming the margin is close to 43%, 42.8%. So, the margins are incredibly strong at USPI and the business is performing well. Operator: Thank you. Next question is coming from Brian Tanquilut from Jefferies. Your line is now live. Brian Tanquilut: Hey, good afternoon. Dan, thanks again for all the help over the years. I guess my question, as I think about your comment about medical fees being up sequentially, is that just conservatism or expectations for higher volume? And then maybe for Saum, maybe take a step back, how do you think or judge to make that decision to in-source certain physician groups versus keeping them third-party? Thanks. Saum Sutaria: Hey just on the first point, I'm not sure I would characterize -- look, the way I would characterize it is what I've said all along this year, which is we are interested in seeing what a fourth quarter looks like post-pandemic for the first time in many years. You can interpret that as how you want to from your question around conservatism or whatnot. We're being thoughtful in our view about the services that we want to offer and maintain access to as we move into the fourth quarter, and we're doing it in a way in which we would like to maintain strong margins. Now, I'll point out again, I did it in the very first couple of lines of my statement at the beginning of the earnings call. It's notable that we are reaching the point where we're almost at a 17% EBITDA margin company-wide. We believe in the strategy we're pursuing around acuity, capital efficiency, thoughtful management of our capacity for the services we offer, and obviously, the expansion and growth of USPI. And that margin is notable for Tenet as an entity, which I don't think we've seen for a very long time, if ever. So, that's really the pathway we're down. There was a second part of your question which I didn't take down. Daniel Cancelmi: It was in terms of the sequential increase that we're assuming from three to four in medical fees. I mean, some of it also relates to, it can be a combination of volume. It can be a combination of contracts we've entered into that we know how the pricing lies out. Saum Sutaria: Yes. And to your question about in-source/out-source, I mean, our managed care contracting platform is pretty thorough. I mean, we talk about what we do with respect to hospitals and ambulatory surgery centers and other things. But we do maintain active physician service contracts for hospital-based specialties. And we do have markets in which we have, over the last couple of years, in-sourced, out-sourced -- previously out-sourced work. Again, I would refer you to even back during the pandemic, I made some comments about the fact that we undertook a comprehensive review of every physician service contract in the company to restructure, consolidate, scale services, and work with some of our better partners. And when those weren't available either due to market penetration issues or competitive issues they may have had, we looked at opportunities to in-source. So, we understand that these fees are going up. But all year long and going into next year, we're planning them in the way we issue guidance. Operator: Thank you. Our final question today is coming from Sarah James from Cantor Fitzgerald. Your line is now live. Sarah James: Thank you and I want to echo my well wishes to Dan. I appreciate the comment that you just made about the service contract review, but I think also during the pandemic, Tenet stood out in making investments in technology for efficiency and scheduling. So, I'm wondering, has that had any impact on your mix of contracted physician labor? And then also, are you seeing any of the incremental pushback on in-patient versus monitoring clarification that some of your peers are in acute? Saum Sutaria: Yes. So, on the technology front, I appreciate you remembering that. I mean, we deployed technologies that assist with scheduling in most of our high acuity like surgical, cath lab, their procedure areas, along with some interesting things that we did even in emergency room access for lower acuity scheduled, but truly emergent care and those have been paying off well. We've also continued to utilize scheduling technologies in our out-patient specialty practices. And one of the reasons we do that is it gives us the ability in a data-driven way to track week-to-week volume demand movements in our specialty practices, which we roll up countrywide to understand what's going on in the different specialties because the technology provides an automated source of having that data. So, yes, I mean, we feel good about those investments. They were not large investments. They're simple, usable technologies that are physician-friendly and we feel pretty good about those. In terms of in-patient/out-patient pressure, I would reframe that into we are concerned with the degree of denial activity that we see from some of the health plans. We think it's excessive and inappropriate. And we continue to work on our appropriate documentation, both for us and obviously with Conifer for all of our clients in order to push back on the volume of clinical denials on the basis of having excellent documentation and we think that's the right path out of that. Operator: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Saum for any further or closing comments. Saum Sutaria: Yes. So, Justin stole my thunder, but I kept this until the end because I was worried Dan might walk out if we thank him too early from this phone call. But I want to thank Dan as well not only for being an outstanding CFO, an exceptional colleague. But I would tell you, he is the picture of integrity and honesty that's a role model for every CFO that exists in this country. So, thank you, Dan. Daniel Cancelmi: Appreciate the kind remarks, Saum. Saum Sutaria: All right. With that, we'll wrap up. Thank you, everybody. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Operator: Greetings and welcome to the Tenet Healthcare Second Quarter 2023 Earnings Conference Call and Webcast. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good afternoon, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's second quarter 2023 results, as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chief Executive Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this afternoon includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information, actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that I'll turn the call over to Saum. Saum Sutaria: Thank you, Will, and good afternoon, everyone. Before we get into this quarter's results, I'd like to start by extending a warm welcome to Sun Park, who has joined us for this phone call. Sun will become our Chief Financial Officer, following Dan's retirement. He has more than 25 years of finance experience and an impressive track record of delivering positive results in the healthcare industry. Most recently, he was responsible for the commercial and operational finance for all of AmerisourceBergen's business units. The CFO transition at Tenet is actively underway, supported by our broader leadership team. I look forward to the impact of Sun's leadership as we continue to execute on our strategic priorities. Now let's turn our attention to the results that I'm pleased to present for the second quarter. In the second quarter, we reported net operating revenues of $5.1 billion and consolidated adjusted EBITDA of $843 million, which translates into an attractive 16.6% margin. Robust volumes and effective cost control drove attractive results and strong free cash flows and our adjusted EBITDA is about $53 million or 6.7% better than the midpoint of our guidance range. We produced another very strong quarter in USPI with $370 million of adjusted EBITDA, which represents 16% growth over second quarter 2022. Same-facility cases grew 6.6% and adjusted EBITDA margins remained robust. Orthopedics volumes were strong with total joint replacements in the ASCs up over 12% over second quarter 2022, coupled with ongoing strength in GI, Urology and ENT. Net revenue per case improved nearly 3%. Looking ahead, the tailwinds that support ambulatory surgery demand recovery and growth are evident in the current environment. These tailwinds include an active but aging population. Patients proactively seeking more convenient access to procedural care. A recovering healthcare ecosystem looking for lower sites of care and ongoing innovation in ambulatory surgery care delivery. These factors collectively create a strong foundation for continued growth. As the leader in this space, USPI is well-positioned to capitalize on these opportunities. We continue to attract and retain high quality physicians, which has translated into growth and overall physicians performing procedural care in a USPI facility. We continue to expand high acuity service lines, while delivering high patient and physician satisfaction through operational excellence. This has enabled strong volume growth from servicing new physicians, as well as deferred demand. It is worth noting, the GI case growth has been particularly strong so far this year. We see evidence of both deferred care and also expansion of care for the under 50 year old patient population from recent guideline changes, which we believe should be a source of ongoing and expanding demand over time. During the quarter, we successfully expanded our reach by adding 12 new centers. Among this impressive new portfolio our three single specialty GI centers in Ohio, bringing our total to 12 in the state. Additionally, two of our new facility openings were focused on orthopedics and de novos in Michigan and Florida. We are also encouraged by the high level of de novo activity in our pipeline. With more than 30 centers currently in syndication stages or under construction. This demonstrates momentum in our expansion efforts and further strengthens our growth prospects. USPI's future is bright and our capital deployment into this business will continue to grow and develop this portfolio. Turning to our Hospital segment. We generated $388 million of adjusted EBITDA in second quarter 2023. Acuity remained strong with revenue per adjusted admission up 4% over second quarter 2022. On a non-COVID basis, same-store admissions were up 5%. Our workforce continues to grow and stabilize. We've successfully reduced turnover and nurse hiring has accelerated and shown improvement. As a result, we reduced contract labor cost during the second quarter of 2023 to about 4.3% of SW&B. With the improving labor environment, we find ourselves in a favorable position to capitalize on our strategic approach to prioritize high acuity specialty services. We feel comfortable with this level of contract labor and we'll look to prioritize placement of new hires for targeted capacity expansion, aligned with our strategy. It is important to note that our SW&B as a percent of net revenue was 47.3% for the first half of 2019 and is now running 45% year-to-date in 2023. We see this as a validation of our analytics driven labor management capabilities, continued portfolio transformation, and the higher acuity topline strategy, as we recover from the pandemic. It gives us more room to invest and at the right time market-by-market, add capacity as we feel comfortable bringing it online. Our business processes utilized real-time analytics to equip staff, managers, and senior leadership to make data driven decisions to optimize their areas. This includes workforce productivity, contract labor utilization, inpatient throughput, procedural room utilization, transfer acceptance, and more. The analytics are easily digestible and highly accessible with dashboards and insights integrated into key workflows and care team huddles. We believe that this data driven operating discipline coupled with our focus on high acuity service line development will enable our hospital segment to continue to deliver strong results. Conifer continues to perform well for its clients and also delivered strong margins. Ongoing technology automation and offshoring initiatives support that performance. Second quarter EBITDA margins were 26.3%. Conifer continues to focus on commercial activities, especially in patient eligibility services, given the need from the Medicaid redeterminations. Stepping back, I indicated last quarter that our confidence and the ability to turn the various styles on the business and generate predictable results is growing. I like the operating environment right now, because it is evolving such that higher acuity focus, effective, capacity management, and nimble cost control, all strengths of ours support improving results in our business. As a result, we are again raising our full year 2023 adjusted EBITDA guidance by $75 million at the midpoint to a range of $3.31 billion to $3.46 billion. This range represents a $125 million increase over our initial full year guide. In short, we are optimistic about our ability to continue to differentiate our unique business mix and deleverage through strong earnings growth. Free cash flow continues to improve, which provides us flexibility to make necessary investments to enhance our future growth prospects and improve our capital structure. And with that, Dan will now provide a more detailed review of our financial results. Dan? Daniel Cancelmi: Thanks, Saum, and hello, everyone. Our financial results in the second quarter were strong with USPI and the hospitals adjusted EBITDA, same-store volumes, and revenues above our expectations. In the quarter, we generated consolidated adjusted EBITDA of $843 million above the high end of our second quarter guidance range. Our results were driven by strong same store revenues and volumes, high patient acuity, and effective cost control. Now I'd like to highlight a few key items for each of our segments. Let's start with USPI, which delivered strong growth and continues to provide high-quality care to our patients. In the quarter, USPI produced a 9.8% increase in same facility net operating revenues compared to last year, with case volumes up 6.6% and net revenue per case up 2.9%. We saw strong growth in GI, urology, ENT, and orthopedic cases. USPI's adjusted EBITDA excluding grant income grew 16.4% compared to the second quarter of last year and it's margin continues to be very strong at 39.2%. We're pleased with continued strength of USPI's performance, which is a testament to the attractiveness of the portfolio and the value we provide to our stakeholders. Turning to our acute care hospital business. Second quarter same hospital adjusted admissions increased 3.2% compared to the second quarter last year and total same hospital inpatient admissions increased 3%. While non-COVID admissions increased 5%. In fact, year-to-date, non-COVID admissions are up 9.2% over last year. Our labor management continues to be very effective despite the cost pressures, especially contract nurse staffing costs. On a consolidated basis, contract labor costs were 4.3% of SW&B in the second quarter, a significant decline from 6% in the first quarter this year, 7.3% in the fourth quarter of last year, and 6.2% in the second quarter last year. Our consolidated SW&B costs as a percent of revenue were 45% in the quarter compared to 45.8% in the second quarter last year. And our case-mix and revenue yield remained strong, as we continue our strategic focus on investments in higher acuity, higher margin service lines. And our case mix index in the quarter has grown at a 3% CAGR, since 2019 before the pandemic. Let's now turn to Conifer, which again delivered a solid quarter. Conifer produced second quarter adjusted EBITDA of $85 million and a strong margin of approximately 26%. Overall, we were very pleased with our performance in the second quarter. Let's now review our cash flows, balance sheet, and capital structure. At the end of the quarter, we had $934 million of cash on hand and no borrowings outstanding under our line of credit. We generated $466 million of free cash flow in the quarter and $680 million so far this year, bolstered by Conifer's strong cash collection performance. As previously announced, in the second quarter, we issued $1.35 billion of secured notes that mature in 2031. We used the proceeds from the notes to early retire $1.345 billion of our then outstanding secured notes that were due next year. We now have no significant debt maturities until 2026. And we have approximately $1.6 billion of secured debt borrowing capacity available if needed. Our June 30th, leverage ratio was 4.14 times EBITDA compared to 4.1 times at year end 2022. Also during the quarter, we repurchased approximately 580,000 shares of our stock for 40 million as part of our $1 billion share repurchase program. Since the inception of the program last year, we have repurchased approximately 7.4 million shares or about 7% of our then-outstanding shares for $340 million at an average price of about $46 per share. We believe our strong free cash flow generation and capital deployment actions will continue to provide us ample financial flexibility to support our growth initiatives. Let me now turn to our outlook for this year. As Saum mentioned, we are raising our 2023 adjusted EBITDA outlook by $75 million to $3, 385 million at the midpoint of our range, reflecting our continued strong performance. This $75 million increase includes a $45 million raise for USPI and a 30 million raise for our hospitals. Additionally, we now expect net operating revenues be in a range of $20.1 billion to $20.5 billion, an increase of $300 million. We've increased our assumptions for growth in hospital inpatient admissions and adjusted admissions. Additionally, in the USPI, we've increased our assumptions for same facility surgical case growth to 5% to 6% for 2023, a 200 basis point increase over our prior expectations. Our increased full-year EBITDA guidance absorbed an approximately $15 million headwind from recently passed legislation in Florida, which among other things reduced worker's compensation and personal injury reimbursements. Regarding our third quarter outlook, we expect consolidated adjusted EBITDA to be in the range of $775 million to $825 million or $800 million at the midpoint. And we anticipate the USPI's EBITDA in the third quarter at the midpoint will be approximately 23% to 24% of our full year 2023 USPI EBITDA guidance of $1,510 million at the midpoint of our range. Turning to our cash flows for 2023. From a cash flow perspective, we expect net cash from operating activities to increase $50 million over our prior expectations and are reinvesting this amount back into our business in the form of higher capital expenditures to fuel future growth. As a result, we continue to expect free cash flow to be in the range of $1.1 billion to $1.35 billion for this year. Our free cash flow generation has improved substantially over the past several years and we expect our business to continue to drive strong cash flows, while executing on our growth plans. Our improved cash flow provide us with significant financial flexibility to effectively deploy capital for the benefit of shareholders. As a reminder, our capital deployment priorities have not changed. First, we plan to continue allocating approximately $250 million of capital annually to grow our USPI surgery center business. Second, enhancing our hospital growth opportunities, including the continued focus on higher acuity service offerings. Third, evaluating further opportunities to retire and/or refinance debt and share repurchases depending on market conditions and other investment opportunities. And with that, we're ready to begin the Q&A. Operator? Operator: [Operator Instructions] Our first question today is coming from Steve Valiquette from Barclays. Your line is now live. Will McMahon: Hi guys. Will McMahon on for Steve. Congrats on the roughly 7% in the USPI. Just kind of a quick question on the $45 million full year guidance raise there. In the past, you've kind of told us what portion you expect. So what do you think it for that for 3Q and then kind of on the back of it pretty sizable increase for the full year against the normalized growth rate for EBITDA? Can you just give us a little more color on what's driving the outlook and maybe anything on payer mix specifically in the outpatient setting to call out? Thanks. Daniel Cancelmi: Yes, this is Dan. In terms of USPI's guidance for the rest of the year, as I mentioned in my remarks, you may not have heard them. We're anticipating that USPI's Q3 EBITDA would be roughly 23% to 24% of the full year EBITDA guide of $1.510 billion. So that's how we're looking at Q3. And obviously, looking on pushes into Q4. Q4 is typically, seasonally stronger and we are still anticipating that business has performed incredibly well so far this year with very strong volume growth, the expense management has also been very tight combating, a lot of inflationary pressures that are out there. And so we're pleased with the results so far and that's resulted in us increasing their guidance by $45 million. Will McDowell: Thank you. Saum Sutaria: The only other thing I would add to that, because you specifically asked about the mix. We feel very good about both the case-mix and the payer mix in the recovery and growth this year. Operator: Your next question is coming from Jamie Perse from Goldman Sachs. Your line is now live. Jamie Perse: Thank you. Good afternoon. I was hoping we could spend a few minutes on just the surgical volumes in the quarter for the hospital segment. There are obviously very strong for USPI, but I got a little bit surprised with the trends in the hospital segment. I think you guys were down about 10 basis points and outpatient actually looked a little bit weaker than inpatient there. So can you just maybe give us a little bit of color on what you're seeing there, and more importantly, how we should think about the outlook for surgical growth, just given some of the comments you made around backlog recovery. I know those were probably a little more tied to USPI, but still I would think there'd be some tailwinds there. So any color on that topic would be really helpful. Thank you. Daniel Cancelmi: Yes, my comments on the backlog and recovery we're really meant to address a more fundamental examination we did at the GI service line recovery and growth at USPI and we're actually happy to be able to report that while some of it appears to be deferred care, a substantial amount of it appears to be new demand stimulation that we're seeing both in terms of physicians that are ramping up and the ability to expand the service line into the new population supported by the guidelines. That's younger and obviously with most of them, if not all of them being commercially insured. So I think that's a positive tailwind there. Look, on the hospital side, I think you guys are aware that we have taken an approach where we've been very thoughtful about our capacity. I think that this is nothing more than a little bit of a mix towards medical versus surgical admissions, given the capacity we were willing to open. Obviously, we're still very focused, as you can tell from our results on the labor side. We were still very focused on bringing down our utilization of expensive contract labor at this point, even with rates moderating still expensive, and getting that into a target range that we feel comfortable with on an ongoing basis before we began any type of capacity expansion. So, we do face some trade off sometimes, between what we see coming in medically especially through the emergency department, and a bit of capacity from a surgical standpoint in the acute care hospitals. Again, we're still managing to a capacity constrained environment. And that's probably a little bit of what you saw. Look, we feel pretty good about our surgical and our procedural mix investments in the acute care hospitals. There'll be some ups and downs as the quarters go from a recovery standpoint, but if you really follow us and you follow our acuity and net revenue intensity, that's really what we're focused on, because we think that's going to help generate the best margins over time. Saum Sutaria: And Jamie, when you look at overall our inpatient revenues on the hospital side - the same hospital basis, they were up roughly 8%, outpatient revenues were up year-over-year about 6%. Like there was ahead of our expectations, so we are very pleased with how they - hospitals performed overall during the quarter. Operator: Thank you. Next question is coming from Pito Chickering from Deutsche Bank. Your line is now live. Pito Chickering: Yes, good morning or good afternoon, guys. Thanks for taking my questions. For guidance looking about the hospitals in the USPI, it looks like that the modeling case growth and just admissions to normalize in back half of the year. I just guess the math here, profitable - you did about a 5% same-store designation in the first half of the year, this implies a 2% for the back half. And for USPI, you did about 7.2% case growth, implies about - is under 4% of the back half of the year. Are you seeing anything to be conservative about the normalized case growth or is it simply conservatism, and if - this current volumes remain, would there be upside to your guidance and any color on July? Daniel Cancelmi: Well, no color on July. But the - I mean, I think you've hit on some important points. I mean, first of all, even as you described normalize, I mean, the full year guidance on USPI volumes is still ahead now of what we think. The long-term trends would look like and obviously, if the volumes are stronger, the chassis has proven. Just like in this quarter and the first quarter, it can certainly outperform expectations from an earnings standpoint. And look I think the biggest thing to think about here is Q4 seasonality tends to be pretty robust at USPI and we see no reason to believe that that's going to be any different this year. But 6%, 7%, 7.2% as you point out, you mean, that's pretty significant growth and I think it's prudent to look ahead in a much better than normal year. But also ensure that we're thoughtful about what we're seeing from a volume perspective that we can really truly predict looking-forward. The same thing on the hospital side, Q4 tends to be stronger there is not as seasonal in its variation as USPIs, but it is somewhat seasonal somewhat driven by different things including respiratory illness and other things and I think again - I think the guidance reflects their above. Our optimism about the business and also some planning around adding capacity back-in if we can maintain the contract labor environment and labor cost environment the way that we finally got it to where we're comfortable. Saum Sutaria: Yes, the only other thing I'd add Pito is, I was - in the back half of the year, we're assuming at the midpoint admissions grow about 2.4% roughly. And you know, in the third quarter last year, COVID admissions were roughly 6% of cases and roughly 4% in the fourth quarter. We're not expecting the same level of COVID volumes, obviously, in the back half of this year at this point. But again, the volumes performance has been very good on the hospital side and overall the hospitals have outperformed our expectations. Operator: Thank you. Next question is coming from Justin Lake from Wolfe Research. Your line is now live. Justin Lake: Thanks. Appreciate it. Just a couple of numbers questions. First, physician outsourcing has been a hot topic. And certainly, it looks like your other operating costs were up a bit. Just curious, what's going on there. Maybe you can give us a ballpark estimate of what that physician outsourcing costs or physician costs are within that other operating as a percentage? And then just lastly on your payer mix on the hospital side. Given you include managed Medicaid and Medicare and there, love to hear just a pure commercial number and how that look year-over-year? Thanks. Saum Sutaria: I'll take the first one. Dan, you want to take the second one. So just a few thoughts on the physician outsourcing and hospital based physician staffing costs have been an area of focus for us. We've talked about them since the pandemic began and have been a focus for us over that period of time. Not surprisingly, there's pressure in the industry based upon some of the reimbursement and market discontinuities that those entities have faced. But this isn't something new, right. So our - I mean, if you look forward our guidance, in both of our care delivery segments, takes into account and our robust increase in guidance takes into account, what we think will happen with respect to costs in that line item. So yes, there is cost pressure there, we also work on mitigating that by improving utilization of the physician resources that we have by consolidating and combining service lines where possible. And certainly, with our work with some of our preferred partners in that area, they're growing their market share with us, because they provide better opportunities for us to partner. And selectively, because of our contracting strategies, including outpatient, we're selectively able to insource where needed seamlessly in order to manage our expense base there. So I do think this is an important area, but it's not - at least my recollection is it's not new and we've been managing it for some time. Daniel Cancelmi: And Justin on - from a payer mix perspective, the payer mix in the quarter really consistent with this - the first quarter, continues to remain attractive from a commercial perspective with in-and-outpatient volumes tracking, stronger than the aggregates inpatient, outpatient volumes and the revenue yield has been very good as well, so we're satisfied with the payer mix trends. Operator: Thank you. Next question today is coming from Kevin Fischbeck from Bank of America. Your line is now live. Kevin Fischbeck: Great, thanks. I wanted to go into your point about temp labor now being at a point where you can kind of invest in growth. Is there some way to quantify kind of where admissions or volumes might be, if you had forced - I've just kind of frame, how much volume is deferred volume and then when we think about - it sounds like there's a staffing aspect to it, which might be shorter term and there is a CapEx aspect to it, maybe longer-term. So let's just kind of think about - how to think about that volume recovery and whether it's right to think that volumes could be above average, if you're able to staff and grow the CapEx you're talking about. Thanks. Saum Sutaria: Yes, Kevin. I think it's been a couple of thoughts. I mean, I think the CapEx and infrastructure constraints are really minimal. There may be certain service lines, where our current physician capacity or particular areas of the hospital in services we've invested in are bit full. But in general, I would not say that we have physical capacity constraints to be able to grow. It's more about the service lines that we want to be in. From a labor standpoint, I mean 4.3%, the blended number across our portfolio, obviously, and it's a little bit different market-to-market in terms of what we're doing. What we really and therefore the ability to take market share, if that's where the growth is - is really something we're selective about based upon both the service lines and the payer mix that we service in those markets. So in some of our markets, we're already investing and adding capacity and feel pretty good about the results. In other markets, we're a bit more cautious based upon the underlying mix or case mix that we tend to see in that area. But in all cases, as time goes on, if contract labor costs and premium labor costs continue on the path of normalizing, we think, we'll have additional room for volume growth as we look forward. Finally, you asked the question about how much is really deferred. My general view has been on the acute-care side, not much of it is really deferred care. I mean, it's different than maybe what others are seeing, I'm not really sure. But at least for us, I have not really seen or viewed patterns that suggest to me a large fraction of what we're seeing right now and the acute care side is deferred and somehow going to be one-and-done. Operator: Thank you. Our next question is coming from Calvin Sternick from JPMorgan. Your line is now live. Calvin Sternick: Yes, thanks for the question. I had a question on the geographic mix. Were there any that stood out as sort of particularly strong in the quarter and you're seeing a rebound in maybe some of the markets that were slower to recover initially? And then just on USPI, can you give an update on the M&A pipeline and some of the physician buy-ups from SCD too. Just wondering if any - if there's any sort of impact on how physicians are thinking about potential buyouts just given the strong volume environment. Saumya Sutaria: Yes. Just taking them in reverse, I'll take the first one, the first - the second one if you want to take the first one. Look, nothing to report out of the ordinary on the SCD buy-ups like we mentioned last time, those are on track with our expectations this year. And while we're at it, just the de novos that we're going to open that were delayed are all on track this year as well. And obviously, that's been a contributor to an overall very, very strong first half of the year for USPI. Daniel Cancelmi: Yes. Calvin, in terms of the geographic markets or areas from a hospital perspective. What I would say -- I'm not going to get into like specifics about each geography but what I would say is the volume growth that we're reporting is not primarily due to certain geographies that have reopened at a slower pace than others. So it's not like the Florida and Texas markets are not big contributors to this performance. And it's being driven by some of the other markets, whether California or Michigan. The markets are performing well, and these volume trends are not because there's one or two markets that just reopened slower and that's what's driving all this growth. That is not the case. Operator: Thank you. Your next question is coming from Whit Mayo from Leerink Partners. Your line is now live. Whit Mayo: Hi, thanks. Good afternoon. Just back on the physician staffing point or the question. Are you seeing any changes in anesthesia coverage at USPI? Meaning are we seeing groups ask for increase subsidies? Are you seeing any disruption on volumes in any markets from the dislocation with these groups? I know you said it's manageable so, but I just - I guess I'm trying to kind of unpack maybe what's sort of new relative to USPI. Saum Sutaria: Yes. This is a little bit like the contract labor discussions that we have. It's just - it's sort of not - the issues on the hospital side are so much more significant than anything we see on the USPI side because the mix is good, and it's just a different environment to operate in. And so the magnitude of that effect that USPI is so much lower than the challenges that are being faced on the hospital side with respect to anesthesia staffing. Operator: Thank you. Our next question is coming from A.J. Rice from Credit Suisse. Your line is now live. A.J. Rice: Hi, everybody. Just maybe talk about two other areas you haven't mentioned - some are saying they're seeing some of the benefit from all the growth we've seen on the public exchanges or marketplaces, whatever you want to call them. I'm going to hear you talk about what your strategy has been with respect to marketplace for a while. What - are you - do you feel like you're in the most contract there? And how much is that? I assume that's being booked in the managed care line, but I just want to confirm that and how much of a tailwind does that provide year-to-year for you? And then, on the same lines, obviously, there's the question of Medicaid redeterminations. You've got a couple of markets that tend to be a little heavier Medicaid. Are you - what do you see in early days there? Are you actively involved in getting people reverified? And is there upside because some of those people may end up on the exchanges for you there? Saum Sutaria: Yes, A.J., thanks for the question. I think it's early days on redetermination, first of all. So we're not really seeing much effect. And it's - I'm glad you raised that because I'll reinforce, Conifer has a best-in-class eligibility and enrollment service. And it benefits us, it benefits our clients. And now as I've indicated, we're expanding that as a point solution. So we feel very, very good about our ability to catch and capture eligible patients, whether they're moving from one form of insurance to another, Medicaid to exchange or other, or even from the standpoint of those that may enter the system apparently uninsured but actually do qualify for coverage. And by the way, that includes even in this environment, a lot of new enrollments in Medicaid that we achieved. Our exchange strategy has been very consistent for many years. We took the approach early on of contracting broadly in the exchanges and doing that on a commercial minus rather than a Medicare plus basis. So we're pleased with the rates and we're pleased with the network access. As narrow networks have opened up, including some ultranarrow networks, there may be some or a handful that are in, but they really don't have a lot of lives in them. And so for the networks that are gaining a lot of lives or have a lot of lives, we tend to be very well contracted. It has been a long-standing strategy of the company to be broadly inclusive of exchange patients. Daniel Cancelmi: And A.J., the exchange volumes that we care for and the revenues, they are included in that managed care line that you see that we disclose. And I would tell you the exchange volumes and revenues are trending very nicely, like overall, it's part of our commercial when we think about our commercial mix. Trends are good. Operator: Thank you. Next question is coming from Andrew Mok from UBS. Your line is now live. Andrew Mok: Hi. Good afternoon. You've done about $90 million of share repurchase to date and have $660 million of authorization remaining through 2024. You've increased the CapEx guide by about $50 million. But curious to hear what your thoughts around share repurchase have changed and with a better cash flow profile this year. Thanks. Daniel Cancelmi: This is Dan. No, there's absolutely no change in our views and how we're thinking about share repurchases. We obviously repurchased some additional shares in the quarter. And we'll continue to look at that in terms of - from a capital allocation perspective, as we always say. Depending on other investment opportunities and market conditions, we will certainly continue to pursue share repurchases. So no change whatsoever from our thinking on share repurchases. We increased our CapEx guidance with additional investments to drive additional growth substantially on the hospital side. Saum Sutaria: Yes. I would echo that, especially on the first point. I mean, as our business strengthens, and in particular, the long-term trends that would support, especially the Ambulatory Surgery division growing over time as we come out of the pandemic, we still feel that our equity is a very, very compelling investment vehicle as we trade even on an EBITDA minus NCI basis, we still trade at a discount to some of our peers, whether you look at it by segment or in total. So we very much feel like that our business prospects have a lot of upside associated with them. Operator: Thank you. Your next question today is coming from Brian Tanquilut from Jefferies. Your line is now live. Brian Tanquilut: Hi. Good afternoon, guys. Congratulations. Saum, as I think about the revenue per adjusted admission in the hospital up 4%, pretty strong, how should we be thinking about your ability to sustain that healthy level, both from an acuity perspective and maybe some of the contract negotiations with the payers as we look at obviously higher than average inflation rates? Thanks. Saum Sutaria: Yes. Look, maybe Dan and I will both comment. Look, I think the acuity strategy, we still have runway across our markets. And I actually think, as we come out of the pandemic if we continue to focus on expanding our initiatives in that area, we ought to be able to sustain. On a non-COVID basis, our case mix index has been growing at a 3% CAGR since 2019, which in the CMI world is a very, very strong result. I mean this has been a strategy pre-pandemic, as you know, that we undertook when some of us joined the company to really reposition Tenet's acute care hospital portfolio, and we've been working at that for a long time, and we continue to work at it and think that there will be upside there. And then from a contracting perspective, as we - part of strengthening the attractiveness of our portfolio, has been upgrading the reputation and quality of physicians that choose to work in our hospitals, which create a lot of pull among consumers, employers and other things, and that has definitely been the case. It's been the case pre and post now pandemic in terms of what we're doing. And that helps our contracting because our hospitals are more desirable from a quality reputation and program standpoint than they were five years ago. And as a consequence, if I look at our recent contracting efforts, they're better than what they were two or three years ago in terms of the kinds of escalators were able to negotiate because we're more must-have in some ways in the networks in the cities in which we operate. So this can be a virtuous cycle I believe that will continue for some time. Operator: Thank you. Your next question is coming from Jason Cassorla from Citi. Your line is now live. Jason Cassorla: Great. Thanks for taking the question. Just wanted to ask about your cash flow and CapEx guide. It sounds like you're up both in context of better EBITDA generation this year. Just obviously, cash flow, you done $466 million year-to-date. You updated free cash flow guide of $1.35 billion. There's an operationally strong fourth quarter to consider. I'm just wondering if there's any timing elements that we should consider as it relates to cash flow and CapEx spend? And then just as a quick follow-up, if there's any onetime items we should be thinking about in the back half of the year on EBITDA, like Medicaid supplemental payments or otherwise? Thanks. Daniel Cancelmi: Yes, this is Dan, Jason. In terms of free cash flow generation, obviously, we're pleased with how our performance has been so far this year. Conifer has done a really good job. It's outperforming our expectations. So that's very encouraging. Your point about the timing, I would say there's we still have some tax payments to make in the fourth quarter that wouldn't necessarily maybe seen in the third quarter. But really no substantive change from our thinking other than the strong performance so far. And as we mentioned, we made a decision, we're going to invest a little bit more into CapEx this year, $50 million. Operator: Thank you. Your next question is coming from Stephen Baxter from Wells Fargo. Your line is now live. Unidentified Analyst: Hi. This is Nick on for Steve. I was hoping you could provide an update on the performance of the SCD businesses so far this year and where you are in terms of progression to the effective multiples you target for those assets. Thank you. Saum Sutaria: Yes, I did that earlier. We're very pleased with the ongoing buy-ups according to plan this year and the opening of the de novos. And U.S., it's been a contributor to the entirety of USPI's performance this year, which has been strong on both acuity and growth. And as Dan mentioned also, a lot of the work we've done on operations management that has improved margins and strengthened margins as well. Operator: Thank you. Next question is coming from Ben Hendrix from RBC Capital Markets. Your line is now live. Ben Hendrix: Thank you very much. I appreciate all the color on the growth across USPI case categories, but I don't know if I heard you mention cardio growth. Just want some comments on your degree of focus there and what you're seeing in that area. Thanks. Saum Sutaria: Yes. No, of course, we're very attuned to the cardiovascular market in the ASC setting. We perform peripheral and device-based work there today, and very selectively other types of vascular coronary vascular work. Look, this is an area in which I have consistently voiced caution about how rapidly it will expand. One, because of patient safety and selection issues that still have to be worked out. So we're in the midst of a number of different pilots to work out appropriate safe clinical protocols. I mean, ASCs are small businesses and a single patient error and associated liability can really do a lot of damage there. So we're very careful and cautious about developing the right set of protocols in that environment if we're going to expand into cardiovascular in a more broad way. The second thing you just have to realize is that, the payer mix, because it's cardiac, tends to be much, much more heavily Medicare than commercial. Even if you compare to orthopedics, which has a lot of commercial activity and that is going to impact the types of margins that those types of facilities can generate. Now look, I recognize USPI has got best-in-class margins for the ASC business by far. But part of what you got to work out at is how to do this, build the scale and do it with margins that are healthy so that the partnership with physicians stays engaged in building that. So my view here is that, will things move into the outpatient setting in that field? Sure. But I think it's going to be slower and more cautious all around because of the things I mentioned than what some people discuss. Ben Hendrix: Thank you. Operator: Thank you. We reached the end of our question-and-answer session. And that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today. Saum Sutaria: Thank you very much.

Operator: Good morning, and welcome to the Tenet Healthcare First quarter 2023 Earnings Conference Call. After the speaker’s remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] I’ll now turn the call over to your host, Mr. Will McDowell, Vice President, Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good morning, everyone, and thank you for joining today’s call. I am Will McDowell, Vice President of Investor Relations. We’re pleased to have you join us for a discussion of Tenet’s first quarter 2023 results, as well as a discussion of our financial outlook. Tenet senior management participating in today’s call will be Dr. Saum Sutaria, Chief Executive Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represents management’s expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today’s presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I’ll turn the call over to Saum. Saum Sutaria: Thank you, Will, and good morning, everyone. We’re off to a nice start for 2023. Strong volumes support good results in all three business units. USPI’s performance continues to accelerate given our focus on organic growth and is ahead of our expectations so far. In the first quarter, we delivered net operating revenues of $5 billion and consolidated adjusted EBITDA of $832 million, which translates into an attractive 16.6% margin. As a result of our strong performance in the first quarter, we are now raising our full year guidance, which demonstrates the confidence we have in our operations. Across our businesses, a post-pandemic environment is taking shape, COVID admissions are down, a wider range of acuity is returning to the hospitals, deferred GI procedures are returning and our workforce is starting to stabilize. We have anticipated this for some time, and our strategy, operating efficiency and capital discipline enable us to deliver attractive performance in this environment. We had a great quarter at USPI with $340 million in adjusted EBITDA, which represents 21% growth over first quarter 2022. Same-facility cases grew 7.9% and adjusted EBITDA margins were strong at 37.6%. As I’ve said before, the continued migration of procedural services into the ambulatory setting is a sustained and significant tailwind for our business. Growth in our active physician population as well as higher acuity service line expansion, especially GI, urology, ENT and orthopedic cases, drove the first quarter volume strength. We are pleased to have our organic growth initiatives gaining traction and bearing fruit. Our USPI development pipeline remains active and healthy. We added three new centers in the quarter. We completed two additional post-transaction buy-ups in the quarter at multiples unchanged from prior buy-ups. Progress continues in this area. As previously discussed, USPI’s M&A engine under the Tenet umbrella is an industry leading differentiator. We continue to drive post-synergy multiples for many of our acquisitions to below 5 times. We intend to invest approximately $250 million in ambulatory M&A each year and have a robust pipeline to support that level of investment. We are also energized by the level of de novo activity in the USPI pipeline with over 25 centers currently in syndication stages or under construction. USPI is the preferred partner for high quality physicians as demonstrated by our organic growth and development pipeline. The linkage to our hospital business creates a superior platform of management talent and significant scale benefits. Turning to our Hospital segment, we generated $405 million of adjusted EBITDA in the first quarter of 2023. Same-store hospital adjusted admissions grew 6.7% and ER volumes grew 4.8% over the first quarter in 2022. On a non-COVID basis, same-store inpatient admissions were up 14%. Acuity levels remain strong, as our case mix index has grown at a 3% compounded annual growth rate since 2019. We continue to expand access to high acuity specialty services across our hospitals and enable access to cutting edge clinical technologies. In the first quarter, we maintained our focus on cardiovascular, neurosciences, specialty surgical services, trauma, and women’s health. A few examples include a new non-invasive focused ultrasound technology to treat Alzheimer’s patients at our Delray Medical Center. Certification of our Resolute Baptist Hospital as a Joint Commission Advanced Primary Stroke Center, and the achievement of a Level I Trauma designation at our Desert Regional Medical Center, which enables us to provide total care for nearly every aspect of injury across a broad region of the southwestern United States. Our workforce is getting stronger, investments in 2022 and pay and benefits have reduced turnover, and the pace of first quarter 2023 nurse hiring continues to accelerate. This helped to further reduce our contract labor costs in the first quarter of 2023. All-in-all, our hospitals have had a nice start to the year. Conifer continues to perform well for its clients and deliver strong margins. Ongoing technology automation and offshoring initiatives support that performance. Third party revenue was up 3.8% in the quarter, and cash collection performance was strong in the quarter, helping to drive Tenet’s days outstanding in accounts receivable down by two days from year end. Conifer continues to ramp up commercial activities with a strong sales pipeline for 2023. Looking forward, we are raising our full year 2023 adjusted EBITDA guidance by $50 million at the midpoint to a range of $3.21 billion to $3.41 billion. Our management discipline, operational excellence, and ongoing investments in talent have enabled a strong start to the year, and we remain focused on accelerating performance across our businesses. At USPI, strong margins, organic growth tailwinds and inherent capital efficiencies generate significant free cash flow. Continuing to add centers with strong margins and attractive post-synergy multiples remains a great use of cash for investments to enhance Tenet’s free cash flow. These cash flows will enable us to further grow, deleverage the balance sheet, and return capital to shareholders in the future. And with that, Dan will provide a more detailed review of our financial results. Dan? Daniel Cancelmi: Thanks, Saum, and good morning, everyone. Our financial results in the first quarter were strong with our USPI and Hospital’s adjusted EBITDA and same-store volumes and revenues well above our expectations. In the quarter, we generated consolidated adjusted EBITDA of $832 million above the high end of our first quarter guidance range. Our results were driven by strong same-store revenues and volumes, continued high patient acuity for non-COVID patients, and effective cost control. Now, I’d like to highlight a few key items for each of our segments. Let’s start with USPI, which delivered strong growth and continue to provide high quality care to our patients. In the quarter, USPI produced a 7.9% increase in same facility surgical cases compared to last year, with strong growth in GI, urology, ENT and orthopedic cases. Surgical cases were 107% of pre-pandemic levels in the quarter. USPI’s adjusted EBITDA grew 21% compared to the first quarter of 2022 and its margins continue to be very strong at 37.6%. We are pleased with USPI’s excellent start to the year. This strong performance is a testament to the attractiveness of the portfolio and value that we provide to our stakeholders. Turning to our acute care hospital business, first quarter same-hospital adjusted admissions increased 6.7% compared to the first quarter of last year and total same hospital inpatient admissions increased 4.3%, while non-COVID admissions increased 14%. Our labor management continues to be very effective despite the cost pressures, especially temporary contract nurse staffing costs. On a consolidated basis, contract labor costs were 6% of SW&B, a significant decline from 7.3% in the fourth quarter 2022. Total hospital costs were well managed in the quarter, as these costs were 2.7% lower than first quarter 2022 on a per adjusted admission basis. When you exclude the impact in the prior year from a $69 million gain on sale of medical office buildings. SW&B costs per adjusted admission were down 5.4% compared to first quarter last year. Our SW&B costs as a percent of revenue were 45% in the quarter compared to 46% in the first quarter of 2022 and 46.2% in fourth quarter last year. Our case mix and revenue yield remain strong as we continue our strategic focus on investments in higher acuity, higher margin service lines. Our case mix index in the quarter has grown at a 3% CAGR since 2019 before the pandemic. Our hospital’s first quarter results included $27 million of insurance proceeds received related to last year’s cybersecurity incident. As we previously disclosed our guidance reflected 10 million of these recoveries in the quarter, which were received in January. As a reminder, in the first quarter of last year we recorded a $69 million gain on the sale of medical office buildings as well as $31 million of Texas Medicaid revenue that related to 2021. Let’s now turn to Conifer, which again delivered a solid quarter. Conifer produced first quarter adjusted EBITDA of $87 million and a strong margin of approximately 27%. Also, Conifer generated 3.8% growth in revenue from external clients compared to the first quarter last year. Overall, we’re off to a good start to the year in each of our businesses. Now, let’s review our cash flows, balance sheet and capital structure. At the end of the quarter, we had $766 million of cash on hand and no borrowings outstanding under our $1.5 billion line of credit facility. We generated $214 million of free cash flow in the quarter. As a reminder, the first quarter’s oftentimes our softest cash flow generating quarter due to certain annual working capital requirements such as our annual 401(k) matching contributions for our employees and annual incentive compensation payments. Conifer produced a strong cash collection performance in the first quarter, which resulted in a two-day improvement in our days in AR. Also, during the quarter, we repurchased approximately 906,000 shares of our stock for $50 million as part of our 1 billion share repurchase program. Since the inception of the program in the fourth quarter last year, we have repurchased approximately 6.8 million shares or about 6% of our then outstanding shares for $300 million at an average price of about $44 per share. Our March 31 leverage ratio was 4.19 times EBITDA, slightly up from 4.1 times the year end 2022. And as a reminder, we have no significant debt maturities until the third quarter of 2024 and have approximately 1.6 billion of secured debt borrowing capacity available if needed. Let me now turn to our outlook for this year. As Saum mentioned, we are raising our 2023 adjusted EBITDA outlook by $50 million to $3.21 billion to $3.41 billion, or $3.310 billion at the midpoint reflecting the strong start to the year. This $50 million increase includes a $20 million raise for USPI and a $30 million raise for our hospitals. Additionally, we now expect net operating revenues to be in the range of $19.8 billion to $20.2 billion. Also, we expect full year adjusted diluted earnings per share from continuing operations to now be in the range of $4.92 to $6.09. Regarding our second quarter outlook, we expect consolidated adjusted EBITDA to be in the range of $765 million to $815 million. And we anticipate that USPI’s EBITDA in the second quarter at the midpoint will be approximately 23% to 24% of our full year 2023 USPI EBITDA guidance of $1.465 million at the midpoint of our range. Turning to our cash flows for 2023. From a cash flow perspective, we are targeting another strong year of free cash flow generation and now expect free cash flow in the range of $1.1 billion to $1.35 billion for 2023, an increase of $25 million over our previous expectations. Our free cash flow generation has improved substantially over the past several years. We have significantly reduced our leverage and pushed out debt maturities and we expect our business to continue to drive strong cash flows while executing on our growth plans. As we’ve mentioned previously, these cash flows provide us with significant financial flexibility to effectively deploy capital for the benefit of shareholders. As a reminder, our capital deployment priorities have not changed. First, we continued planning on allocating approximately $250 million of capital annually to grow our USPI surgery center business; second, enhancing our hospital growth opportunities, including the continued focus on higher acuity service offerings; third, evaluating further opportunities to retire and/or refinance debt; and finally, share repurchases depending on market conditions and other investment opportunities. And with that, we’re ready to begin the Q&A. Operator? Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Brian Tanquilut from Jefferies. Your line is now live. Brian Tanquilut: Hey, good morning, guys, and congrats to the good quarter. I guess my question is just how much improvement do you think you have left to bring down temp labor? I know you’re reinvesting some of that in wages for your permanent employees. But as we think about temp labor and maybe SLB [ph] as a whole, what do you think is the remaining opportunity for that embedded in your guidance and even as we look into next year? Thanks. Saum Sutaria: Hey, Brian, it’s Saum. Good morning. We do expect some additional moderation in our contract labor spend as we move through the year. The operators have done a really phenomenal job, managing this, obviously a very difficult environment. Our recruiting and retention measures have been improving, which is helping to mitigate some of the incremental costs associated with contract labor. So we are expecting some additional moderation as we move through the year. But as we’ve said when we released our guidance in February for this year, we are not expecting our contract labor to get back to pre-pandemic levels certainly that won’t happen this year. Operator: Thank you. Next question is coming from Pito Chickering from Deutsche Bank. Your line is now live. Pito Chickering: Yeah, good morning, guys. Thanks for taking my questions. A great quarter. For guidance, you beat the midpoint of the first quarter guidance by $57 million. You raised 2Q by $50 million above The Street, but only raised the full year by about $50 million. So, just curious, should we read sort of into the implied back half of the year guidance reduction? Is this conservatism something that The Street was missing or simply did The Street misunderstand the seasonality for the back half year versus the first half year? Daniel Cancelmi: Hey, Pete, it’s Dan. Good morning. Now, you shouldn’t read it into anything of that. Listen, we off to a good start to the year. We beat by $57 million, and we’ve raised our guidance by $50 million. So we’re optimistic and we’re encouraged by the trends that we’ve seen and that shouldn’t read anything into it. Pito Chickering: Great. Thanks so much. Operator: Thank you. Next question is coming from Justin Lake from Wolfe Research. Your line is now live. Unidentified Analyst: Hey, guys, thanks for the question. This is Austin [ph] on for Justin really strong core on the volume side, both in USPI and the Hospital. Just curious, you guys had kind of talked previously some service line flexing in the hospitals and then some COVID driven interruptions in USPI. Were any of those still present in the 1Q here or are we kind of at a clean comp going forward? Thanks. Saum Sutaria: Hey, it’s Saum. On the Hospital side, as Dan was just talking about with one of the prior questions, as the contract labor rates come down, and I indicated a little bit in my comments, it opens up the ability to improve access for services. We know the demand has been there, it’s always been a bit about whether that demand at scale was serviceable with very high contract labor costs. And, I think, in particular, as the contract labor rates come down, it makes it easier to make decisions about utilizing contract labor versus the full time labor from the perspective of opening up that hospital capacity to take in more volume. And, obviously, imperative in that is that we to have discipline in our overall cost structure, productivity, length of stay, things that we’ve talked about for the past few years during the pandemic. Continuing to remain focused on that so that we can generate strong margins as we open up the capacity, even if some of the work that returns is lower acuity. On the USPI side, I’m really pleased with the volume strength. This is not – we’ve talked over the last couple of three quarters about things that were going on in the business, certain types of low acuity business that we were strategically and otherwise having reductions in that affected it. This quarter demonstrated growth in the services that we want to grow. Strong return of GI services, orthopedic strength was strong. And in particular, I’ve commented about pain before, the volume strength is not coming from pain that business was flat year-over-year. So this isn’t a volume recovery based upon kind of, so to speak, engineering certain service lines that we were dampening our interest in, but it is actual strength in many of the areas. And I think most importantly, breaking through significantly the pre-pandemic volume levels is a really important marker for USPI and the ASC industry, because it suggests that there will be strength going forward. Operator: Thank you. Next question is coming from Calvin Sternick from JPMorgan. Your line is now live. Calvin Sternick: Yeah. Hi, good morning. I wanted to ask about some of the SCD II centers and how the integration is progressing there? I know you talked about the slower position bias last year and the ramping of some of the de novo in developing centers. So just curious how that’s trended so far just to sort of understand some of the progress. Saum Sutaria: Thanks. Yeah, no, good question. Good update. As I indicated, the buy-ups continue the progress and the buy-ups continue at multiples that are not changed from any of the prior multiples. So that’s good. And the centers that were in-development, as I kind of described them somewhere from the point of having broken ground to just having opened. We expect all of them from that original transaction number two to be opened up this year, and that’s a good thing. Those partnerships are still strong and intact. So, I think, we’ll see positive movement. Like I said a last time, we were about a year behind the original plan, but the original plan is still the original plan. Operator: Thank you. Next question is coming from Kevin Fischbeck from Bank of America. Your line is now live. Kevin Fischbeck: Great. Thanks. Just wanted to ask about your views about the volumes in the quarter. It sounds like the volumes were stronger than we were looking for. It sounds like maybe they were even stronger than you guys were looking for. Is there something that you would point to as to why all of a sudden 2023 is the beginning of this volume rebound? And maybe to go back to that earlier question about the guidance, because it is kind of you raised for the beat, it sounds like it’s conservatism, but is there any reason to believe, either based upon how volumes progressed through Q1 or so far in Q2, that these higher volume numbers wouldn’t persist? Saum Sutaria: Yeah, this is Saum. So a couple of things, I think, the volume strength at this point, we really have our information and what we’ve read publicly about HCA’s information. I think there is some industry recovery going on as we kind of enter this post-COVID, post-pandemic anyway environment, where people are getting more comfortable returning to healthcare. We know that from our physicians’ offices. They’re now all pretty. The ones that we employ and run are now all running at full throughput in the outpatient environment. Obviously, that helps to create demand. I think that we’ve in our case gotten much more effective and efficient with our ER throughput and operations across the board. That was a big focus area last year that we didn’t talk much about. But with the staffing shortages, having adequate throughput, having fast track setups in our ERs and things to improve that throughput is important to be able to service the demand. And then for us, in particular, I think that as we get into this post-pandemic environment, hospitals are going to naturally be able to hold onto and deliver when they have put in the right infrastructure, doctors and technology for higher acuity services that don’t have a substitute location to go to. And for us, that’s an important piece of the recovery puzzle across the board. Look, the other thing from a Tenet portfolio perspective, as we indicated, our portfolio has a pretty broad range of exposure to markets that handled states, that handled COVID differently. And we always had a little bit more recovery to go in some of the states that were more locked down. And I’m pleased to see that we’re seeing some volume strength in those markets as well. At USPI, I think, there’s a couple of things, one is we put a lot of focus and reengineered some of our processes, incentives as well as service line priorities in the third quarter and fourth quarter of last year, going into this year to focus a bit more on. Some of the things that we wanted to grow rather than just some of the things that we were trying to optimize out as a low acuity service. And I think getting that balance right has helped create some momentum at USPI with respect to organic growth. There’s really no reason that I see looking forward at this point that that should change. And I’ll just add my commentary to the guidance. Look, we’re pleased to have delivered a good quarter, and we’re pleased to have raised our guidance at this point in time. We’re optimistic about the future, and we’ll revisit as we look forward, depending on what the results look like. Operator: Thank you. Next question is coming from A.J. Rice from Credit Suisse. Your line is now live. A.J. Rice: Hi, everybody. I wanted to just ask about two other areas that haven’t been touched on. As you’ve done your analysis on redeterminations, we’re getting sort of different views as to as people roll off of Medicaid, get picked up on public exchanges, or hopefully on the commercial rolls, whether that’s a neutral event for you guys or a positive. However, you factored that into guidance, and then any update generally on your managed care contracting, I know this year you got a little help. It seemed like from labor rates and labor pressures rather. Is that following through in your discussions for 2024? Do you think you’ll get some help on the labor side there in rates for 2024? Daniel Cancelmi: Hey, A.J. It’s Dan. Let me try to address those in terms of the Medicaid redetermination, I would say, at this point we haven’t seen anything, any substantive impact from the redeterminations, which really just began. But I would tell you that we have Conifer in our hospitals, we have dedicated resources to address this as the redeterminations occur state by state. We have communications across the enterprise through all levels of Conifer in the hospitals. We’re doing other types of communications like webpage banners with links to state enrollment websites. We’ve been going through and revising our screening scripts and reenrollment questions, updating various resource documents, messaging at registration point of entry and in broader messaging campaigns across our facilities. And also working with community members, non-Tenet community members on the community and working with them and tracking some of those statistics. So far, nothing significant, but we think we’re on top of it and we’re monitoring it closely. In terms of your question, in terms of the guidance for the year, as we said in February, we haven’t assumed any significant upside or downside from the redeterminations. We think it’s premature at this point. Obviously, the exchange enrollment statistics were very encouraging in terms of the growth. So some of the individuals who may transition off of Medicaid rolls, you would expect that many of those would potentially reach out and try to obtain exchange coverage. But again, we haven’t factored anything significant into our guidance this year. In terms of the commercial contracting, I would say consistent with our previous messages on this. We think we’re very well positioned from a contracting perspective. We’re essentially 95% contracted this year, and around 85% next year and even 25 fair amount of our business is already contracted. Listen, the terms been clear, it’s not like we’ve been getting CPI type of increases in every contract negotiations, but what we have seen, obviously, the levels of inflation are top of mind, they always have been, but certainly more pronounced now. And the conversations obviously are being held with the plans. And I would say some of our more recent negotiations, it’s a little bit better than what maybe we historically would have negotiated. A.J. Rice: Okay. Thanks a lot. Operator: Thank you. Next question is coming from Josh Raskin from Nephron Research. Your line is now live. Joshua Raskin: Hi, thanks. Good morning. I just wanted to get back to USPI and that 9% plus same-store revenue growth number. I was wondering if you give us some more color on maybe perhaps geographies and whether these were legacy centers or some of the newer ones that are ramping up. And then did you give a number for the buy-ups for the second SCD transaction? And then lastly, I hate to keep harping on this guidance, but the guidance for USPI specifically, sort of implies a lower growth rate for EBITDA over the next three quarters than what you saw in the first quarter. Any changes to seasonality, anything about that, or just sort of consistent with the overall message on guidance? Daniel Cancelmi: Hey, Josh, it’s Dan. Let me start. Now, in terms of the guidance, obviously, USPI is off to a great start to the year. We increased the guidance $20 million for EBITDA. Strong volumes – we also increased our volume guidance assumptions from 2% to 3% to 3% to 4%. So we’re obviously encouraged. Again, as I mentioned, another question, there’s nothing to read into this. It’s early in the year and we like what we’re seeing and we’ll continue to obviously reevaluate where things stand at the end of the second quarter and make any guidance changes if appropriate. At that point in time, the USPI business continues to generate incredible margins, so we’re very pleased with the start to the year. Operator: Thank you. Next question is coming from Ann Hynes from Mizuho Securities. Your line is now live. Ann Hynes: Hi, thanks. I just want to talk about the no surprise billing act. Is that having a negative impact on surgery volume at USPI? Some data that I’ve seen and check suggests that maybe anesthesiologists aren’t making as much money, so they’re gravitating more towards inpatient or outpatient departments given the reimbursements higher. So I guess is this having an impact? And if so, what do you think it is on the dragon [ph] volumes? Saum Sutaria: Just a couple of comments there. I’m not sure I could credibly answer that question with data. It’s an interesting question and something that we’ll look into to see if we can identify any trends there. But what I would say is that the pressures that we’ve talked about before in the staffing arena for hospital-based or ASC-based physicians, in particular, in anesthesia is certainly an area that’s requiring a lot of work. Your commentary about the activity and revenue intensity for anesthesiologists in hospitals versus ASCs is certainly true. But again, remember, our payer mix in the ASCs is significantly better, and that creates a draw to the ASC environment, in particular in RASCs [ph], the way they’re set up. So while there’s some pressure there, we’re managing through it. And again, I would have to say that we’d have to take a look at the data more carefully to answer your question in any kind of statistically relevant manner, but it hasn’t bubbled up as a major driver of the volume issues that we saw in particular last year in the third quarter. Ann Hynes: All right, perfect. And then, Dan, I know you up free cash flow guidance, which is good. And can you remind us, do you have any share repurchase or incremental debt repayment and guidance at this point? Daniel Cancelmi: No additional share repurchases are assumed in the guidance, and that was consistent with how we started the year with our guidance. Ann Hynes: Okay, great. Thank you. Daniel Cancelmi: Sure. Operator: Thank you. Next question is coming from John Ransom from Raymond James. Your line is now live. John Ransom: Hey, there. Kind of an end of the weeds [ph] question because all the good ones have been asked. If we look at the rest of the year on USPI and you look specifically at revenue per procedure, what’s going on there in terms of rate versus just mix? I mean, we assume there’s some natural lift as you get more ortho and less pain, but if you could kind of help us understand what’s going on in that line item? That’d be great. Thank you. Saum Sutaria: Yeah. No, John, I appreciate it. And that is still a good question, so appreciate it. Listen, I think there’s a couple of things, as I indicated, and I think we’ve talked about this a bit before, but maybe not as specifically. There are certain areas of healthcare services that were deferred or more actively deferred and I think in our ASC business in particular, we saw a dampened utilization of procedures that might have preventative value and in particular in the Medicare population. For us in general, that’s a good sign that it’s coming back, even if there’s some impact on the net revenue per case. Because ultimately as the ASCs become fuller, we’ll get benefit from capacity utilization. And we had prepared for this a bit, we weren’t sure when it was going to come back, to be honest, but we had prepared for this a bit by looking like we would in an acute care hospital environment for efficiencies within our ASCs that would help to maintain our margins. So we’ve been focused on knowing that this business is going to come back, knowing that some of the mix would be a little bit more challenging and doing the preparatory work to ensure that we maintain our margins by finding efficiencies in advance of it coming back. And it happened to come back a bit this quarter and, again, I think that’s a good sign. Our independent physician partners’ offices running at full throughput, similar to what we’re seeing with our employed physician practices, if that happens across the board, I think, that’ll be a nice tailwind. It’ll give them the confidence sometime this year to maybe recruit new partners to their practice and continue to grow their own businesses, which again will represent some long-term tailwind in our partnerships with them at USPI. So I think this is a good cycle to be in, even if some of the mix and other things in the short-term will be a bit more challenging. We’ll stay focused on the margin performance. John Ransom: I take from that as a big colonoscopy quarter, is what I’m hearing from you. Is that what you think about it? Operator: Thank you. Next question is coming from Sarah James from Cantor Fitzgerald. Your line is now live. Sarah James: Thank you. I was hoping you could walk us through how you think about margin evolving as we start to come out off of the peak of labor shortage. So how much margin leverage can you really get from scale as you’re able to staff up? And then how do you think about some of the payer rate increases possibly flowing through to margins? Daniel Cancelmi: Hey, Sarah, it’s Dan. Good morning. Listen, obviously, we’ve strengthened our margin significantly over the past several years, not only through USPI, but the hospital margins as well. And we’re very mindful of that and as additional volumes are treated and cared for given the efficiency of our hospital platform, we think there’s opportunities for margin expansion. And, obviously, the USPI’s margins are phenomenal anywhere depending on the quarter from the [high-30s to 40%] [ph] territory. But yeah, certainly, adding additional volumes can help in terms of given at least on the hospital side, there are certain fixed costs and so we can take on additional volumes and be profitable with it and have a nice margin associated with it. The operators, they’ve done really just a phenomenal job during the past several years in driving efficiencies and incredibly highly inflationary and challenging environment. And you see it in our cost statistics clearly. In terms of commercial pricing, as I mentioned earlier, we feel very good where we’re at from a contracting perspective and more recent negotiations, we’ve been able to negotiate rates with annual escalators that are a little bit higher than historically we may have negotiated. So we feel good about where we’re at from a contracting perspective. Sarah James: Thank you. Operator: Thank you. Next question is coming from Ben Hendrix from RBC Capital Markets. Your line is now live. Ben Hendrix: Hi, thank you very much. Certainly, appreciate the sequential color on improvement in agency cost in SW&B. But could you talk a little bit about how that impacted inpatient capacity constraints, specifically, your peer HCA noted decline in rate of admission, declines as a percentage of inpatient volume? And I hope you can give us an idea of how that has trended for the acute segment, how you see that progressing this year given your labor strategy? Thank you. Saum Sutaria: This is Saum. As I indicated before, I think probably the most important marker that we look at is the contract labor rate. I mean, we’re building up our workforce. We’ve been focused on that for over a year. It has been slow going. It’s improving quarter-over-quarter-over-quarter, which is a good thing in terms of recruiting and retention. But ultimately, the structural shortages in the market from a labor perspective haven’t just disappeared as we move from 2022 to 2023. And so contract labor is still an important resource, but as those contract labor rates begin to normalize, you can use that contract labor more freely to open up capacity. For us, the math equation, if you will, on where we open up capacity and how varies a bit, because our markets are in different stages of recovery, different kind of cost structures, even different contract labor rates that we face in different markets. And so we kind of take that market by market. I think part of the volume strength that you saw in Q1 reflected the fact that, as we indicated, opened up access to some of our services a bit more than we had in the past. And that’s good, because it’s not only testing whether the demand is there, but it’s also our ability to service it at healthy margins. And that ended up being a good test for this quarter. And so we’ll keep pushing on that. But we are also very focused on trying to drive contract labor unit rates back towards pre-pandemic levels. And though they won’t get all the way there, perhaps, we’re driving in that direct action this year. Ben Hendrix: Thank you. Operator: Thank you. Next question is coming from Andrew Mok from UBS. Your line is now live. Andrew Mok: Hi. Good morning. Adjusted admits were up 6.7% in the quarter and outpaced inpatient admissions by about 240 basis points. Can you help us understand what’s driving that spread? There weren’t any obvious drivers in the outpatient stats that would blend adjusted admits higher. Thanks. Daniel Cancelmi: Yeah. Hey, Andrew, it’s Dan. It’s just a mix of the intensity of the outpatient volume, the gross revenue in relation to the inpatient side. That’s the primary driver there. Obviously, our volume strength in the quarter was very strong. We’re pleased with what we saw and it was consistent throughout the quarter, which was encouraging, too. Andrew Mok: Got it. So mix and acuity on the outpatient side was a driver of the strength there. Daniel Cancelmi: Yeah, that’s a contributor to. And as I said, what was encouraging not only on the hospital side, but also on the USPI side, the volumes were generally speaking strong throughout the quarter. Andrew Mok: Got it. Thank you. Operator: Thank you. Next question today is coming from Jason Cassorla from Citigroup. Your line is now live. Jason Cassorla: Great, thanks. Just wanted to ask about uncompensated care trends, it looks like bad debt in the quarter was up pretty decently year-over-year that could be a comp issue, but any color on what drove that bad debt expense higher and just overall uncompensated care of 12% year-over-year in 1Q? I think that uncompensated care stat was up about 10% back in fourth quarter too. So just any color on uncompensated care trends would be helpful. Thanks. Daniel Cancelmi: Yeah. Hey, Jason. It’s Dan. Listen, I would say the year-over-year comp is probably more last year in seeing some lower levels. I would tell you overall the uncompensated care, we think, it’s been manageable. We spend a lot of time with our Conifer team and hospital resources doing everything possible for when someone who does not have an insurance, we assist them and we do an incredible job of finding other forms of insurance through our eligibility enrollment program. So I wouldn’t say you’re never concerned about uncompensated care, but the trends are essentially in line with what our expectations were so far this year. Jason Cassorla: Okay. Got it. Thank you. Operator: Thank you. Our final question today is coming from Stephen Baxter from Wells Fargo. Your line is now live. Stephen Baxter: Yeah. Hey, thanks for the question. I want to ask another one on the Ambulatory side. It’s a little bit of a longer-term question. I was hoping you could talk a little bit more about the outlook for ortho procedure growth and the opportunity here over the next couple of years. We’ve had this massive shift of ortho procedures from the inpatient hospital setting to the outpatient hospital setting compared to where we were pre-COVID. I guess for the ASCs, do you think about this shift as having pulled forward the opportunity there in a meaningful way? And then second, what do you need to do strategically to help migrate these procedures into your ASCs? Thanks. Saum Sutaria: Yeah. Hey, it’s Saum. I think a couple of things. First of all, you’re right that a lot of what used to be done inpatient with a multiday stay, even if it was a short stay, is turning into hospital based outpatient surgery. And I would say the moment you have something that turns into hospital based outpatient surgery, there’s going to be a subset of patients that will qualify in an ambulatory surgery setting. Over time, it’ll be more the comorbidities that patients have that determine the site of care rather than the technical nature of the potential procedure and what that recovery will look like from the standpoint of being able to ambulate and get home on a same day basis. So that’s really, I think, what will end up determining what the ultimate mix of inpatient hospital based outpatient, especially when there’s certain comorbidities that one needs to be careful with versus a fully ambulatory ASC outpatient setting. I would tell you that our belief in the ASC setting in this area for much more runway comes from the fact that we continue to see growth in the ASC setting. We continue to see new patients, including Medicare senior patients that are older, being effectively treated in the ASC setting along with expanding the commercial market. And we continue to see physicians coming to USPI wanting to initiate their first orthopedics de novo work in our centers either through new center development or joining existing centers. So I think there’s still demand in runway to go for ASC based orthopedics. Longer term, what we’re focused on is looking at areas within orthopedics or even spine work that today are very much done in the acute care hospital and developing clinical algorithms to figure out how to safely do those types of procedures more actively in the ASC setting. So in orthopedics, an example of that would be shoulder surgery and as I indicated, spine surgery, and I think we’ll see a migration in those areas in a few years as well. Operator: Thank you. We’ve reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today’s teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

Operator: Good morning. Welcome to Tenet Healthcare's Fourth Quarter 2022 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell you may begin. Will McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's fourth quarter 2022 results, as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saum Sutaria, Chief Executive Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represents management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Saum Sutaria: Thank you Will, and good morning, everyone. To kick us off, I want to thank all of our physicians and caregivers for their commitment and attention to our patients' needs throughout 2022. Three years into the pandemic, I continue to be inspired by the people I meet who have chosen to forge ahead and find their calling in health care. Second, I want to take a moment to acknowledge three of our leaders who have announced their retirements this year. Roger Davis came to Conifer in 2020, planning to transition to become the CEO of a spun out independent company. Roger has been a selfless leader acting upon the opportunities to improve Conifer's technology, point solutions, AR operations and global footprint with Conifer remaining a part of Tenet rather than advancing his own personal goals. For that we will always remember his leadership as a role model in the company. Brett Brodnax has devoted over 20 years to building today's USPI. He is a pioneer in ambulatory surgery and a rock star in his field. The relationships he has cultivated with health system partners and doctors will remain a hallmark of USPI, because he has never treated them as his, but ingrained them into the fabric of USPI. He and I jointly selected Andy Johnston to return to the company after gaining additional operating experience outside of the organization and I could not be more pleased with the way the three of us will lead this transition over a full year. And generously Brett's desire for USPI's success is so strong that he has offered the option for additional time beyond 2023 with us. Dan Cancelmi is approaching 30 years with Tenet, starting as a CFO in a hospital and building his career succeeding in every role he took as he ascended to our company's CFO. At every step, Dan championed his team members, brought the perspective of the leaders in the field to our home office, and relentlessly works to be solution oriented to the problems we face. In the last few years he's been instrumental in every aspect of our turnaround efforts, demonstrating his ability to adapt and take a fresh perspective on a company he's known his entire career. He creates value for our shareholders. Dan represents the highest model of integrity in our organization and I'm grateful for his dedication to help onboard a new CFO at Tenet. In the last five years, we've built a model for leadership transitions that are stable and collaborative handoffs and these should be no different thanks to all three of you. With that, let's turn to our 2022 results. In 2022, we recorded net operating revenues of $19.2 billion and consolidated adjusted EBITDA of $3.47 billion, which translates into an attractive 18.1% adjusted EBITDA margin. We finished the year strong and delivered results in the fourth quarter consistent with or slightly above the expectations we set for all three of our businesses, driven by stronger volumes and excellent cost management. For the year, USPI delivered $1.327 billion in EBITDA, with strong margins at 40.9%. Importantly, in 2022, USPI had 4.6% growth in same-facility revenues in the range of our long-term goal of 4% to 6% top line growth. But as we've discussed, the performance in 2022 was not consistent quarter-to-quarter and same-store EBITDA growth was below our expectations. We are pleased that the fourth quarter returned to positive same-store growth and the typical seasonality of strong December volumes that we used to see pre-pandemic. USPI's M&A engine under the Tenet umbrella continues to be an industry-leading differentiator. In 2022, we added 45 centers to the portfolio through M&A and de novo development, in addition to the SCD centers. This was highlighted by our acquisition of 22 facilities in our partnership with the United Urology Group. Turning to our hospital segment. We generated nearly $1.8 billion of adjusted EBITDA in 2022 during a challenging operating environment. Our operators navigated a cybersecurity attack, as well as continued COVID-related pressures. Importantly, we saw a meaningful improvement in clinical quality and patient safety metrics such as a 50% reduction in both MRSA infections and hospital-acquired pressure ulcers. We saw our peak in contract labor expense in September and by December we had reduced that by almost 23%, exiting the year with contract labor below 6.5% of our consolidated SW&B expense. We are confident in our labor management system and we'll continue to adjust as needed for critical patient needs. Over the past year, we have also invested in our workforce with increased pay bonus programs and incremental benefits. Importantly, our nurse retention and recruitment efforts continue to pay dividends, with RN hires up in 2022 over 2021. Retention has improved as well. In the fourth quarter, nurse turnover improved by 22%, compared to the average of the prior four quarters. Finally, Conifer had another strong year, with third-party customer revenue growth of 10%. Adjusted EBITDA margins remained strong at nearly 28%. Conifer's pipeline of sales opportunities remains robust, reflecting the investments that we have made in our commercial capabilities for both integrated and point solution initiatives. Let's transition to 2023 guidance. We are projecting full year 2023 adjusted EBITDA of $3.16 billion to $3.36 billion, which represents an attractive growth rate of 7.2% at the midpoint on a normalized basis. First, in our industry-leading ambulatory surgery business, we anticipate normalized adjusted EBITDA growth at USPI of 11% at the midpoint of our guidance, based upon our expectation of 4% to 6% growth in same-facility revenues, further accretion from the second SCD transaction and continued strong contributions from our M&A and de novo initiatives. Our guidance reflects a healthy 5% organic EBITDA growth rate for this year. Let me address the second SCD transaction in same-facility growth in more depth. The most direct way to characterize the second SCD transaction is that we are behind our expected ramp-up by approximately one year. Recall, unlike the first SCD transaction, where we acquired mature centers and achieved 100% in buy-ups to consolidate and deliver synergies into those centers. The second transaction had a broad range of assets, including many that were early in development. We had some planned buy-ups and center openings that did not happen on our original time line in 2022. The agenda to make progress has not stalled. Since Q3 we have completed six more buy-ups at multiples unchanged from prior buy-ups. We have opened the majority of the de novo centers, with the remaining seven on track to open this year. Collectively, the SCD transactions deliver a total of 135 centers, which have margins of approximately 40% and were acquired for an average multiple under 10 times pre-synergies. Turning to same-facility growth. The continued migration of procedural services into an ambulatory setting acts as a sustained and far-reaching tailwind for our business. Looking back from 2019 to 2022, the same facility business has recovered to pre-pandemic volumes. And at the same time our net revenue per case has risen by 12.8%, as a testament to our ongoing addition of higher acuity cases. We are also positioned to drive attractive growth in 2023 and beyond. Let's unpack that further given our Q4 2022 same-facility volumes and how we bridge into our 2023 guidance. First, as a foundational element, in 2022, on a same-facility basis, our active physician population grew over prior year. Second, the impact of Hurricane Ian causing facility closures during the fourth quarter was about 0.3%. Those facilities are now repaired and operational in the current year. Finally, reductions in certain lower acuity services and investment in higher acuity services are still ongoing. For example, in Q4 2022, this impacted same-facility growth by approximately 1.1%. We will continue to seek opportunities for service line acuity enhancements into the future. It is noteworthy that our same facility ASC total joint cases, as one of the highest acuity orthopedic sub-service lines, grew by 13.2% in 2022 relative to 2021. For these reasons, we have conviction in our strategy and we are comfortable with our guidance of same-facility growth returning to 2% to 3% in 2023. Let's turn to our USPI M&A engine, which represents the other critical value driver for Tenet shareholders. For many years we have consistently acquired centers at attractive valuations and driven post-synergy multiples for our acquisitions to below 5 times. And our latest 2022 vintage is estimated to do the same by the end of year two. We intend to invest approximately $250 million in ambulatory M&A each year and have a robust pipeline to support that level of investment. We continue to be active in the construction of new centers originating from our USPI development team and separately from our SCD partnership pipelines. We currently have 22 centers that are in active syndication or under construction. Adding centers with strong margins, and attractive post-synergy multiples, remains the best use of our cash for investments, to enhance tenants free cash flow. We recently announced a new development agreement with Providence Health System, a leading innovator in health care services in the Western United States, that will expand our strategic partnership and increased ambulatory access across new markets. We expect this relationship will expand to 15 to 20 centers in the next two years. Stepping back, USPI is among the best examples of value-based care in our industry. Our services are generally 30% to 50% more affordable than similar services delivered in a hospital setting. USPI is the preferred partner, for both high-quality physicians and health systems as our teams deliver the full range of management services. The linkage to our hospital business creates an unquestionably superior platform, from which to draw talent operating expertise and scale benefits. Turning to our hospital segment. We are expecting adjusted EBITDA growth of 4.6%, on a normalized basis at the midpoint of 2023. We anticipate this will be driven by 2% to 4% adjusted admissions growth, continued operating discipline and the expectation for further moderation in contract labor costs, partially offset by increases in employed labor costs. The year-over-year core adjusted EBITDA growth rate for 2023 is higher than our long-term forecast of 2% to 3% annually, because of the tailwinds created by the points I've noted, and also the continued recovery of our Massachusetts market and ramp-up of our hospital in Fort Mill. Our portfolio transformation also continues as we recently reached an agreement for John Muir Health to purchase Tenet's 51%, interest in the Santa Ana [ph] Regional Medical Center for $142.5 million slightly above a 10 times multiple. This transaction is expected to be completed in 2023 and subject to regulatory approvals, and customary closing conditions. Finally, Conifer is expecting adjusted EBITDA growth of 11% for 2023, on a normalized basis for changes in Tenet’s contract terms and client hospital divestitures, driven by new sales and a continued focus on automation and offshoring activities, to realize greater efficiencies in our operations. All in, our full year 2023 guidance of $3.16 billion to $3.36 billion, represents an attractive recovery target that is also respectful of the continued challenges of the current operating environment. Our management discipline has been a hallmark of our success, and we are focused on accelerating efficiencies and across our business segments, and investing for the future. And with that, Dan will now provide a more detailed review of our financial results. Dan Cancelmi: Thanks, Saum. And good morning, everyone. We were very pleased with how we finished the year, with fourth quarter adjusted EBITDA excluding grand income, coming in at or above the midpoint of our guidance ranges, for all three of our businesses, driven by renewed same-store volume growth for USPI, strong same-store adjusted admissions growth in our hospital business, and lower levels of contract labor exiting the quarter, all of which gives us momentum as we begin 2023. In the quarter, we generated consolidated adjusted EBITDA of $897 million, which included $40 million of grant income. Our performance reflected strength in volumes and improved management of labor costs. Additionally, our results were supported by continued focus on high acuity service lines. Now I'd like to highlight a few key items for each of our segments, beginning with USPI, which delivered strong operating results. USPI's fourth quarter adjusted EBITDA grew 18.7% compared to last year excluding grant income and its EBITDA margin continues to be very strong at 43.6%. Surgical case volumes were 101% of 2019 pre-pandemic levels. Also USPI delivered a solid 2.3% increase in revenue per case and surgical cases were 70 basis points higher than fourth quarter 2021 on a same-facility basis. For the full year, USPI produced case volume growth of 2% and net revenue per case growth of 2.5%. We continue to be pleased with the strong margins and cash flow generated by our ambulatory business. Turning to our acute care hospital business. Fourth quarter same-hospital adjusted admissions increased 2.9% over the fourth quarter of 2021 and total same-hospital inpatient admissions increased 50 basis points, while non-COVID inpatient admissions increased 4.3%. Our labor management continues to be very effective, despite the cost pressures, specialty temporary contract and our staffing costs. On a consolidated basis, we exited the year with December contract labor at 6.4% of consolidated SWMB providing us momentum as we move into 2023. Total hospital costs were well managed in the quarter, as these costs were 3.1% lower than the fourth quarter of 2021 on a per adjusted admission basis. SWMB costs per adjusted admission were up only 50 basis points compared to the fourth quarter of 2021, despite more severe labor pressures this year. Our case mix index and revenue yield remains strong, as we continue our strategic focus on investments in higher acuity, higher margin service lines. Our 2022 CMI has grown at a 4% CAGR since 2019. Turning to Conifer, which again delivered a solid quarter. Conifer produced fourth quarter EBITDA of $90 million with a strong EBITDA margin of about 28%. For the year, Conifer resumed top line revenue growth of about 4% and revenue from external clients increased 10%. Next, let's review our cash flow, balance sheet and capital structure. As of the end of the year, we had $858 million of cash on hand and no borrowings outstanding under our $1.5 billion line of credit facility. We generated $321 million of free cash flow for the year or $1.329 billion before the repayment of about $1 billion of Medicare advances and deferred payroll taxes related to the pandemic that were received or deferred in 2020. All of these advances and deferred taxes have now been repaid. During the fourth quarter, we repurchased approximately 5.9 million shares of our stock for 250 million. Our December 31 leverage ratio was 4.1 times EBITDA, consistent with year-end 2021. As a reminder, we have no significant debt maturities until the third quarter of 2024 and have approximately $1.8 billion of secured debt borrowing capacity available, if needed. We have strengthened our balance sheet over the past several years and retired or pushed out debt maturities, which we believe provides us ample financial flexibility to support our growth initiatives. Let me now turn to our outlook for this year. Our projected consolidated adjusted EBITDA for the year is in the range of $3.160 billion to $3.360 billion. As we have discussed previously, there are a number of items that impact the comparison of our 2022 results to our 2023 outlook, which are outlined on slide 7 of our investor presentation. Let me summarize them. First, we are assuming consolidated organic EBITDA growth at the midpoint of approximately 6% over 2022, after normalizing for various items that I'll discuss shortly. The organic growth is anticipated to be driven by stronger ambulatory and hospital volumes lower levels of contract labor and other cost efficiencies, negotiated commercial rate increases and continuing investments in hospital higher acuity service lines. Second, we anticipate the USPI will drive $65 million of organic EBITDA growth which is about 5% growth. This organic growth coupled with approximately $78 million of additional earnings related to USPI's acquisition and development activities, is anticipated to result in normalized EBITDA growth of about 11%, for USPI. Third, we anticipate year-over-year EBITDA growth of about $100 million due to the estimated impact of the cyber attack on our hospitals last year and an additional $10 million of earnings from proceeds related to the attack that we received this year. No other insurance proceeds for this matter have been assumed in our 2023 guidance. There are also several other items impacting our 2023 EBITDA guidance compared to last year, many of which we previewed on our third quarter earnings call. First, we recognized $194 million of grant income in 2022, related to the pandemic. Our guidance, for 2023, does not assume any noteworthy amount of grants this year. Second, we realized $114 million of gains on asset sales completed in 2022. Next, there was $31 million of Texas Medicaid supplemental funding revenue, related to 2021 that we recognized early last year when the program was approved. Also, there are various revenue reductions this year that total almost $200 million for reimbursement changes substantially related to the pandemic, the 340B outpatient issue and the ACA that are detailed at the bottom of the slide. Finally, our 2023 guidance assumes a $14 million reduction in EBITDA, due to our planned sale of the San Ramon facility that we announced last month and a $27 million reduction in Conifer's EBITDA this year, due to transition contract expirations related to the sale of our former Miami Hospitals and CHI's divestiture of certain Iowa facilities. After adjusting for these items, our 2023 outlook represents year-over-year normalized consolidated EBITDA growth of 7.2%. A few additional assumptions related to our outlook. We are assuming 2023 same-hospital admissions increased 1% to 3% and adjusted admissions increased 2% to 4%. COVID admissions of approximately 3% down from 6% in 2022 same-facility USPI surgical cases are projected to increase 2% to 3% and USPI's net revenue per case is also projected to increase 2% to 3%. Another assumption I want to mention is that we are revising the rates and scope of services under the revenue cycle contract between Conifer and our hospitals. The revised contract continues to be on a commercially reasonable basis is anticipated to result in an approximately $40 million EBITDA reduction for Conifer this year and its corresponding $40 million increase in our hospital segment EBITDA. This has no net impact to consolidated revenues, EBITDA or margins. Finally, we would expect first quarter 2023 consolidated adjusted EBITDA to be $775 million at the midpoint of our range. And we anticipate that USPI's EBITDA in the first quarter this year at the midpoint will be approximately 22% of our full year 2023 USPI EBITDA guidance. Turning to our cash flows for 2023. From a cash flow perspective, we continue to target another strong year of free cash flow generation. We are expecting cash flow from operations of $1.850 billion at the midpoint of our range and capital expenditures of $650 million at the midpoint. We anticipate this will result in free cash flow of $1.200 billion at the midpoint, which does incorporate an estimated $170 million increase in income tax payments this year compared to 2022 due to us nearly fully utilizing our tax NOL carryforwards as a result of our improved profitability over the past several years. This free cash flow will be used in part to fund approximately $560 million of anticipated cash payments to non-controlling interests. I do want to point out that our 2023 guidance does not reflect the use of any capital deployment for share repurchases or debt repayment. However, this is not to say that we won't deploy capital for these items. It's just that we have not reflected any 2023 share repurchases or debt retirement in our guidance. Our free cash flow generation has improved substantially over the past several years and we expect to continue to drive strong cash flows, while executing on our growth plans. As a reminder, our capital deployment priorities have not changed. First, we plan to continue allocating approximately $250 million of capital annually to grow our USPI surgery center business; second, to enhance our hospital growth opportunities, including the continued focus on higher acuity service offerings; third, evaluate further opportunities to retire and/or refinance debt; and finally, share repurchases depending on market conditions and other investment opportunities. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin Fischbeck: Great. Thanks. I appreciate all the color on the USPI side of the equation and the expectations for improvement there. But I just would love a little bit more color on as you do the postmortem on what happened in 2022 and why you're a year behind on that first -- on the second part of the transaction, how much visibility do you have in that normalizing? What went wrong then? Why do you have visibility in improvement this year? And is there anything you're going to be doing differently around future deals or de novo developments? Thanks. Saum Sutaria: Hey, it’s Saum. Just real quickly on that. I think it goes -- this goes back to the commentary that I made about a wide range of the types of centers that we purchased, many of which were much, much in earlier stages of development ramp-up. And again, some of them were literally just breaking ground. And so when you couple that with the disruption from COVID to physician practices that would impact ramping centers, you look at some of the supply chain issues we faced in getting centers opened and running with the right equipment and infrastructure on time, the ramp-up of those centers being slowed slowing potential timing for buy-ups. I mean all those things kind of played into a bit of a perfect storm on a great set of assets as we noted they're the center level asset performance on the ones that were more mature, we're doing just fine. But just when you look at all of that put together, we had a set of assumptions that entered not expecting a lot of that disruption and it just didn't play out that way. And that's why I figured, it's just easier to just be clear. It's a year behind the expectations but we still feel great about the portfolio. Operator: Our next question comes from Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse: Hey. Good morning, guys. I was wondering if you could just spend a minute on what's in guidance for reimbursement, particularly on the commercial side. What kind of success are you getting in renegotiating contracts? And what visibility does that give you in terms of the rate update you'll see over the next two to three years, the contract duration? Saum Sutaria: Hey Jamie, it's a Saum. Good morning. We believe we're in a very good position from a health plan contracting perspective, where is essentially fully contracted this year about 95% and in terms of the negotiated terms and provisions we negotiate contracts for all of our facilities hospitals, USPI facilities, our physicians on the national basis with the national plans and on a statewide basis for the Blues. So we feel very good where we're at. We get asked a lot about in terms of percentage increases. And are we having conversations about given the inflationary environment, we absolutely are. We talk about rate increases typically in the 3% to 5% range, and some more recent negotiations. We've, obviously, been discussing the inflationary aspects and I think we've been making progress on that too. So we feel really good where we're at from a contracting perspective. Operator: Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. I wanted to ask another question on USPI. I appreciate all the detail. Dan said, I think 22% of EBITDA for the year in the first quarter that looks like it's up about 6% year-over-year, if I'm measuring that correctly versus 11% for the year. So what's driving that? What do you think is going to drive the significant ramp through the year to get to 11%? And then just quickly on NCI it looks like it's up a lot year-over-year materially faster than growing faster than EBITDA. Can you walk through the driver of that? I assume, it's at least partially due to the buy-ups. Thanks. Dan Cancelmi : Hi, Justin, it's Dan. Let me address – let me hit the second one, the point about the NCI. Our NCI expense assumption for the year, when you look at it on a – we refer to it as sort of like a flow-through basis EBITDA minus NCI. It's roughly 64% anticipated for this year, which is consistent with prior years. 2022 is roughly 65%. So the flow-through is really consistent between the year. You're right. There is – obviously, as some buy-ups are completed that can have an impact too. But the flow-through in aggregate is very consistent from year-to-year. In terms of the first quarter, we obviously laid out our first quarter assumptions on a consolidated basis $775 million at the midpoint and your point about USPI being 22%. Keep in mind, as USPI moves through the year fourth quarter is typically seasonally the strongest quarter for USPI, so we feel comfortable with where we've set our guidance at this point. Justin Lake: Okay. But the seasonality wouldn't be impacted on a year-over-year basis then I would just say my right that it's up 6% in the first quarter, but 11% for the year. And if so what drives the ramp through the year to get to the 11%? Thanks. Dan Cancelmi: Yeah. Again, we feel comfortable with the growth. Obviously, the percentage can move around a bit depending on various factors. But we – again, we feel good with where we set guidance for the first quarter as well as full year. Justin Lake: Thanks. Operator: Our next question is from Ann Hynes with Mizuho. Please proceed with your question. Ann Hynes: Hi. Good morning. Thank you. I just want to focus on surgery center organic revenue growth of 3%. You did give some detail on the call backing into it, it would be 4.3% and 1% being the reduction of lower acuity services. Can you tell me what inning you are in that process? How much of a headwind to growth? Is that – will that be next year? And also is there anything else that you think is currently impacting the company's ability to get back to that mid-single-digit growth target and maybe other things you're doing to achieve that in 2023? Thanks. Saum Sutaria -: Hi, it's Saum. First of all, just so that we characterize it the right way. I don't consider it a headwind to growth in the sense that what we're really trying to do is enhance acuity and focus on not only net revenue growth, but over time profitability from those higher-end services. I mean, the case counts it's a headwind to case counts in some respects more than it is what we're trying to do and build and grow. And really, we're talking about the lower end of really the lower end of services that you find in the ASC setting, which you're going to migrate over some time anyway. So we actually -- I mean, I'd reiterate we're going to continue to look for those opportunities. Now I think your question of what inning are they in particular for USPI is a good one. And the -- one of the reasons that we feel comfortable with this year's guidance is that the impact of the strategic and other initiatives as well as some of the reductions from those type of migrations that we saw in 2022, we expect to slow in 2023. That's not to say that sometime in the year or in the future, we won't look at other opportunities for transitions, but we expect them to slow, which is why I called that out as a bridging item into the 2023 guidance Operator: Our next question comes from A.J. Rice with Credit Suisse. Please proceed with your question. A.J. Rice: Hi, everybody. Thanks for all the detail on USPI. I might pivot over to labor. If you're saying in December contract label was about 6% of total SWB. Is that a good run rate that you're taking into 2023 with guidance on where you think that would be? And then I know your experience with contract labor throughout 2022 was a little different in pattern than some of the other public peers. How much of a tailwind gross basis would that represent if you're 6% or whatever the number you're thinking it will be for 2023 versus what you spent on contract labor in 2022? And then finally have you incorporated any of that into your outlook, or are you sort of holding that out in case you need it for the permanent labor? Dan Cancelmi: Hi, A.J. It's Dan. Good morning. In terms of contract labor - contract labor peaked as a percent of SWB in September. And as we move through the quarter it declined sequentially each month. And we exited with December at 6.4%. As we move into this year, we have assumed some further moderation this year in our contract labor spend, obviously, net of full-time employment costs because I mean what we're really focused on is replacing contract labor to the greatest extent possible with employed colleagues. And so we – obviously, we've been focused on now. We're going to continue to do that as we move through this year. And so, yes, we have built some moderation in aggregate contract labor into our guidance this year. A.J. Rice: So net-net what you're doing on the permanent side it is -- you have some in there? Dan Cancelmi: Yes. We've obviously taken into consideration the incremental investment with our employees when we think about the reduction in contract labor it obviously will be replaced by some form of employed costs, right? A.J. Rice: Okay. All right. Thanks a lot. Operator: Our next question is from John Ransom with Raymond James. Please proceed with your question. John Ransom: Hi. Just a little confused about the cyber issue. How do we think about that last year versus this year in terms of a good guide to organic growth? Dan Cancelmi: Hey John, it's Dan. So, obviously, in terms of the EBITDA, we've sized that approximately $100 million and we did receive insurance proceeds in January of $10 million and that is reflected in our guidance this year. But we have not reflected any additional insurance proceeds in our guidance this year. Obviously, we're working that with the insurance carriers, but we have not assumed any additional proceeds. Obviously, in terms of the impact on volume, it did have an impact on volume. And we obviously took that into consideration when we built our volume assumptions for this year. John Ransom: Just remind me what was the total that you collected last year from insurance? Dan Cancelmi: Total was about $10 million in terms of the net impact on the P&L. But that offset -- that's part -- we rolled that into that net $100 million number. John Ransom: I see. So, in other words just to be clear it's about a $90 million good guide if we think about the organic growth help this year. Dan Cancelmi: Well, no, we view it as $100 million. That's what we put on the slide. Again the cyber estimate that was an estimate and it took into consideration some of the insurance proceeds that we received. John Ransom: Okay. I got you. That's what I was confused. All right. Thanks so much. Operator: Our next question is from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Hi, thanks. Just first a clarification. I think the baseline that you guys were talking about last quarter was about $3.15 billion in EBITDA for 2022. And now it's $3.03 billion. So, I'm just curious what changed in the baseline assumption? And then my real question I was interested in the comment that Saum made around value-based care and USPI I'd be curious if the build-out of your ASC portfolio in the past couple of years has changed anything with respect to those contracts on a national or state level with the Blues with the big payers. And specifically are they looking at ways to move more volumes to ASCs? And how is that sort of impacting your negotiations? Dan Cancelmi: Hey Josh it's Dan. Let me address in terms of some of the funding reductions compared to what we talked about on the call in October a couple of things. One, there is -- we did recognize $40 million of additional grant income in the quarter that number through the end of the third quarter was roughly $154 million. We ended the year with $194 million. But also at that time we didn't have visibility -- clear visibility in terms of when some of the pandemic supplemental funding for the Medicare 20% add-on the FMAP the Medicaid, additional FMAP funding so when -- obviously, we know now when the public health emergency is anticipated to expire. And we have visibility into how the FMAP will be phased down during the year. Those are the primary differences. Saum Sutaria: Yes, hey it's Saum. On the second part of your question, this is another reason why the continued push into what I described strategically around higher acuity services in the ambulatory surgery setting is important because on a differentiated basis relative to the cost in a hospital that continues to be a very attractive site of care value-based care initiative, I don't -- I can't think of other than the ASC setting a stronger site of care efficiency in the system that would exist relative to the alternative cost structure. And so yeah, we do see that as not only attractive to commercial payers, but also to government payers from the standpoint of the work that we do there and also the ability to do it with high patient satisfaction and safety levels. So I think over time as we continue down this path of innovating in higher and higher acuity things than our ASCs. I think the ASC business in USPI in particular will be viewed as a real value-based care enterprise. Operator: Our next question comes from Steven Valiquette with Barclays. Please proceed with your question. Steven Valiquette: Great. Thank. Good morning, everyone. I mean the details on slide 10 for the adjustment [indiscernible] EBITDA for 2022. And I guess from that it seem like EBITDA margin for the total company [indiscernible] is right around 15%, if we're doing the math roughly, and then 2023 [indiscernible]. So just want to confirm that we are thinking about that right that are at least gradually determine the level of EBITDA margin expansion in 2023 versus 2022 [indiscernible] basis? And then [indiscernible] is there anything else where we're calling out if your point of view [indiscernible] that could drive some margin expansion at least on gross basis for 2023? Thanks. Dan Cancelmi: Hey, Steve, we were having a hard time hearing you and you were cutting out. I think you were asking about the margins on a normalized basis. When we look at the margins in 2022 versus 2023 projections on a normalized basis in 2022 15.9% call it 16%. And for 2023, it would be roughly 16.3% on a consolidated basis, after you normalize for those various items. So there is some margin expansion and that's obviously will continue to be a focus of ours to continue to expand our margins as we move through the year and into 2024 and beyond. I'm not sure I heard exactly on contract labor. But as I mentioned, we exited the year at 6.4% saw nice improvement. The operators did a really good job managing those costs down and we have assumed some moderation as we move through this year in contract labor that has been reflected in our guidance. So hopefully, that addressed your questions that we were having a hard time hearing you. Steven Valiquette: Yeah, better now. But that was really just [Technical Difficulty] Saum Sutaria: Steve, you're breaking up entirely for us probably better to follow-up with Will off-line. We really can't hear you. We're kind of catching every other word. Operator: Our next question is from Whit Mayo with SVB Securities. Please proceed with your question. Whit Mayo: Hey, thanks. Maybe to ask one more on USPI sorry about this. But what actually did SCD contribute in 2022? That might be helpful. And what do you have in your plan for this year? Do you think you get back to that $140 million target, the $175 million? And then maybe just a quick follow-up. Looking at the bridge, it does strike me as odd that you expect USPI to generate the lowest organic growth of all the segments this year. And the prepared comments sound a lot more bullish and encouraging than maybe the percent that you're guiding to. So maybe just to challenge you a little bit on the 5% number like why that is the right number? Dan Cancelmi: Hey, Whit, it's Dan. In terms of SCD, as Saum mentioned in his prepared remarks, we're basically a year behind. And what we said for 2022 for SCD was we would anticipate generating approximately $140 million of EBITDA in 2022. So you should think of it as that in terms of -- for 2023. We're essentially a year behind in terms of that. In terms of the organic growth, USPI's organic growth we're projecting that to be 5% on a normalized basis. And the hospital growth is -- there's -- as Saum again mentioned in his script that growth is a little bit higher than what we historically project for the hospitals. But it's also being supported by further improvement in our Massachusetts Hospital, as well as our new facility outside of Charlotte. Whit Mayo: Okay. Thank you guys. Operator: Our next question is from Andrew Mok with UBS. Please proceed with your question. Andrew Mok: Hi, good morning. Hoping you could provide an update on the buy up activity in the second SCD transaction? How many SCD II buy-ups did you complete in 2022 versus your expectation I think of 30 plus to start the year? And what are you assuming in your guide for 2023? Thanks. Dan Cancelmi: Hey, Andrew, it's Dan. In terms of -- we have assumed some buy-ups in 2023. I would say we have very good visibility into them and we feel very comfortable with the assumptions that we have built into our guidance for this year for those anticipated buy-ups. Andrew Mok: And do you have the number that you did in 2022? Dan Cancelmi: The entire -- 35 -- roughly 35. Andrew Mok: Okay, great. Thanks. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey guys. Thanks for taking the questions. A couple of questions on the hospital side just for -- just some number of questions. Can you quantify the nurse-to-patient ratio you guys had in back office 2022? And how do you think about that for 2023. On the same topic, can you quantify the turnover you saw in the back half of 2022? And any details around nurse recruiting and how it's tracking versus your expectations? Saum Sutaria: Hey, Pito it's Saum. We don't report our nurse-to-patient ratio. They're different state-to-state and some states have regulations and others don't. And it really depends heavily on the acuity. I'm not even sure how in an aggregated way one could describe a nurse-to-patient ratio given the differences in ICU, MedSurg, Forest [ph], Telly, et cetera and we don't plan on reporting on that. The second part of your question, it's important obviously I took the time to mention it and I appreciate you're highlighting it. We're very focused on our nurse, but also tech and other important clinical role recruiting and that's been going very well. As I've indicated, our hiring was up on employed staff in 2022 over 2021 and that's accelerating. But at the same time, importantly, because of the investments we've made in the workforce, our turnover rates have come down, which is important from a retention perspective. And I think, you could legitimately attribute those reductions to the investments we've made stabilization of the operating environment, coming out of the pandemic surges, the recurrent surges and also probably a somewhat less desire for nurses to continue on the pace at which many of them are choosing to travel for other assignments. And I think as all of those things help to stabilize the workforce environment in 2023. As Dan noted, we hope to make further reductions in our reliance on contract labor and expect that to moderate through the year. So, it is a very important agenda item as we look forward. I would tell you, one last piece of color on this that, over the past couple of years, I had mentioned a few times, that we have built a lot of relationships at the ground level with nursing schools. And our ability right now to bring on new graduates into our environment, it's better than I've seen in a long time and that's helping. Those investments in relationships that we made over that time, I think will serve us well in 2023. Pito Chickering: Great. Thanks, so much. Operator: Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Hey good morning, guys. Dan thanks for the color on your capital deployment views. But maybe just thinking about the buyback announcement from last quarter and your views on debt pay down as well. Where do you think the right leverage ratio is, or have you set leverage targets? And maybe just to clarify, as we think about buybacks, curious as to your thought or philosophy on using debt at some point to buy back stock, or are we avoiding that altogether? Just want to clarify all these things. Thanks. Dan Cancelmi: Yes. In terms of leverage, we've obviously made substantial progress over the past four or five years. If you go back to 2017, we were north of six times and we brought it down to approximately four times since then. Reducing leverage is obviously a very important focus of ours. As we make all capital decisions, we take into consideration, what's it going to mean to our margins, what's it going to mean to our free cash flow generation, what's ultimately going to mean to our leverage. So, it's top of mind always. And we'll continue to look for opportunities to reduce leverage in the future. In terms of the mix of debt retirement versus share repurchases, as I mentioned in my remarks, we have four key priorities. Debt retirement is one of them, as well as share repurchases. We look at -- obviously, we'll look at where market conditions are at and as well as various investment opportunities that we have and balance -- balance our capital allocation based on what we think will drive a best return for shareholders. Brian Tanquilut: Thank you. Operator: Our next question is from Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: On the volume outlook. So on the hospital side it looks like if you achieve the growth you're targeting. I think you'll be in the upper 80s range compared to the 2019 baseline. I guess how should we think about the volume that you haven't recovered? I guess how much of that do you view as a real opportunity, if labor pressure eases and how much do you think could be service lines that might not make sense for the company going forward? And then just on the USPI side, do you think the volume growth on USPI is going to be pretty consistent throughout the year, or do you think maybe that's going to be ramping a little bit throughout the year maybe as the environment continues to normalize? Thanks. Saum Sutaria: Yes. I'm happy to start, it's Saum. So on the hospital side from a volume perspective, I would say that it really – the year really depends on the assumptions that we've moved past significant disruption from COVID-related activity. Obviously, as the last three years have proven, that can be somewhat hard to forecast. But I think there's a lot of good reasons at this point to believe that that will in fact be the case this year. Even the acuity of the COVID that we're seeing and even during the winter the amount of COVID we saw has come down. It's been quicker to treat easy short stay in and out type of cases with much lower impact on acuity. And importantly for us, given our strategy, it had a lot less effect on disrupting surgical scheduling and other things in the acute care hospital environment. So anyway, that's just I think a good sign overall. Look, in terms of USPI, as I mentioned, we're bridging from an inconsistent quarter-to-quarter set of results in 2022 into 2023 with a very thoughtful, bottoms-up, comprehensive examination of our portfolio. It's – this is really important. We took the time to understand the physician additions, the initiatives, the service lines, et cetera before coming to our guidance and we expect to see more consistency through the year this year than we did in the prior year. And look, if there's a range on the guidance for a reason, if post-pandemic recovery is more attractive, the upper end of the guidance contemplates that. And obviously, we would love to deliver that. So that's what we're working towards. Dan Cancelmi: Yes. And just to add on just in terms of from an earnings perspective is for USPI, as we move through the year, as I pointed out, roughly 22% of the EBITDA for the year will be generated in the first quarter, which is great when you look at the first quarter last year, it's growth of close to 13%, you take into consideration there is some headwinds in the first quarter this year compared to last year related to sequestration the 340B, but still even with some of that there's still nice growth year-over-year in the first quarter. And obviously, the fourth quarter is the strongest quarter for USPI. Operator: We have reached the end of the questions at this time. This concludes today's teleconference. Tenet Investor Relations is available for follow-up questions. You may disconnect your lines at this time and we thank you for your participation.

Operator: Good morning. Welcome to Tenet Healthcare’s Third Quarter 2022 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. [Operator Instructions] I will now turn the call over to your host, Mr. Will McDowell, Vice President, Investor Relations. Mr. McDowell, you may begin. Will McDowell: Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's third quarter 2022 results, as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saum Sutaria, Chief Executive Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represents management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the Risk Factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Saum Sutaria: Thank you, Will, and good morning, everyone. I’d like to start by taking a moment to remember Ron Rittenmeyer, our former Executive Chairman, who recently passed away. Ron had an unwavering commitment to Tenet for which he will always be remembered. This included ensuring a seamless transition in management, which was substantially completed late last year. Ron was a dear friend and colleague to many and our thoughts remain with his family. Let's turn to the quarter. Throughout the third quarter, we continued to deliver high-quality care for our patients and value for our stakeholders. We delivered favorable results with enterprise net operating revenues of $4.8 billion and consolidated adjusted EBITDA of $841 million in the quarter. Our operators effectively navigated a significant COVID surge impacting staff availability during the summer, continued our recovery from the cyber-attack and supported operations throughout Hurricane Ian. Despite these challenges, we exit Q3 with a positive trajectory for the remainder of the year. USPI demonstrated continued EBITDA growth and strong free cash flow generation in the quarter. The segment delivered EBITDA growth of 16.4% over prior year. We are very pleased with the expanded portfolio we've built, but must acknowledge that we are behind our original 2022 plan for USPI. Throughout the first half of the year, we were confronted with some of the challenges impacting the segment, but we also had periods where performance met our high expectations early in 2022. In the third quarter, multiple things came together and when performance did not meet our increasing expectations sequentially through this year, we decided now it's the time to reduce our guidance in the segment. It is important to unpack this because the impact is mostly due to shorter-term disruption rather than any change in our future outlook for the segment. We are also not seeing evidence of recession-related “patient demand changes.” In fact, we continue to see ongoing recovery in elective diagnostic procedures such as in GI and anticipate seasonal growth in Q4 like in previous years. With that summary, let's go through the unpacking in some detail together. In Q3, the segment generated approximately 40% EBITDA margins and maintained 100% of pre-pandemic volumes. USPI did not face a significant trail-off in business, nor a shock that caused the business to fall backwards from its trajectory this year. In Q4, we are still targeting sequential seasonal earnings improvement above Q3 of approximately $86 million at the midpoint from $319 million to $405 million. This is a very attractive business and deserving of the investments we make in it. Now, let's turn to why the business has not met expectations in Q3. First and more recently, Hurricane Ian had a modest adverse impact on 60 USPI centers in Florida and South Carolina. While the majority of cases have been rescheduled over the next few months, there's still four centers that have not resumed fully normal operations. Second, case cancellations spiked in July to nearly 20% and remained high throughout the summer COVID spike. The lingering impact on COVID has impacted staff and physician availability, as well as demand from doctors' offices not running at full throughput. Stepping back, if you recall, our original assumptions for USPI in 2022, as we have indicated before, included minimal impact of COVID in the growth we expected from the segment this year. Despite this, as I noted, USPI delivered surgical volume consistent with 2019 pre-pandemic levels. Recognizing the shortfall to expectations, each center is currently working through 2023 plans for further growth with no change in the mindset about a strong ongoing recovery from COVID. We are not changing our assumption that our ASCs should target 4% to 6% organic year-over-year growth in EBITDA over the long-term. Third, USPI has also seen the adverse impact of global supply chain issues. Let me explain. New center de novo developments, which is a rapidly growing and very attractive part of our portfolio expansion strategy, have been delayed or slow to ramp up. This includes many of the second SCD transaction centers, which were either still in development and or yet to open. To make this tangible, we are dealing with delayed shipments of everything from air handlers to electric switchboards to OR infrastructure to get these centers open. Remember, each center is a well-syndicated physician partnership wanting to fully ramp up their surgical cases. I want to be clear. We remain confident in the future performance of these centers when they open and a special development team is coordinating with the tenant supply chain leaders to alleviate bottlenecks as quickly as possible. As an added point, the exclusive development agreement with SCD's principal to syndicate new partnerships on the next 50 centers is still on track in year one. Fourth and finally, the pace of USPI's consolidating buy-ups in the SCD centers after success in Q1 and Q2 has slowed in Q3. We have worked with the physicians in these centers and there is further opportunity for some of the centers to mature before completing the buy ups and we can deliver our added synergies. We will not force these unnaturally as the relationship with these physicians is foundational to our ongoing success. I want to be clear here as well. These centers are performing well. Their earnings are consistent in a range of our expectations and they are continuing to ramp up. As we are a substantial minority owner in these centers, we do participate in this strong performance, but not yet at the consolidating equity ownership levels we originally anticipated. Service line improvement continues to be important to our earnings growth at USPI. Similar to what we have done in a data driven way in the hospital segment, we continue to focus our business in the ASCs towards higher acuity service lines. For example, the continued growth in our orthopedic and spine business at the end of Q3 now represents 20% of our total volume. Our focus is on net revenue intensity and margin expansion more so than only case volumes in some of these markets. Let me give you one example to illustrate the point. At an ASC facility in Tennessee, we have seen a 25% decline in volume on a year-to-date basis, but we have had an overall increase of 46% in net revenue per case and growth in the EBITDA of 10% because we replaced high volume, low acuity cases with high acuity orthopedic cases. I hope the transparency about the segment is helpful and gives you a basis for the strength of our conviction in USPI. Turning to inorganic growth at USPI, our M&A pipeline is very strong. We remain committed to Tenet’s portfolio diversification strategy into ambulatory surgery with a baseline intention of $250 million of M&A and de novo investments each year. We completed our acquisition of 22 United Urology Group centers in the third quarter, which adds well established in new ASCs in key markets like Arizona, Colorado, and Maryland. In Q3, we added 32 centers to the portfolio across 10 states and advanced de novo development for 15 additional centers currently under construction. Adding centers with very attractive margins and post synergy multiples remains the best use of our cash for investments to enhance Tennant's free cash flow. In total this year, we have added 45 centers and this 2022 vintage has an estimated average year two multiple below 5x. We are optimistic about USPI's performance in the fourth quarter and into the coming year. As I indicated, our assumptions this year about COVID, primarily impacting only our hospital segment and generally not our USPI segment just didn't play out that way. The team is focused on organic growth, increase in higher acuity services and M&A. Like in previous years, we are starting to see the seasonal demand for surgical care increase in Q4 and are adjusting our operations to accommodate that demand. Our track record in this business is very strong and very long and our conviction behind the strategy is unchanged by a year of short-term challenges. Let's turn to our hospital segment, which generated $432 million in adjusted EBITDA in a challenging environment. In July, we had an increase in COVID admissions and procedure cancellations, but more importantly, during July with the Omicron surge, nearly 10% of our clinical staff in the hospitals were out at some point in the month, due to COVID. These dynamics led to compressed patient volumes in July and for us increased our procurement of contract labor staff, which impacted the quarter. Our management of contract labor utilization has been very strong during the last two years, but in Q3 it rose to 7.4% of consolidated SWB from 6.2% in Q2. However, our teams immediately made data driven labor productivity improvements and clinically appropriate length of stay actions, which kept our total SWB as a percent of revenue in-line with pre-pandemic levels and importantly demonstrated sequential reductions in the months of the quarter such that we stood at 42.6% of net revenue in September. The point being operating discipline through the challenges we face is a continued strong point of our management approach. Our operators adapted quickly to the volume challenge from July and hospital patient volumes improved sequentially during the quarter. We exited September with adjusted admissions nearly 6% higher than the prior year. Long-term fundamentals in our workforce are as important as our short-term management strategies. We have also applied a data driven and streamlined approach to staff recruitment and retention and we welcomed over 2,000 additional nurses, many of them new graduates to our care teams in the third quarter alone, which will benefit us over the coming quarter and year. We remain focused on enhancing high acuity services across our hospital portfolio and our year to date case mix index has grown at a remarkable 4% CAGR since pre-pandemic in 2019. This is the result of continued clinical program development and capital deployment in cardiovascular, neurosciences, general surgery, neonatal care, and trauma. To share just a few examples, we added cath and EP lab capacity in Palm Beach, introduced the latest cardiac valve technology in Phoenix, expanded our robotics program in San Antonio and began significant NICU enhancements in El Paso. Additionally, we opened the Piedmont Medical Center-Fort Mill in South Carolina in September. So, off to a great start. Our dedicated team designed, built, and staffed the 100 bed state-of-the-art facility amidst COVID on time and on budget. The hospital provided emergency procedure on women's care for over 1,000 patients in its first few weeks. This is a great example of our commitment to providing high quality specialty care closer to home in growing communities. Turning to Conifer. Conifer continues to demonstrate top line growth. Conifer delivered 6% revenue growth, including third-party customer growth of almost 10% with a strong 27% margin in the quarter. We continue to maximize opportunities through automation and offshoring to improve the effectiveness and efficiency of Conifer services. We remain pleased with Conifer's strong performance on cash collections, coding quality, and other key metrics for our clients. Conifer's track record for performance coupled with the reinvestment in commercial efforts is gaining traction in the marketplace. For Tenet, Conifer's cash performance enhanced our liquidity by over $100 million, compared to our target for the quarter. Our sales pipeline is up over 85% from prior year as our investments in commercial capabilities mature. As an example, Conifer recently won a competitive new five-year contract to provide physician revenue cycle services to the Sinai Medical Group in Chicago. Our physician revenue cycle services help entities address the complexities providers are facing with payment models, expanded network coverage and other regulatory changes. Based on our enterprise performance year to date and the realities of the challenges we faced in the second half of this year, we are now guiding to a full-year 2022 adjusted EBITDA guidance range of 3.375 billion to 3.475 billion. Quarter after quarter, each of our businesses has demonstrated disciplined management and the ability to navigate unforeseen challenges. I'm confident in our team to continue to deliver strong results. Our consistent operating performance in deleveraging over the last few years has led to an increase in free cash flow generation. This has enabled us to deploy capital strategically to strengthen our operations and grow our ambulatory business. As we have discussed before and now our Board has authorized a share repurchase program of up to $1 billion. Our ability to generate free cash flow is an underappreciated part of our story and we see our current valuation as compelling. We are pleased that our strong free cash flow enables us to efficiently return capital to shareholders while maintaining our commitment to grow the ambulatory business and further deleverage the balance sheet. And with that, Dan will provide us more details on our financial results. Dan Cancelmi: Thanks, Saum, and good morning, everyone. Let's start on Slide 3. Given our improved free cash flow generation and a significant reduction in our leverage over the past several years and our belief there is future upside in our equity value, we announced a $1 billion share repurchase program that we'll start executing on. Our free cash flow provides us with the capital flexibility to balance share repurchases with investments to grow the business and debt retirement. I'll discuss capital deployment in more detail in a few minutes. As Saum mentioned, our financial results in the third quarter were impact by significant COVID-related challenges, including the continuing inflationary wage and labor availability pressure providers across the country are facing. In the quarter, we generated consolidated adjusted EBITDA of 841 million. The quarter got off to a slow start due to the impact COVID had on our patient volumes and staff availability. However, our volumes and labor trends strengthened considerably throughout the quarter. Our results were supported by continued high patient acuity and effective cost control. Our operators did a good job responding to the labor challenges as their consolidated SW&B cost as a percentage of revenue were only 60 basis points higher than the second quarter of this year, despite more difficult labor pressures. There were two items that were not included in our guidance which helped earnings in the quarter. First, we recognized 54 million of grant income. As a reminder, we are able to recognize grant income as a result of lost revenues and incremental costs, due to COVID. And the second item is a $45 million gain on the sale of a large portion of our interest in certain assets of the HealthTrust GPO we have an affiliation with. Now, I'd like to highlight a few key items for each of our segments beginning with USPI, which continues to deliver strong results, although not up to our high expectations. USPI's adjusted EBITDA grew 16%, compared to last year and its margin continues to be very strong at approximately 40%. USPI’s surgical case volumes were 100% of 2019 pre-pandemic levels and flat, compared to Q3 last year. As Saum mentioned, USPI results have also been impacted by COVID-related challenges. However, we continue to deliver overall results that are strong in terms of margins and cash flows. Turning to our acute care hospital business, our labor management continues to be effective despite the cost pressures, especially contract nurse staffing costs that are temporary. On a consolidated basis, contract labor costs were approximately 7.4% of consolidated SWMB in the quarter, which was up from 6.2% in the second quarter and 6.8% in the first quarter. COVID-related fact and the impact of the availability of our staff created pressure on our hospital patient volumes contributing to a 0.7% decline in adjusted admissions. However, adjusted admissions did increase 3.4% sequentially from the second quarter, also hospital patient volume strengthened significantly throughout the quarter. Our case mix and index and revenue yield remain strong as we continue our strategic focus on investment in higher acuity, higher margin service lines. Our year-to-date case mix index has grown at a 4% CAGR since prior to the pandemic in 2019. Let's now turn to Conifer, which delivered a solid quarter. Conifer produced revenue growth of 6% over last year and importantly, revenue from external clients grew nearly 10%. Conifer generated adjusted EBITDA of 90 million, representing growth of 6% over third quarter last year and continued to produce a strong EBITDA margin of 27%. Let me now turn to our outlook for the rest of this year. We have tightened the range for the year and reduced the midpoint $50 million to $3.425 billion. At the segment level, we have increased the outlook for adjusted EBITDA for the Hospital segment by 25 million at the midpoint of the range and we reduced the EBITDA outlook for USPI by 75 million, reflecting the various impacts that Saum previously discussed. I do want to mention that our Q4 guidance does not assume any insurance proceeds associated with the cyber-attack. Based on our year-to-date results, we have also provided various updated guidance assumptions in our press release, including volume, assumptions and the narrowing of certain ranges given we're heading into the last quarter of the year. Before we turn to cash flows and liquidity, let's turn to Slide 7. I'd like to spend a minute to provide some context for the jumping off point for our 2023 EBITDA outlook. I want to call out the following items that will impact the comparison of our 2022 results to 2023 when we issue our guidance next year. First, 154 million of grant income recognized so far this year as a result of loss revenues related to the pandemic. Second, an unfavorable impact of about 100 million this year from the cybersecurity attack. Next, a $69 million gain this year from the sale of medical office buildings in the first quarter and the $45 million gain from the sale of our interest in GPO assets that I mentioned earlier. Next, 30 million of Texas Medicaid supplemental funding revenue related to 2021 that we recognized earlier this year when the program was approved. Additionally, the full-year impact next year as a result of Medicare sequestration is expected to be a headwind of about 40 million. And finally, the unfavorable impact on Medicare related outpatient revenue from the rate adjustment in 2023 associated with the 340b issue is expected to be approximately 40 million. However, from a fundamental perspective, we anticipate positive tailwinds in 2023, including the possible moderation in the rate and utilization contract labor. Further recovery from the pandemic, which may drive increased volume levels, continuing investments in hospital higher acuity service line. Cost efficiencies that we anticipate executing on, including the transition of additional roles to our Global Business Center in Manila. Our new Fort Mill Hospital near Charlotte and further improvement of our St. Vincent Hospital post strike. USPI organic growth additional USPI synergies from the SCD transactions, and other USPI-related M&A activity. Since we are currently in the midst of our 2023 business planning process, it's premature to provide any specific numbers on those items, so we will provide our full-year 2023 guidance on our earnings call in February. Moving to Slide 8, let's review our cash flow, balance sheet and capital structure. As of the end of the quarter, we had approximately 1.2 billion of cash on hand and no borrowings outstanding under our 1.5 billion revolver. We generated 555 million of free cash flow in the quarter before the repayment of Medicare advances that we received in 2020. All of these advances have now been repaid. Year to date free cash flow before the repayment of the advances is almost 1.1 billion. As a result of our continued growth and focus on deleveraging, our September 30 leverage ratio was 3.9x EBITDA, compared to 4.1x at the end of last year. As a reminder, we have no significant debt maturities until July 2024 and have approximately 2 billion of secured debt borrowing capacity available if needed. We have strengthened our balance sheet over the past several years and retired or pushed out debt maturities, which provides us ample flexibility to support our growth initiatives. Turning to our cash flows outlook for 2022. From a cash flow perspective, we continue to target another strong year of free cash flow generation of approximately 1.4 billion at the midpoint of our guidance, excluding the repayment of Medicare advances and deferred payroll taxes. Our free cash flow generation has improved substantially over the past several years and we expect to continue to drive strong cash flows, while executing on our growth plans. As we've previously mentioned, these cash flows provide us with significant financial flexibility to effectively deploy capital for the benefit of our shareholders. As we noted in the earnings release, our Board has authorized a $1 billion share repurchase program. The authorization reinforces the confidence we have in our long-term growth plans and the underlying cash flow generation of our businesses and the belief and the upside in our equity value. As a reminder, our capital deployment priorities have not changed. First, we plan to continue allocating approximately 250 million of capital annually to grow our USPI surgery center business. Next, to enhance our hospital growth opportunities, including the continued focus on higher acuity service offerings. Third, evaluate further opportunities to retire debt. And finally, share repurchases, depending on market conditions and other investment opportunities. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. [Operator Instructions] Our first question is coming from John Ransom from Raymond James. Your line is now live. John Ransom: Hey, good morning. Just as we think about the hospital bridge from say second half of 2023 or excuse me, 2022 to 2023, Dan, do you have any like quantitative puts and takes to think about that at this early stage? Thanks. Dan Cancelmi: Hey, John, it's Dan. As I, sort of outlined in my remarks, when we think about next year, we called out certain items that occurred in 2022, as well as items that will come into play next year, including full-year sequestration, as well as the 340b issue. I went through the various positive tailwinds that we do anticipate next year. We're in the midst of our business planning process. So, we were not ready. We think it's premature at this point to put specific numbers out there for 2023, but again, the possible moderation in contract labor further recovery from COVID, which may drive increased volume levels and we're going to continue to allocate capital in our hospital more complex service offerings, cost efficiencies, we've demonstrated good job over the past several years executing on our cost actions. There's more opportunities to transition additional roles to our center in Manila. And we have the new hospital in Fort Mill that just came online and we continue to expect that hospital is in a great market and we expect it to continue to evolve and grow from its initial start and drive incremental EBITDA next year, as well as our St. Vincent Hospital. Post the strike and the hospital is – the performance has been improving throughout the year and we expect that to continue into next year. And as we also mentioned, there's anticipated additional synergies related to the SCD transactions and it will continue to grow as we move through next year as well. And the other thing is, the M&A activity that USPI will execute on, the pipeline is robust. I'm sure we'll get into some questions on that with Brett and Saum, but we feel very good about the pipeline and we feel very good about the type of value that we can bring to the table in those type of transactions. John Ransom: Okay, thanks. Operator: Thank you. Next question is coming from Stephen Baxter from Wells Fargo. Your line is now live. Stephen Baxter: Yeah. Hi. Thank you. I was hoping you could just expand a little on your expectations for USPI in Q4, normal seasonality is a pretty significant sequential increase. Can you just confirm that you feel like you're seeing what you need to see exiting the quarter and in the early part of October to have confidence in that? And then broadly, some of the capacity constraints you've talked about, just confirm that you don't see that as a rate limiting factor to achieving that normal seasonality? Thank you. Brett Brodnax: Hey, Stephen, this is Brett. Yes. So, if you think about the midpoint of the range that assumes 2.8% volume improvement in Q4, year-to-date, we're at 2.5% and as you noted, we do expect to see some significant – not significant, but a nice surge in Q4 as we typically do. And we've also been, kind of hovering around 100% of 2019 volumes all year. The 2.8% implies 101% of 2019 volumes. So, we feel good about being able to get to that in Q4. And to your point, we are starting to see the signs of some improvement in case volumes as we entered into October, heading out of the second half of October. Operator: Thank you. Our next question is coming from Justin Lake from Wolfe Research. Your line is now live. Justin Lake: Thanks. Good morning. Just wanted to talk about inflation and one of your peers brought about as a pretty significant uncertainty going into 2023. Anything you can point out to us in terms of what you're seeing for instance on supply inflation, some of the other factors besides labor. And then on labor, you talked about contract labor being a benefit to the year, can you talk a little bit about what your typical salary wage and benefit per adjusted admission trends are within your normal, kind of algorithm to growth? I think one of your peers said 2% to 3% typically. And do you think contract labor, I know that's going to be a tailwind next year, do you think big enough tailwind to offset labor inflation being a little more heated on the permanent side? Basically asking are you – do you think labor is going to be a tailwind overall when you layer in that contract level? Thanks. Saum Sutaria: Yes, Justin, it's Saum. So, let me start with those in sequence. The first part of question related to inflation in supplies, infrastructure, et cetera. And look we have faced those, but we have also, since the beginning of the pandemic, organized ourselves to consolidate vendors and at the same time find offsets in our purchase services and improvements in our supply contracting efforts, especially on many of the, kind of physician preference items that are consistent with our own high acuity-based strategy. And obviously on commodities, we maintain a high degree of compliance with respect to purchasing through our GPO, which gives us additional benefits. And that's across the hospitals, the physician business and USPI from that standpoint. So, there's no question about the fact that there is an inflationary effect in those areas, but we've been working actively to mitigate that impact over time. Second part of your question relates to contract labor and base wages And I'll focus, I think you were focused primarily on the hospital segment. So, there's a few things there. One, our nurse hiring that I mentioned is very important because it does over time change with the relationships that we've built in our communities with the nursing schools, change the mix of nurses, and the overall wage mix of nurses as we bring new grads into the environment. And that's just not for nursing. It's for all frontline staff. The second thing from that standpoint is that while it's not complete, our approach to making wage adjustments, whether through our highly predictable at this point, union contracts or in our other markets has largely been factored in to our approach in 2022 going into 2023. So, we're not anticipating a large number of much more significant base wage adjustments in our workforce outside of the norm. And so, I would be very comfortable and consistent with the kind of numbers that you described. Look, on contract labor, this is obviously an area where it's highlighted in Q3, but our contract labor performance as a percentage of our SW&B has been significantly below what I think we have seen broadly in the industry. And it's been because we've had a very deliberate strategy of being thoughtful about where the marginal revenue would overcome the cost structure in our hospital facilities in order to manage our margins appropriately through this kind of staffing crisis and we're going to continue to do that. We have made assumptions going into Q4 that we will moderate on contract labor. The fact is that contract labor rates have not come down this year the way we anticipated back in our February guide. There's no way to escape that in terms of the labor rates, but we've tried to offset it as I indicated with strong productivity management and length of stay management in order to mitigate our use of contract labor. And we feel very good about our disciplined use of contract labor despite the increase in Q3 and the ability to get control of that going forward. Operator: Thanks. Your next question is coming from Whit Mayo from SVB Securities. Your line is now live. Whit Mayo: Hey, thanks. Good morning. Maybe on USPI for a second. I think you guys called out a 20% spike in the cancellation rate. Can you just remind us what a normal cancellation rate is within the quarter and maybe what the impact was specifically on the case growth from those cancellations? And also, how much has been rescheduled and maybe just refresh us on the physician recruiting efforts and how you're tracking this year? Thanks. Brett Brodnax: Hey, Whit, this is Brett. Yes, to answer your first question. So, normal cancellation rate for us is around 15%, 15% plus. So, to see a cancellation rate at 20% that's a pretty significant increase. And as you know, the cancellation rates during COVID have been anywhere from 16% to 20%. So, actually 20% plus when you go back to 2020. So, you see that that level was pretty significant for us. Fortunately, it came down sequentially month-over-month. As it relates to your question, I think you're, kind of getting to where are we seeing volumes headed, kind of going into the future and also what impacted volumes in Q3. So, if you think about Q3 2021 on a same store basis, we saw volume increase of 6.8%. So, it was a pretty difficult comp. In addition, as Saum alluded to, we did feel the lingering effects of COVID on staffing and physician availability and the cancellation rates that you referred to as well as obviously the impact on our ASC’s from Hurricane Ian. And just from Hurricane Ian, we saw probably anywhere from 2,300 to 2,500 cases that were lost in September. Fortunately, we've rescheduled a large majority of those cases in Q4. Also getting to your point around physicians, I think in our conversations with physicians, the story for their offices is similar to ours as it relates to practice volumes being right around pre-COVID levels and the expectation or the exception I would say to that as ortho and GI specialties that are slightly outpacing 2019 volume levels, but I would say most are optimistic. Most of the physicians are optimistic that once we get past the trailing impacts of COVID, then we'll see more of a recovery in their offices, which will obviously translate into surgical volume over time. All said, we do believe that we'll get back to normal growth rates as the physician offices recover. And as we continue to build out to your point, our professional sales force, which we have been doing in that special sales force continue to collaborate with our operators to develop and execute very center specific sales plans. And of course, as we implement new higher acuity service lines across portfolio. As Saum mentioned, that's a significant part of our growth story as it relates to improving not only our acuity, but also our volume trends. So, we've implemented 70 new service lines so far, 70 plus new service lines so far this year and we have another 150 in the pipeline that we'll implement in Q4 and in 2023. Operator: Thank you. Next question is coming from Pito Chickering from Deutsche Bank. Your line is now live. Pito Chickering: Hey, good morning guys. Thanks for taking my questions. I know that you're not giving 2023 guidance, but there's a lot of noise. I've seen 3Q and 4Q within the USPI segment. So, as you think about 2023, has anything changed with the USPI growth algorithms? You said the pipeline remains strong and believe that [ASPs] [ph] should sort of keep growing in the 46% range. So, if [indiscernible] guide, this would be sort of 10% M&A, plus 5% organic. Looking at your guidance that would apply a [980 EBITDA] [ph] less NCI. Is that how we should still be thinking about it or is there any change there? Thanks so much. Dan Cancelmi: Hey, Pito, it's Dan. Good morning. As we mentioned, we still believe strongly in our ability to drive organic growth, as well as the ability to execute on M&A whether it's a straight M&A or de novo development. In terms of specifically for next year, as I mentioned, it's premature for us to put numbers out there at this point, but we have not changed at all our belief in the growth opportunities for USPI. It's a great business, great margins, great cash flow generation. And we believe we have competitive advantages when we engage in M&A when there's a competitive process based on the value that we can bring to the table. So, we do believe that the pipeline is robust. And so, it gives us a lot of optimism as we think about 2023 and beyond. Certainly, the results this year for USPI aren't necessarily at the level that we assumed at the beginning of the year and through the second quarter. COVID certainly has had much more significant impact on USPI than we anticipated and Saum went through the other various points in terms of the performance, but the results are still strong, they're just not up to the level that we expected. Pito Chickering: Okay. And just to follow-up on the organic side. I think Saum mentioned in the script, sort of [4% to 6%] [ph] of growth. At this point, you're still uncomfortable that that's the right growth rate for 2023? Dan Cancelmi: As I mentioned, when we get – on our February call, Pito, we'll provide specific volume assumptions next year for USPI. Pito Chickering: Great. Thanks so much. Operator: Thank you. Next question is coming from A.J. Rice from Credit Suisse. Your line is now live. A.J. Rice: Hi, everybody. Just to drill down a little further on the Q3 results. I think in the prepared remarks, you're saying, Saum, that July was where you saw a lot of this hit on the quarantine clinicians I guess that drove you to take on these travelers and temp staff. A lot of those assignments are 12 weeks. So. I'm wondering, by the end of the quarter, did you have excess travel nurse supply that you really did need? And did that just basically roll-off? And how much of a tailwind would that be for the fourth quarter? And then also related to this, on USPI, I know you're also calling the quarantine issue as the main issue. I think last year with Delta, some procedures that were being traditionally done on in-patient got pushed to outpatient because people didn't want to give the surgery in a facility that was filled with COVID patients. I'm wondering, have you looked at how much your flat year-to-year trend in USPI was driven by the fact that maybe last year was somewhat elevated and this year it's just more normal as in-patient seems to be showing some recovery on the surgery side. Maybe just see if you can comment on those. Saum Sutaria: Yes. A.J. it’s Saum. So, let me take the hospital side first. On the contract labor question, you're right that as we saw that effect through July in our staff in the hospital business, we did end up procuring more contract labor to cover that. And you're right about these are generally 12-week cycles. So, we're kind of hitting the end of those cycles right now and that's why we're going through the process of moderating what we had procured from that standpoint. I mean just to dimensionalize this, that rate of our staff in particular in July being out because we keep a careful count of this is 3x to 4x what we see when there's not COVID impacting the staff. So, for us, it was material. And I'm sure there's variants state-to-state of what happens there, but it did cause us as I indicated to increase our procurement of contract staff in order to maintain the service lines that we prioritize being open. And again, I'd reiterate, we've been very disciplined about where we place contract labor. So, the fact that we in increased our utilization of contract labor, you can rest assure it was based upon a belief that we wanted the volume that we were seeing. As we go into Q4, just like in the USPI business, the hospital business also has some degree of seasonality to it for a variety of reasons. And so, we would expect our use of contract labor to be better matched perhaps with the type of demand that we would see there. On the USPI side, and I'll pass to [indiscernible] here in a second with respect to the outpatient side of things, but especially in the surgical hospitals. But I think there's something to that which is in the past in-patients and hospitals have driven further business into the ambulatory setting, including at USPI. The hospital in-patient COVID environment has not really been – I mean, it's certainly down from what it was Q3 last year in terms of hospital inpatients. It's more just that the, as you know, the Omicron wave kind of hit people on an outpatient basis didn't necessarily make as many people sick on an inpatient basis. So, there really wasn't crowding of our hospitals that push things into the ASC or outpatient surgery segment from that standpoint, but I don't know if you want to comment on outpatient surgery at USPI. Brett Brodnax: Yes. I think, the way you look at the Delta variant last year, we absolutely saw some pockets where we picked up some additional cases from some of the acute care hospitals. And there's places that we did see that, we would also see some disruption in our normal business. So, on an overall basis, there was probably a slight positive given the acuity we would get from those cases, but overall from a volume perspective it was generally neutral. A.J. Rice: Okay. All right. Thanks a lot. Operator: Thank you. Next question is coming from Ann Hynes from Mizuho Securities. Your line is now live. Ann Hynes: Hi, good morning. I just have a follow-up question on a question that you answered earlier on labor. I think you said, you have a large number of union contracts that have factored into labor going into 2023, and post that – excluding that, you're comfortable with 2% to 3% wage increases for that year? I guess first is that what you said? And if it is, I guess what gives you that level of comfort because we're just hearing higher wage rates going into 2023? And also, could you just talk about labor per segment like what do you expect increases per segment? And then how much of your [work force] [ph] is unionized would be very helpful as well? Thanks. Dan Cancelmi: Hey Ann, it's Dan. Let me address couple of those points and then Saum can weigh in as well. In terms of the point about the union contracts, obviously with the union contract, you have the wages in place next year. And so, we have obviously real good visibility into that. In terms of the non-union full-time employees, as we've mentioned over the past several quarters, we have been providing wage increases that have been at levels that higher than the typical level that we typically see. And the 2% to 3% is historically pretty good marker in terms of the year-over-year increase in compensation for the employees. This year, we've had to increase that in certain cases to obviously remain competitive. Where the significant tailwind could come from is, by reducing contract labor, which is certainly much, much more expensive than full-time employee cost, even if you're providing a wage increase above the 2% to 3% area, there's significant savings by converting that contract labor to full-time employment and that's what the teams have been very focused on doing and from a recruiting perspective and retention perspective. So that's where when we think about possible tailwinds for next year, further conversion of contract labor to full-time employment would drive noteworthy cost savings year-over-year. And in terms of your question about the various segments, certainly, you've seen – we've put out the numbers in terms of what contract labor is meant across the portfolio, but from the USPI perspective, contract labor, although the rates there in the utilization have increased at USPI. The amount of contract labor in the USPI business is really insignificant, compared to the acute care hospital business. It's less than 10% of the spend that we see in the acute care hospitals. Saum Sutaria: And the only thing I would add to that is, the point I was making earlier was that some of the base wage increases, which may have been above the 2% to 3% level in order to stabilize the workforce and begin to set a platform to reduce contract labor in the future are more built into the run rate as we head into Q4 than our new items for the run rate that will develop sometime into 2023. And point being that we've been thoughtful this year, especially in the last couple of quarters about those type of adjustments where necessary as part of our overall workforce strategy. Dan Cancelmi: And then, Ann, you asked a question about unionized labor. At least on the USPI side of things, we have one facility that you know [indiscernible] labor. Ann Hynes: Okay. Thanks. Operator: Thank you. Next question is coming from Jason Cassorla from Citi. Your line is now live. Jason Cassorla: Great. Thanks. Good morning. Just around capital deployment priorities, you laid those out, which is helpful. You have that 250 million of M&A and de novo annual target for USPI, but can you help on how you're thinking about the allocation of the remaining three buckets as a percent of the free cash flow in the near term and how that might change over the longer term? Just any color or context around those capital deployment priorities as a percentage of free cash flow would be helpful. Dan Cancelmi: Hey, Jason, it's Dan. Let me address that. Looking at things right now, we don't believe there will be any material change in our capital deployment priorities other than the fact that we are accelerating deploying capital for share repurchases to now based on where the equity is trading. We had talked previously that we had intended depending on market conditions to evaluate allocating capital for share repurchases beginning in 2023, but given where our equity is trading, we've accelerated that and had the Board authorize a $1 billion share repurchase program. So, again, it will be balanced approach. Certainly, given where the equity is trading, we will begin executing on our share repurchase program, but as I mentioned, the M&A pipeline for USPI is very strong and we'll continue to allocate capital there and as well as to our hospital business to continue to enhance its more complex service offerings and as well as retiring debt when it makes sense. And there's obviously several tranches out there that we will target. for debt retirement as well. Jason Cassorla: Got it. Okay. Thanks. Operator: Thank you. Your next question is coming from Kevin Fischbeck from Bank of America. Your line is now live. Kevin Fischbeck: Great. Thanks. I guess wanted to ask about labor costs, kind of in two different ways. I guess the first one is, you mentioned that contract labor has not improved the way that you had expected it to improve as the year goes on. Are you attributing 100% of that delta to just how COVID has played out or is there something structural? Because it seems to me like everybody is struggling more than the expected around labor this year, which I guess calls in the question how much improvement we should assume into next year? And then secondarily around this contract labor improvement, it seems like that's probably part of the reason why you think volumes might be able to accelerate next year? If we don't get an improvement in the labor market, do you believe that's a headwind or would stop that accelerated volume into next year? Thanks. Saum Sutaria: Yes. Hey, it's Saum. Just real quickly, I mean, I think on the first part of your question, there is certainly direct and indirect impacts of the environment we've been in because of the pandemic. There are obvious direct effects when you have staff that are out and you're procuring more contract labor, I mean that's a very direct effect, but the impact, the indirect effect on the workforce is I think what you're really referring to as potentially more structural is there as well, right? I mean the workforce shortages that we face as an industry and certainly this year are not just due to individual COVID spikes in people on quarantine and that probably more than anything else is the driver of the contract labor rates not coming down the way we anticipated this year or – and really we're assessing that very carefully market by market going into 2023, how we would think about that. To the second part of your question, I mean, if the labor market from a contract labor standpoint continues to be turbulent in 2023, we believe our strategy of being disciplined about contract labor utilization and making data driven trade-offs in where we will open-up capacity and where we won't for volume in order to manage and maximize the earnings is the right way to go. That's proven to be the case for many quarters on end and just because it wasn't the case in Q3 because we had an increase in contract labor is not a reason to question the successful strategy for a long period of time. And we'll continue to manage it that tightly if necessary through whatever part of 2023, this is still an issue that we face. I mean at some point that contract labor environment will begin to normalize and mitigate because of new graduates and other things entering the workforce that we're obviously spending a lot of time competitively trying to recruit into our system for the exact reason described, which is that we would like to have the ability to alleviate some of these structural challenges, not just react to the short-term COVID spike issues. Operator: Thank you. Next question is coming from Josh Raskin from Nephron. Your line is now live. Josh Raskin: Hi. Thanks. Question on the ASC side as well. Was wondering if you could give us a sense on sort of specific types of procedures that were impacted? It sounds like it's more overall facility and position, sort of COVID hits, etcetera, not necessarily, but I'd be curious if there was anything that stood out in terms of types of procedures. Do you think there's been any change in competition in terms of are you seeing more surgery centers for example, in your markets or a change in the competitors? And then, sort of lastly, any difference in these centers that have been acquired, built to know both last year or so versus ones that were more maturely owned? Dan Cancelmi: Yes. Hey, Josh. First related to competition, no, I mean, the competition has been strong. For the last several years, it continues to be strong, but as you know, we feel like we have a very good value proposition and continue to do very well as it relates to competing with other surgical facility companies, not only from an M&A perspective, but from an organic growth perspective. As it relates to specific specialties, I would say that some of the lower acuity specialties like ENT and ophthalmology and GI that were slower to recover as a result of COVID. Some of those have started to come back, specifically ENT has come back pretty strong in the last couple of quarters. GI has come back strong, ophthalmology has, but still, as we alluded to earlier, they're still only getting back to 2019 volume levels. So, the only specialties that have really recovered beyond 2019 volume levels at this point, and I alluded to this earlier are GI and ortho. And ortho is only slightly over 2019 volume levels. The one that's significantly over and significant is a [relevant term] [ph], as GI, which is about 3% over 2019 volume levels. The others again are pretty consistent with 2019 thus far. Josh Raskin: Okay. Operator: Thank you. Our final question today is coming from Jamie Perse from Goldman Sachs. Your line is now live. Jamie Perse: Hey, good morning guys. I was wondering if you could talk a little bit about what you're seeing on the reimbursement side. First, can you give us your calculation of what you expect Medicare to be up for you specifically next year? And then on the managed care side, what are you seeing from your partners there? Are you getting incremental price? And if so, can you just kind of quantify that? And overall, between those two pieces and Medicaid, what do you expect pricing to be up for you next year? Dan Cancelmi: Hey, Jamie, it's Dan. Let me hit that. In terms of Medicare pricing on in-patient fee for service side, the rate increase that went into effect October 1 is a little less than 4%. It's about 4% based on the final rule. In terms of on the outpatient side, after you take into consideration the 340b adjustment, its Medicare outpatient rate update will be pretty close to flat. From the commercial health plan side, what we're saying, we like where we're at from a contracting perspective. We anticipate in terms of moving through next year and beyond is rate increases and with some acuity as well in the 3%, 4%, 5% type of territory in aggregate. Some negotiations a little better than that. Some negotiations are a little bit lower than that, but in aggregate, that's where we see commercial pricing. Operator: Thank you. We've reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today's tele conference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

Operator: Greetings and welcome to the Tenet Healthcare Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Mr. Will McDowell, Vice President of Investor Relations. Thank you sir. You may begin. Will McDowell: Good morning, everyone and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's second quarter 2022 results, as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be, Ron Rittenmeyer, Executive Chairman; Dr. Saum Sutaria, Chief Executive Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represents management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the Risk Factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Saum Sutaria: Alright, thank you, Will and good morning, everybody. This quarter, we are once again pleased to deliver strong results based upon our continued disciplined management through a challenging market and the previously disclosed cyber attack. We generated enterprise net operating revenues of $4.6 billion and consolidated EBITDA of $843 million. USPI delivered impressive EBITDA growth of approximately 15%, excluding CARES Act grants. Volumes were consistent with 2019 pre-pandemic levels. We remain convinced that the demand for our ambulatory surgery services will recover consistently above pre-pandemic levels when COVID prevalence declines. Our hospitals performed very well in a complicated environment. On labor, despite the challenging environment and contract labor rates and utilization, we managed to a modest reduction in overall SWB as a percentage of net revenue from the prior year. We will continue to employ disciplined cost management practices, while focusing on building back the high acuity volumes at the heart of our strategy as this new COVID wave runs its cycle. In the midst of these challenges, we are pleased to ratify the three year agreement with the California Nurses Association on a new contract that includes eight of our California hospitals. We appreciate the collaboration to support our nurses and maintain uninterrupted patient care in coming to a resolution quickly. The partnerships we have with the unions that represent our employees have resulted in approximately 50 successfully negotiated agreements since the onset of the pandemic. Disruptions in the cyber attack clearly added significant pressure on volumes and earnings in April and May. We estimate this incident had an unfavorable impact of approximately $100 million on adjusted EBITDA during Q2. We’ve filed our insurance claim and continue to insist on full payment from our insurance companies. Unfortunately, the speed at resolving this is slow but we are committed to driving this to a reasonable and appropriate resolution as quickly as possible. Importantly, this attack should be considered one-time impact. Our systems have been rebuilt and we have restored network operations. As such that we typically do not discuss individual monthly results, it is important to note that we saw significant recovery in June, which we believe creates optimism about the second half of the year. June patient acuity was strong relative to April and May and we saw growth in high acuity service volumes including cardiovascular, neonatal and spine. We also saw improvement in our surgical admissions, outpatient visits and outpatient surgical visits and hospital-adjusted EBITDA, excluding grant income improved significantly in June, compared to April and May. Conifer delivered mid-single-digit revenue growth and margins were strong at 27.9%. We continue our focus on multi-shore recruitment and adding scale in our global business center. These activities are an important component of our ongoing work to expand margins on a sustainable basis. We continue to revitalize our sales efforts and have seen a significant increase in opportunities with our point solutions for new and existing clients. In fact, opportunities with new clients that we are pursuing have more than doubled in the last year. In addition, Conifer will extend point solution services to USPI to further enhance ambulatory revenue cycle performance. As you can see, we are continuing to deliver results across each of our businesses. Based on our enterprise performance year-to-date and our confidence for the balance of the year, we are once again reiterating our full year 2022 adjusted EBITDA guidance range of $3.375 billion to $3.575 billion. We believe this is competitively attractive as an outlook and reflective of our business diversification in the ambulatory surgery and Conifer segments, which are relatively insulated from the contract labor exposure, as well as our disciplined management in the hospital segment. I would like to spend a few minutes discussing USPI in more detail. Our work to accelerate investments in this high growth area continues unabated. We now own 100% of USPI’s voting shares after acquiring Baylor Scott & White’s equity position in USPI for approximately $400 million at the end of the second quarter. This transaction does not impact our collaboration with our esteemed partner in the Dallas Fort Worth market which we have enjoyed for over 20 years. Our joint venture with Baylor remains one of the largest surgical facility JVs in the country that will work together to continue to grow. USPI is the preferred operating partner for both physicians and health systems as our teams deliver market-level strategic planning, operational excellence and scale-based advantages that are unmatched. We are the leader in the highly fragmented ambulatory surgical space with approximately 7% market share. We see significant runway towards expansion of our footprint and expect to have 575 to 600 ASPs in place by the end of 2025. Our dedicated development team is constantly identifying new opportunities such as our recent announcement to acquire ownership in 22 ASCs from the United Urology Group. United Urology is one of the largest urology practices in the country. We recently closed the transaction which adds well-established and new ASCs in key markets like Maryland, Colorado and Arizona. The deal is an investment of roughly $100 million and we expect to drive the EBITDA less NCI multiple below five times within the first few years. Partnering with larger physician practice platforms remains an important diversification and growth strategy. UUG is one of the growing number of strategic partnerships we have in place with pEVAC [ph]and independent MSOs where physicians are looking for a highly capable ASC partner. Through these collaborations, we help independent physician groups unlock growth in their centers while maintaining their independence consistent with our historical practice, but now we are doing it at scale. Our ability to deliver operational excellence and synergies makes us a very attractive operator. We also continue to foster strategic partnerships with health systems, some of which build on successful relationships that span many years. One such example is an LOI, we recently signed with the Provident Health System to expand our relationship with who we have been JV partners since 2004. We intend to invest more than $200 million in ambulatory M&A each year and have a robust pipeline to comfortably support that level of investment. All in for the past quarter, we acquired or opened seven facilities not including the UUG deal I already mentioned. We continue to be active in the construction of new centers originating from our USPI development team and separately from our SCD partnership pipelines. We currently have about 20 centers that are in active syndication or under construction. The ambulatory surgery business is a highly capital-efficient business model with capital needs that are fraction of what we see in the hospital business. As we continue to scale our ambulatory capabilities, we expect to drive substantial growth in free cash flow for the enterprise. Before I pass the call over to Dan to discuss our results in more detail, I’d like to leave you with a few thoughts. Whether we are in a favorable or a tough operating environment, we are building value for our stakeholders through business diversification and a commitment to disciplined execution. Three months ago, we reported strong results during a challenging Q1 that saw significant inpatient and outpatient disruption from COVID cases. At that time, we maintained full year guidance for adjusted EBITDA and free cash flow. During the second quarter, we have witnessed our stock price fall by more than third, continue to see COVID-related staffing disruption and experienced staff utilization in April and May partially due to a cyber attack. Despite these unplanned obstacles, our team has again delivered solid operating results and maintained guidance for adjusted EBITDA and free cash flow for the full year. Our portfolio mix and strong execution underlie these results. Right now, we are operating in the same challenging environment that everyone faces in healthcare services, but we are executing successfully using the data-driven operating platform we’ve created. It is driving strong financial results, but at the same time it is improving quality for patients, continuing to generate value for payers and find efficiencies that support affordability. On labor, while contract labor cost remain elevated, we are managing our resources well. Importantly, and to reiterate, both USPI and Conifer, which represent about half of our adjusted EBITDA are relatively insulated from these issues. As you’ve heard, we are very bullish about where we are with USPI. We now own a 100% of USPI’s voting stock, a move which we believe is in the best interest of our shareholders and our company given the compelling growth runway ahead. We are reaffirming our full year 2022 adjusted EBITDA guidance range $3.375 billion to $3.575 billion. We believe Tenet continues to present an attractive opportunity for investors given the ongoing business diversification in the USPI and Conifer, as well as the very strong management of our hospital segment. Even now, but surely as we progress towards 50% of the company’s EBITDA coming from USPI, we believe the conditions for a material premium to hospital-only valuation would be fair and appropriate. And with that, Dan will now provide us more details on the financial results. Dan, I’ll pass it to you. Dan Cancelmi : Thanks Saum, and good morning, everyone. Let's start on Slide 3. We produced resilient financial results in the second quarter that were above the midpoint of our guidance range despite the adverse impact of the cyber security attack, as well as a continuing inflationary wage and labor availability pressures providers across the industry are facing. All three of our business segments performed well despite the challenging environment. We generated consolidated adjusted of $843 million, our results were supported by continued high patient acuity and very effective cost control. To reiterate what Saum mentioned, our labor management was strong as our consolidated SW&B cost as a percentage of revenue were 20 basis points lower than last year despite the severe labor pressures and the cyber incident. Our second quarter EBITDA included two large items that were not included in our guidance that essentially offset each other. The first item is an approximately $100 million adverse impact to adjusted EBITDA that we previously announced in June in our hospital business from the cyber incident. This impact includes the lost patient volumes and revenues due to the business interruption and incremental cost incurred to remediate the incident. Importantly, we have filed insurance claims through these losses and we have ample coverage. While we expect to recover insurance proceeds in the future, we have not included in our 2022 guidance any insurance proceeds in the back half of the year. We did receive $5 million of proceeds in the second quarter. We have sufficient coverage and we will record proceeds in earnings when received and disclose that in a transparent manner. The other large item not anticipated in our second quarter guidance was that we earned $94 million of grant income in the quarter. Again, these two items essentially offset each other. Now I’d like to highlight a few key items for each of our segments beginning with USPI, which continues to deliver strong operating results. USPI’s EBITDA grew 15% excluding grant income compared to last year’s second quarter and its EBITDA margin continues to be very strong at about 41%. And USPI surgical cases were 100% of 2019 pre-pandemic levels reflecting continued strong performance by the team. Turning to the hospital business, our hospitals delivered another solid quarter despite the difficult operating environment and the cyber incident that we faced. Our labor management continues to be very effective despite the pressures, especially the temporary contract in our staffing cost. On a consolidated basis, contract labor costs were approximately 6.2% of consolidated SW&B in the quarter, which was down from 6.8% in the first quarter of this year. Again to provide a frame of reference contract labor cost were about 5% last year and historically before the pandemic in the 2% to 3% range. The cyber security incident did create pressure on our hospital patient volumes contributing to a 5.3% decline in adjusted admissions. However, our case mix and index and revenue yield remain strong as we continue our strategic focus on investments in higher acuity higher margin service lines. Our year-to-date case mix index is about 15% higher than 2019 prior to the pandemic. And we are pleased to announce that we recently reached an agreement with United Healthcare to extend our multi-year national contract with them through 2025 covering all of our hospitals, ambulatory facilities, physicians and other providers. Let’s now turn to Conifer, which also delivered a nice quarter. Conifer produced revenue growth of 4% over last year. And importantly, revenue from external clients grew 14% and Conifer continued to produce strong EBITDA margin of about 28%. Let’s now move to slide 10 and review our cash flow, balance sheet and capital structure items. We continue to maintain more than sufficient cash resources and available liquidity under our $1.5 billion line of credit facility. As of the end of the quarter, we had approximately $1,350 million of cash on hand and no borrowings outstanding under our line. We generated $248 million of free cash flow in the quarter before the repayment of the pandemic-related Medicare advances that we received two years ago. As we pointed out in our release, we now own 100% of USPI’s voting stock having acquired the remaining 5% interest that was previously held by Baylor Scott & White for $406 million. I do want to point out it’s important to remember that the $406 million represents the equity value of the business not the enterprise value. This amount will be paid by us over the next three years with monthly payments of about $11 million on an interest-free basis. We are really pleased to increase our ownership in this high performing asset now rather than in the future as we believe the value of this 5% interest would have significantly increased given USPI’s growth strategies and opportunities. As a result of this transaction, we will stop recording 5% non-controlling interest expense related to USPI earnings beginning in the third quarter. Accordingly, our annual earnings are expected to increase about $25 million or more going forward as a result of the elimination of this NCI expense. As we previously discussed in the second quarter, we were able to issue $2 billion of 608 secured notes due in 2030 we used as proceeds to early retire $1.75 billion of debt that was due next year that had an interest rate of 6.75%. We now have no significant debt maturities for the next two years until July 2024 and we still have about $2 billion of secured debt borrowing capacity available if needed. As a result of our continued growth and focus on deleveraging, our leverage ratio at the end of the quarter was little under 4 and if you think back to 2017, significant improvement when the leverage ratio was about 6 times. We have strengthened our balance sheet over the past several years and retired or pushed out maturities which gives us ample financial flexibility to support our growth initiatives. Let me now turn to our outlook for this year. As Saum mentioned, we are reaffirming our adjusted EBITDA outlook of $3,475 million at the midpoint of the range. And again, as I mentioned before, we have not assumed in our guidance for the back half of the year any recovery of insurance proceeds from the cyber incident. We also provided various updated guidance assumptions in our release namely for hospital patient volumes and revenues. In the hospital business, we lowered our assumptions for inpatient admissions and adjusted admissions, primarily reflecting the impact of the business interruptions from the cyber incident, continuing COVID prevalence, as well as the volume impact due to our disciplined approach in the management of capacity and volumes depending on the incremental margin and labor cost. From a cash flow perspective, we continued to target another strong year of free cash flow generation of about $1.5 billion at the midpoint excluding the repayment of the Medicare advances and deferred payroll taxes. Our free cash flow generation has improved substantially over the past several years and we expect to continue to drive strong free cash flows while executing on our growth plans. As we’ve talked about before, these cash flows provide us with significant financial flexibility to effectively deploy capital for the benefit of our shareholders. Our capital deployment priorities have not changed. First, we plan to continue allocating at least $200 million of capital annually to grow our USPI surgery center business; second, to enhance our hospital growth opportunities including the continued focus on higher acuity service offerings; third, evaluate further opportunities to retire debt or refinance debt; and finally, possibly next year and beyond evaluating a share repurchase program depending on market conditions and other investment opportunities. And with that, we are ready to begin the Q&A. Operator? Operator: [Operator Instructions] Our first question comes from the line of A.J. Rice with Credit Suisse. Please proceed with your question. A.J. Rice : Hi, everybody and congratulations on navigating through a tough environment pretty well. We – puts and takes for next year I am going to ask you about the – for the back half of the year. Your implied guidance I think at the midpoint will be something like $800 million in EBITDA for the third quarter which will be sequentially down from both the second quarter and the year ago period and then in your fourth quarter, it’s something like $944 million of EBITDA and that would be a step up. Is this mainly a return to seasonal patterns, are there other things that are puts and takes that you call out that would give you comfort particularly for the fourth quarter but for the back half of the year as you think about where you are sitting with guidance for that period? Dan Cancelmi: Hey, A.J. it’s Dan, let me address that. In terms of your points about the guidance in the back half of the year, we do anticipate some seasonality in the third quarter which is not unusual in the business. So, when you are thinking about the Q2 earnings moving forward sequentially to Q3 of about $800 million, we feel comfortable with that estimate. Then as you move to the fourth quarter, historically, fourth quarter is seasonally much stronger, not only for the hospitals but more importantly for the USPI’s business as many people meet their deductibles and try to get procedures in by the end of the year. So, we are anticipating a strong ramp on the USPI side from Q3 to Q4 as well. A.J. Rice : Okay. And FCD, year-over-year is that – has that moved the needle much for you thinking about that fourth quarter in particular? Dan Cancelmi: Absolutely. Absolutely, transaction, the FCD transaction from – that we completed last December that’s also part of the year-over-year growth. A.J. Rice : Okay. Alright. Thanks a lot. Operator: Thank you. Our next question comes from the line of Whit Mayo with SVB Securities. Please proceed with your question. Whit Mayo : Hey, thanks. May be for Saum or Brett that you guys have alluded in the past and maybe even more specifically on this call to a lot of the investments that you are making in USPI and maybe I am referencing more or lot of the efficiency and the productivity initiatives. Can you maybe just elaborate a little bit more on the specificity of what you are doing? Are these just changes to the edge program? Anything is just an extension of that? Any color would be helpful. Saum Sutaria : Brett, why don’t you take that and I can comment further if needed? Brett Brodnax: Yeah, hey, Whit, this is Brett. Yeah, I mean, I think it is an ongoing effort for us to continue to refine our edge philosophy and our edge program. So certainly we’ve continued to build that program and that philosophy since the company was founded 22 years ago. So, I don’t think it’s a change in terms of a strategy at all, but a refinement of our overall edge process and continue to enhance it just over a period of time as we learn more and as we benchmark good facilities against better facilities and continue to drive performance that way. Whit Mayo : Okay. Thanks. Operator: Thank you. Our next question comes from the line of Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake : Thanks. Couple of numbers questions to you. First, can you give us a little more color in terms of the impacts and how you sized it to that $100 million on the IT issue turns cost and revenue and margin on that lost revenue? And then on the commercial contracting side, you mentioned the United contract, I am not sure you want to give us a specific data point, but how are you seeing commercial contracting for 2023 in terms of rate increases relative to what you would see previously. So maybe give us the last two to three years of contracts and what you think 2023 is going to look like – renewals are going to look like versus those last two to three years? Thanks. Dan Cancelmi: Hey Justin, it’s Dan. Good morning. In terms of the impact on the cyber incident, as we’ve pointed out the approximate impact to EBITDA was about $100 million in the quarter. In terms of the break down between lost revenues and incremental cost incurred, we haven’t put out a specific number for each of those. But I would tell you that the vast majority of that $100 million relates to lost volumes, lost revenues, but, yes, we did incur incremental cost as well to remediate it. Saum Sutaria : And in terms of your managed care point, obviously, we were pleased to extend our multi-year contract with United and in terms of – we are not obviously not going to get into specific terms related to the contract. But I would say, there is we get questions a lot about, hey, you guys going to get rate increases from the plans to cover up CPI of 8% or 9%. We don’t see that happening. But, listen, we believe the contract we just entered into gives us long-term visibility into our pricing. We have escalators in the contract. We are pleased with the terms of the arrangement. In terms of overall going into next year, and beyond, obviously, every conversation we are having with plans to inflation, environment is obviously top of mind and it’s something that we take into consideration when we are negotiating the terms. Overall, where do we think rates will be what we’ve really – we have talked about in the past is, we see rate increases 3%, 4%, 5% type of range. But that’s about all I am going to comment on specifics. Operator: Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering : Hey. Good morning guys. I am going to follow-up on A.J’s question just from a different angle. There is a lot of noise with the hospitals for this quarter due to cyber security and a bit of noise from COVID and USPI. So can you walk us through in a little more detail of the trends you saw in June and what gives you sort of confidence around sort of the third quarter guidance that you provide us and feel free to give any commentary around how July is trending versus June. And then on the revenue reduction for guidance, how much of that was coming from cyber security versus reducing revenues in the back half of the year? Saum Sutaria : Well, let me start and then Dan, then we can get into some of the specifics. But first of all, to reiterate, Pito, what I was saying on the first part of the earnings call, we saw substantial recovery when we got back to normal operations in our hospital business. The cyber event didn’t have material impacts at all on USPI. So this is primarily a hospital segment base effect with a little bit on Conifer. And that recovery was strong on virtually all of the dimensions that drive the business, I mentioned a number of them. And so, that gives us a lot of confidence as we look to the back half of the year. And that’s in an environment where from the beginning of the second quarter to the end of the second quarter, a view out of the COVID activity has risen, and so that’s also a good thing that we continue to see that strength in the hospital segment from that perspective. On Conifer, the disruption from the cyber attack was, as I said, a small part of the effect but importantly, their ongoing cost improvement initiatives, off shoring initiatives and growth runway provide margin expansion opportunities and just earnings expansion opportunities. And then finally, USPI, we are pleased that we are sitting at roughly 2019 or pre-pandemic levels of volume. Look, I think this COVID has two effects there, one is you get some increase in cancellation rates and the second thing is, physician offices are not running at whole throughput that can have a little bit of a downstream effect. So, we are actually really happy that the business showed the strength that it had and as we get through this COVID wave, I think we are going to see even strengthening demand in that area. Obviously, as Dan pointed out, the seasonal effects in the fourth quarter is critical for the ramp. Dan Cancelmi: And Pito, in terms of the – our confidence in Q3 and the revenue guide, the updated revenue guide, couple of things on that, as we pointed out, the hospital business really strengthened in June and as we saw during the quarter contract labor also moderated. So, that’s obviously a positive sign and so when we think about the back half of the year that gives us more optimism obviously in addition to USPI. We fully believe it’s going to continue to grow. The revenue guide that you pointed out, the guide down it really relates to several things. One, the cyber incident is certainly a big part of that, but also when you think about the back half of the year, based on the volume trends that we saw in the first quarter and second quarter as well as how we’ve been managing and our operations and looking at the marginal cost of certain volumes and whether those marginal costs economically makes sense to staff for those volumes. So we’ve obviously taken that into consideration in our revenue guidance in the back half of the year. But we are managing through that and maintaining our overall earnings guidance. Pito Chickering : Great. Thanks, so much. Operator: Thank you. Our next question comes from the line of Jason Cassorla with Citi. Please proceed with your question. Jason Cassorla : Great. Thanks. So, you alluded to this expectation for continued demand an element for USPI. But I am wondering if you are seeing any pressure on cancellations or otherwise if folks are perhaps reprioritizing their discretionary income spend just given the high inflation backdrop. Just a color or commentary on that would be very helpful. Thanks. Saum Sutaria : Yes, it’s a good question. I would tell you that we look very carefully at the mix of cases we are seeing within the business. We feel comfortable that the impacts that we see, the small impacts that we see from a cancellation standpoint is mostly related to COVID activity in the background as opposed to a more fundamental shift in demand or consumer preference and we feel comfortable with the demand that we are seeing even in some of the – what I would describe is lower acuity type of procedures within the platform. And so, I don’t see, at this point, any evidence that is obvious that there are more fundamental shifts in demand affecting the USPI business and that we are pleased with that today. Dan Cancelmi: Hey, and Saum, the only thing I would add and you alluded to it. In the second quarter, we also saw a natural recovery of some of the lower acuity cases such as ENT and ophthalmology and GI that were really slower to recover from the pandemic, so, that was actually a good sign. Jason Cassorla : Great. Thanks. Operator: Thank you. Our next question comes from the line of Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin : Thanks. Good morning. On the labor front, I am curious, do you got a sense that your employed nurse workforce is stabilizing that they are not seeking as many of these travel tours is we’ll call them or do you think there is a new normal where nurses maybe willing to travel than they have in the past, right. They’ve been exposed what they’ve seen it now maybe that continues at sort of elevated levels relative to pre-pandemic? And then, can you just give us a sense of where your hourly base rates are for nursing staff relative to where they were maybe a year ago or even two years ago? Saum Sutaria : Hey, Josh, it's Saum, the - a couple of things. One is, we are pleased with the efforts that we're putting in both in terms of recruiting overall and the impact that's having and nurse new grad recruiting based upon a lot of the nursing school relationships that we formed over the past year anticipating this challenge. I don't know whether it's a new norm in terms of the rates of nurses desiring to travel. I somewhat feel that there is price elasticity in that and so the traveling rates are higher now than they were pre-pandemic, but the rates are still high. And as that – as those price points or data points or data points from the standpoint of what traveling nurses are earning come back towards normal, we think that probably the market will normalize somewhat. I would use this as an opportunity to point out that our TRA, the internal Tenet Resource Agency that we run has been a bit of a buffer to help create longer-term assignments, even within a traveling environment to help with our own nurse staffing stability. And that's been a tremendous resource for us throughout this and at a discount to the overall travel rates that you see out there. So, I think this is going to be an important agenda item for at least another year or two in really ensuring high degree of execution in recruiting, in retention, in creating an environment for nurses where they can seek their career paths that they want. And at the same time, continuing to manage the contract labor rates down. We haven't gotten into details on our base wage rates. I would just point out that it's – the complication in looking simply at unit rates is that you have to think about that alongside the tenure of the nurses that you're bringing in that are new and some new grads, for example with less tenure would have lower base rates. And so those - those - we think that we're managing the average wage of our hires very well based upon the balance between those items. Dan, I don't know if you want to add anything there. Dan Cancelmi : No, I think that's right. And we've been very focused on one of the strategies to reduce the high contract labor spend has been to focus on recruiting of full-time employees and that's had a benefit in terms of what we are seeing on the contract labor side, which is at least heading in the right direction. Operator: Thank you. Our next question comes from the line of Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse : Hey, good morning guys. We hear a lot about supply shortages, things like semi chips, contrast media aid and other basic supplies. Can you give us a sense of if any of these categories or others are impacting you guys or creating any volume bottlenecks on either the USPI side or the hospital side? And are any of these dynamics changing getting easier to manage? Saum Sutaria : Yes. Jamie, it's Saum. I would say that some of the specific shortages that you've seen, whether it's contrast media or other things, given our supplier environment, we did not see a significant impact from those. Obviously, like others, we participated in helping other hospitals when they had acute shortages for patient needs by sharing in local markets what we had, but we have not seen what I would describe as any of those that made kind of headlines become a major issue for us. Without question, there is still additional expense that's sitting in the unit cost that manufacturers of various items are putting through and there are certainly, I wouldn't necessarily say fully shortages, but there certainly have been delays in shipments and other things, including what I would describe as clinical capital equipment over this period of time. But again, this is an area where we have a well-oiled machine to manage our suppliers and supply chain and we have been working through that with the manufacturers in many cases directly in order to ensure liquidity in that supply chain such that we don't have any disruption to patient care. The other thing, of course, that in this environment you have to do is continue to work on improvements in narrowing the range of suppliers and offsetting inflationary trends. And based upon our results on the supplies line, you can see that we've – this has been a multiyear focus. It's continued during the pandemic and it's been quite successful including in the area that pushes into purchase services. So, this is an ongoing efficiency agenda in the hospital business and very much so at USPI. Jamie Perse : Okay. Thanks for the color. Operator: Thank you. Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question. John Ransom : Hey there. The back half USPI guidance, it's fair to say the last four years have been softer from a volume standpoint. So, could you maybe help with what sort of volume assumption you're building out for the back half of the year? And I'd also be curious on the orthopedic mix on a same-store basis I mean, by all accounts, there is a shift [Indiscernible] it's not up yet in your consolidated numbers. Just help with both, those would be great. Thank you. Saum Sutaria : Alright, John, I think your question – you were breaking up throughout that and I think your two questions were about USPI's second half guide and the – in particular orthopedics mix in the business. So let me just tackle the latter first, which is that orthopedics, obviously, is a very, very important platform within USPI as the largest provider of outpatients. Orthopedics, we continue to see attractive growth rates in that market and in particular at USPI. As Brett described before to Whit's question, we've undertaken a new energy in seeking efficiencies in both the supply chain and in labor management at USPI, largely leveraging the same kind of data and analytics platform that has been well embedded into the hospital side. So one of the things we haven't talked about yet is the margin expansion at USPI this quarter has been based on both high acuity like orthopedics and additional new types of efficiencies that we are finding within the business. So, we feel pretty good about that orthopedics platform from that perspective and as volumes recover, the ability to put a lot of that to the bottom-line because of the efficiencies. Dan or Brett, do you guys want to cover the second half guide? Brett Brodnax : Yes. Yes. I'll address that, Saum. Hey John, this is Brett. So, we had – just to put it in context, we had $600 million of EBITDA in the first half of 2022. Therefore, our guidance suggests $800 million for the second half. At the midpoint, that suggests 57% of our EBITDA in the second half, which is a little less on a percent basis than we saw in the second half of 2019. So we feel pretty comfortable with the percentage breakdown between the second half and the first half considering how it looks compared to 2019. John Ransom : Thanks so much. Operator: Thank you. Our next question comes from the line of Kevin Fischbeck with Bank of America. Please proceed with your question. Joanna Gajuk : Good morning. Thank you for taking the question. This is actually Joanna Gajuk filling in for Kevin today. So just a couple of follow-ups. So you mentioned labor or contract labor expense decline in Q2 versus Q1. So can you give us, I know there were some questions around permanent nursing wages. But can you give us a flavor of where you see the temp labor rates per hour trending, either in absolute or in percentages Q2 versus Q1 and Q4? And also, you mentioned recruiting seeing some traction there. So any stat you can give us on recruiting and turnover would be helpful, too. Thank you. Saum Sutaria : Dan, I don't know if you want to cover that? Dan Cancelmi : Yeah. In terms of – Joanna, it's Dan. In terms of the contract labor rates, we did see some moderation in the second quarter, compared to the first quarter and we put the stats out there. We were close to 7% in the first quarter and closer to 6% in the second quarter. So, that was a mix of not only utilization but rates as well. And as we think about – as we move through the rest of the year, we are anticipating some additional moderation. But we are not saying we are going to get anywhere near back to where we were before the pandemic and probably last year, we were about 5% and we'll see where we end the year. But obviously, nice improvement, so that's obviously heading in the right direction. In terms of – again, we're not going to get into the specifics in terms of rates for our full-time employees. But as Saum pointed out a few minutes ago, again, it all depends on the tenure of the clinician that you are hiring that has an impact on the overall rates, at least from an average perspective. Joanna Gajuk : But I guess, outside of the rate, any stats in terms of your turnover and recruiting efforts in terms of where it's tracking percentage-wise? Dan Cancelmi : Yeah. We are not going to get into specific turnover percentages. Joanna Gajuk : Okay. Thank you so much. Operator: Thank you. Our next question comes from the line of Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix : I was wondering to get your initial thoughts on the OPPS proposed rule, both kind of the rate update and then also, I know there was a push several years ago to move kind of that OPPS update from a CPI-based update to an hospital MBU and I think we're coming up on the last year of a five-year period where it is based on the hospital MBU and then kind of given that, that MBU 3% update or so is lagging 9% CPI, kind of implications for maybe CMS moving it back to a CPI-based and how you guys are thinking about that after next year? Thanks. Dan Cancelmi : Hey, Ben, it's Dan. Let me address that. I would say that the proposed OPPS rule for outpatient services, we are disappointed. And the rate that was proposed and when you even further adjust them for the anticipated impact of the 340B adjustment that there was some alternative rate information provided that the rate increase is almost flat. Ours – we estimate ours to be about 50 basis points increase after the 340B adjustment, which would be $5 million or less in terms of annual increase. We believe that's insufficient given the current inflationary environment. And obviously, we are working with all the appropriate constituents and making sure our concerns are raised at the appropriate levels. But right now, we're disappointed with the rate update that's being proposed. In terms of the CMS moving off and changing the methodology down the road, we'll see where that plays out. We can't make any predictions at this point. Now the one thing I would say, and that's on the hospital side, the rate update on the USPI side is more attractive, although we still believe it's insufficient given the current inflationary environment and we anticipate that that annual adjustment to the rates based on what's been proposed for USPI, that would be approximately $25 million of additional EBITDA on an annual basis going forward based on the current proposed rule. Ben Hendrix : Thank you. Operator: Thank you. [Operator Instructions] Our next question comes from the line of Ann Hynes with Mizuho Securities. Please proceed with your question. Ann Hynes : Hi, good morning. I just want to focus on the in-patient and outpatient admission trends in the acute care segment, down 8% and 5%. Can you tell us how much is from maybe the cyber security weakness versus how much is from capacity management versus how much is just from maybe a softer demand environment? Dan Cancelmi : Hey, it's Dan. Let me - I'll start on that. It's really related all three of those components to be quite frank with you. We have not disclosed a specific number for the impact related to cyber. There has been lawsuits filed and similar to other pending litigation. We don't necessarily get into specifics of pending litigation. But I would say that we called the side and released that the cyber incident certainly had a pretty big impact on volumes in the quarter. Your point about how we're managing the business, that's very true as well and that is having an impact on the aggregate statistic. And we again took that into consideration when we thought about our volume assumptions for the back half of the year as well as our revenue assumptions. But again, we are managing through that and maintaining our earnings. Your other point, the third point about COVID continuing to be there, I think that's fair. It's having an impact on aggregate volumes on the hospital side, as well as obviously on the USPI side, but more so on the hospital side. So it's really – it's a combination of all 3 of those components and certainly, in the second quarter, the cyber incident had a large impact. Ann Hynes : So, I guess the reason I am asking about the capacity management is, do you – can you just describe more on which capacity lines you're shutting down? And do you expect to open them once you -- the nursing shortage is relieved? And competitively, do you think that market share is lost or you can gain it back? Saum Sutaria : Let me make a few comments just to give you color around this, and I am not going to get into specifics, it's different by hospital. There are two things to consider. The first is that, as I've indicated, our approach to prioritizing our high acuity services and in particular the surgical and procedure-based areas continues to move forward on all dimensions unabated. And we follow those trends very, very carefully to ensure that we are not only maintaining but building market share in those areas. And we feel very good about that. The second thing is that in terms of the capacity management, there is a lot of low acuity or other work, often medical in nature that is difficult to staff given the cost of excessive contract labor. And it's not – this isn't about just kind of the marginal revenue and the marginal cost, the reality is that the cost structure needed to staff up to take care of a lot of that volume is significantly more than just the marginal unit cost of one additional nurse. And we realized that very early in the pandemic and so we have been very deliberate in managing our capacity in a way that has prioritized maintaining open access, making sure that our high acuity strategy continues to progress unabated and is thoughtful about the margin generation in the hospital by not building in excessive cost through staffing up every floor. As labor rates come down on the contract side and in particular as more and more traction is built on hiring of more full-time staff in this environment and to the point made earlier, travelers decrease, we'll have the ability to open up those units and deliver that volume on a profitable basis and we'll assess that hospital-by-hospital and do so. Look, I think one important thing to realize about this is, this is all fundamentally built around the system that we created a few years ago that is real-time analytics driving real-time decisions within the system that's been embedded into the operating model of Tenet at this point and that's really important because it's just one of another thing about the fundamental discipline in our operating management that we've put into place over the last four years. And so, I am not as worried as you indicated about market share in specific areas, but I am very much following the labor rates carefully to think about when and how to sequentially open up capacity in a way that it will be profitable. Operator: Thank you. Our next question comes from the line of Sarah James with Barclays. Please proceed with your question. Sarah James : Thank you. I was hoping that you could help us take a step back and think about the spread between cost trend and pricing that you are experiencing in 2022 and how that spread differs from a normal or pre-COVID year, so we can get a sense of the unique pressure that's happening this year. And then given what you know of the pricing environment already next year if you think about that spread compressing or expanding. Dan Cancelmi : Hey, Sarah, it's Dan. Yes, let me start off on that. The - I would say the primary difference in the pricing and cost trends now versus before the pandemic is on the cost side, the biggest pressure in this environment has been on the contract labor spend by far. And we called out some numbers earlier where, again, contract labor was previously 2% to 3% of our SW&B. And this year, we pushed 7% in the first quarter. Now it's come off, which is good to see, in the second quarter to about 6%, but still significantly higher than before the pandemic. Listen are there other inflationary pressures on the expense side? Sure. But the contract labor has been the most significant inflationary pressure. In terms of pricing, so on the revenue side of the yield, I would say, I think it's, listen, as I said earlier, the current inflationary environment is top of mind in every conversation we're having with plans and so we obviously take that into consideration. But again, it's not like the plans are sitting there offering 9.1% because the CPI that's what was just published. But I would say we are very pleased with our insurance contracting positions we have been and we continue to be. And it's been very beneficial for this organization across all of our businesses and our contracting positions provide us a unique competitive advantage, we believe, when we are looking at potential M&A on the Ambulatory side or de novo development we are working with potential new partners. So, I think, again, the biggest issue on the expense side has been the contract labor. Operator: Thank you. [Operator Instructions] Our next question comes from the line of Brian Tanquilut with Jefferies. Please proceed with your question. Saum Sutaria : Yeah. And this is going to be our last question, operator. Brian Tanquilut : Yes. Thanks for squeezing me in. Brett, just a quick question on just the trends at USPI. Curious what your thoughts are on some of that deceleration in the case growth that we saw in the quarter and maybe if you can give us any color on the trend intra-quarter and what you are seeing now in terms of any sort of recovery specific to the ASP to the second quarter? Saum Sutaria : Hey Brian, it's Saum. We are not going to comment on July and into this quarter. But - on any of the business units as Dan indicated, but go ahead, Brett. Brett Brodnax : Yes, okay. Hey Brian, I'll just touch briefly on kind of the volume for the quarter. Look, it was slightly down, as you heard on a same-store basis, but we are still tracking to 100% of 2019 volume and this was with an elevated cancellation rate over the prior year, primarily as a result of increased COVID activity. And I think, as Saum mentioned, some physician offices simply aren't back to pre-COVID levels. That said, our net revenue per case was ahead of plan at 3.7%. We managed expenses well and grew EBITDA 15% year-over-year. So we're pretty pleased with the quarter overall. Saum Sutaria : Okay. Well, thank you, everyone. We appreciate the questions and have a nice day. Operator: Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect your lines. Thank you for your participation.

Operator: Greetings and welcome to Tenet Healthcare Corporation First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the forma presentation. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Will McDowell. Thank you. Will, you may begin. Will McDowell: Good morning, everyone and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's first quarter 2022 results as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman; Dr. Saum Sutaria, Chief Executive Officer and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the Risk Factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum. Saum Sutaria: Thank you and good morning, everyone. We had a strong quarter and exited Q1 with significant momentum for the year. Our operators effectively managed through Omicron and accelerated in their recovery month by month after the last surge. We are, of course, pleased that COVID cases have decreased significantly and overall community health should improve as a result. We delivered net -- enterprise net operating revenues of $4.7 billion and $888 million of adjusted EBITDA in the quarter. This is a 14% increase in adjusted EBITDA from prior year. Even after normalizing for a gain on sale, Texas Medicaid supplemental revenues, and a little bit of incremental grand income, which were not assumed in our Q1 guidance, we delivered $756 million in adjusted EBITDA, which exceeded the midpoint of our Q1 guidance. In a quarter marked with speculation about the sector's performance, our core operations performed and delivered ahead of our expectations. The additional items adding to the earnings are attractive upside in the quarter. Let's turn to the business units. We had a great quarter at USPI with $282 million in adjusted EBITDA. Same facility system-wide cases grew 8% and adjusted EBITDA grew 15% excluding grant income, both from prior year. January was challenging given the high transmissibility of Omicron that drove higher cancellation rates. Despite that there was a substantial rebound in February and March with volumes exceeding 2019 on a same store basis. USPI has increased its portfolio by roughly 50% in the last 18 months. Integration of our nearly acquired SCD and Compass facility is on track and these centers are performing well. Physician's receptivity to our buy offers has been very good and additionally, the progress under our new partnership and new center development agreement with SCD is ahead of our expectations. We are truly energized by the level of development activity we continue to have. In Q1, USPI added six new facilities. We have over 20 de-novos under construction or in syndication, and are executing against a robust M&A pipeline. This reinforces the long-term investment thesis behind Tenet. Turning to our hospitals, the hospitals maintain their track record of strong, consistent performance delivering $514 million in adjusted EBITDA. Our operators effectively balanced resources during the Omicron surge, maintain their cost management and drove a strong recovery despite the staffing channel, the industry is facing. This was enabled by our disciplined operating processes and real-time analytics. Although our Q1 same-store hospital adjusted admissions were 1.4% below last year, by early February, we saw the COVID case trendline dropping and adjusted our operating platform to quickly match supply of resources and demand for services. We kept our focus on acuity and ensured convenient access to our emergency services for all those who needed it. We were very pleased with our performance in hospital-based surgeries. In March, we had less than 10% of the COVID admissions that we had in January. Our operators reduced length of stay by over 10%, reduced premium pay by over 20% and as I indicated, our surgical volumes were strong and in March were about 25% higher than they were in January. Nearly all of our markets outpaced our internal expectations in March. Our continued investments in specialty programs enabled sustained higher acuity. Case mix index was 1.77 in Q1, which is roughly 16% higher than pre-COVID and revenue per adjusted admission was 4% higher than prior year. We continue to enhance high acuity services across our hospitals, including cardiovascular, neurosciences, surgical services, trauma, and women's health. For example, in Q1, this included an expanded women's tower in San Antonio, a new cath lab and biplane capabilities in El Paso, expanded procedural capacity in Palm Beach and an enhanced atrial fibrillation care access protocol in South Carolina. Our healthcare campus developments in San Antonio, Phoenix and South Carolina are on track. This includes our new hospital in Fort Mill, South Carolina, which is slated to open in the third quarter of this year. We were also very pleased to see ongoing improvement in clinical quality with a 46% year-over-year reduction in serious safety events and a continued decline in hospital acquired infections. Turning to Conifer; Conifer had a good quarter with a return to topline growth. Conifer's commercial capabilities have translated into a stronger sales pipeline. Of note, we had a new client win in Birmingham. conifer will soon begin to serve four Baptist health system hospitals that are part of the Brookwood Baptist joint venture. The five-year contract for end-to-end hospital revenue cycle services will start in May, next month of this year. Conifer delivered $92 million in adjusted EBITDA, which is approximately 7% growth over prior year and maintained a strong margin at 28.4%. We continue to enrich automation capabilities while expanding our global footprint. We quickly scaled offshore capabilities during the quarter, and now have roughly 3,500 team providing service to our clients from global delivery centers. In addition with Conifer remaining part of Tenet, we have begun to integrate certain functions within the broader Tenet enterprise as part of an ongoing commitment to efficiency and effectiveness. In terms of our ongoing initiatives in the foundation of the business to Tenet, I also briefly comment on our managed care relationships and enterprise liquidity position, both of which continue to meaningfully improve. We are pleased to announce an extension of our nationwide relationship with Aetna through 2026 and a new four-year contract with Blue Cross Blue Shield of Texas. I'm pleased with both of these as they ensure access for patients in our markets and importantly, continue to support value-based care initiatives, especially in sight of care optimization. Our operational performance during the quarter and prior years has led to significant increases in cash flow generation, as well as effective balance sheet management. This was recognized during the quarter with the upgrade of our corporate credit rating by all three rating agencies. We also sold certain of our medical office buildings in Birmingham resulting in cash proceeds of $147 million and an EBITDA multiple of approximately 19 times. These items have allowed us to proactively reduce almost $825 million of debt so far this year using balance sheet cash, which will save us $61 million in annual cash interest payments. We are pleased with our start to the year and our performance and are reiterating our outlook for 2022. In a quarter with significant Omicron impact, USPI delivered substantial volume growth and month-over-month improvements. The hospitals executed and flexed extraordinarily well, as well as performing very well in hospital-based surgeries and Conifer tackled the quarter with both top line growth and margin expansion. We do have a plus or minus $100 million range on the midpoint of our guidance for the year. Let's reflect on where we were a year ago. A year ago at this time we were coming off a very large COVID surge in the early part of 2021 and with vaccines in place, many assumed COVID would melt away. Some of you probably remember those conversations. And then the rest of 2021 was consumed with Delta and Omicron. So at this point, given we are already seeing new variants, we are simply being prudent about our priorities to keep our heads down, recognize our outperformance in Q1 and operate and execute in Q2 in order to better update guidance later and better informed in 2022. In summary, our first quarter performance demonstrates our ability to consistently perform despite ongoing challenges due to the pandemic. We remain committed to volume recovery and executing against our strategic plan. We plan to continue to scale USPI's leading position, enhance high acuity care in our hospital segment and grow Conifer's client base. This is supported by a committed team with a high level of operational discipline and a commitment to realtime analytics. I'll now turn it over to Dan for a more detailed look at our financial results. Dan Cancelmi: Thanks Saum, and good morning, everyone. Let's start on Slide 3. Our financial results in the first quarter were significantly above our expectations. Despite a strong COVID surge early in the quarter, and the continuing inflationary wage and labor availability pressure providers across the industry are facing. As Saum mentioned, all three of our businesses performed well. In the quarter, we generated a consolidated adjust of $888 million, our strong results were driven by continued high patient acuity and effective cost control in a challenging environment. Also, our results included $69 million gain from the sale of certain medical office buildings for net cash proceeds of $147 million at a very attractive multiple as Saum mentioned. In addition, we were able to recognize $57 million of revenue in the quarter as a result of CMSs approval of the Texas Medicaid supplemental funding programs that we assumed in our 2022 guidance would be approved in the second quarter or later. We were pleased that Texas and CMS were able to resolve this and that CMS approved the programs earlier than we anticipated. Even if you exclude the gain on sale and the Texas Medicaid revenue, as well as the $6 million of grand income we earned in the quarter, we produced consolidated adjusted EBITDA $756 million, which exceeded the midpoint of our guidance. Now I'd like to highlight a few key items for each of our segments, beginning with USPI. USPI continues to deliver strong growth and provide high quality clinical care to our patients. In the quarter USPI produced a strong 8% increase in surgical cases compared to last year, demonstrating continuing volume recovery from the pandemic, particularly orthopedic and GI cases and their volumes improved as we moved through the quarter. Surgical cases were 100% of pre-pandemic levels despite the surge in COVID early in the quarter, due to Omicron. USPI's adjusted EBITDA, excluding grand income grew 15% compared to Q1 last year, and its adjusted EBITDA margin excluding grand income continues to be very strong at 37.9%. Turning to our hospital business, our hospitals delivered another very good quarter, despite the continuing challenging environment. Our labor management continues to be extremely effective despite the cost pressures, especially temporary contract nurse staffing costs. As you can see in our numbers, our consolidated salary wages and benefit costs as a percentage of revenue in the quarter were flat compared to last year's first quarter, despite increasing labor pressures over the past year. Our case mix index and revenue yield remain strong as we continue our strategic focus on investments in higher acuity, higher margin service lines. Our hospital performance was especially impressive given the impact from the surge of Omicron, which contributed to a 1.4% decline in our adjusted admissions. And as Saum mentioned, we're also pleased to announced we recently signed a new multi-year national contract with Aetna and a multi-year statewide contract with Blue Cross of Texas. Both contracts cover all of our hospitals, ambulatory facilities, physicians and other providers. Let's now turn to conifer, which also delivered a nice quarter. Conifer resumed top line revenue growth of 5%. Also their adjusted EBITDA of $92 million represented 7% growth over the first quarter last year, and Conifer continued to produce so strong EBITDA margin of 28.4%. Overall, we're up to a good start to the year in each of our businesses. Moving to Slide 10, let's review our cash flows, balance sheet and capital structure. We generated $267 million of free cash flow in the quarter before the repayment of pandemic-related Medicare advances that we received in 2020. As a reminder, the first quarter is oftentimes our softest cash flow generating quarter due to certain annual working capital requirements, such as our annual 401k matching contributions for our employees. We continued to maintain more than sufficient cash resources and available liquidity under our $1.5 billion line of credit facilities. As of the end of the quarter, we had approximately $1.4 billion of cash on hand and no borrowings outstanding under our line. As previously announced in the quarter, we retired $700 million of our 7.5% secured notes due in 2025. Additionally, so far this year, we've purchased $124 million of our six and three quarter unsecured notes due in 2023 in the open market. Together, these actions will save us $61 million annually in future cash interest payments. As a result of our continued growth and focus on de-leveraging, our March 31, '22 leverage ratio was 3.9 times adjusted EBITDA compared to 4.1 times EBITDA December 31. As a reminder, if you look back to 2017, our leverage ratio was about six times EBITDA. Also our secured debt borrowing capacity is currently approximately $4 billion. Let me now turn to our outlook for this year. As Saum mentioned, we are reiterating our adjusted EBITDA outlook for 2022 of $3.475 billion at the midpoint of our range. We are pleased with our start to the year, but it's early and there are uncertainties related to the impact of the pandemic. We'll continue to re-evaluate our guidance as we move through the year. From a cash flow perspective, we continue to target another strong year of free cash flow generation of $1,558 billion at the midpoint of our guidance, excluding the repayment, Medicare advances and deferred payroll taxes. Our cash flow generation has improved substantially over the past several years, and we expect our business to continue to drive strong cash flows even as we continue to reinvest to support growth and innovation. As we've mentioned previously, these cash flows provide us with significant financial flexibility to effectively deploy capital for the benefit of shareholders. We plan to continue allocating capital to grow our surgery center business, enhance our hospital growth opportunities, evaluate further opportunities to retire and refinance debt and possibly in 2023 or beyond, evaluating share repurchases depending on market conditions and other investment opportunities. And with that, we're ready to begin the Q&A. Operator? Operator: [Operator instructions] Our first question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Hi, thanks. So good morning. I heard some of the commentary around value-based care, and so I know Tenet and more so legacy Vanguard had some risk-based entities, even health insurers, I think in the past. But is Tenet really focused as acute care footprint and the market continues to look for more and more value based care. Is there a strategy in place, at Tenet broadly now to test more ACO-like arrangements to use all of your assets in sort of these targeted markets or other sort of risk based ideas? Saum Sutaria: Hey, Josh it's Saum and yeah, I did refer to value-based care in my comments related to manage care in particular. So let me first explain what I was referring to. A primary strategy for us in value-based care of course, is site of care optimization. Not surprisingly, we embrace the utilization of the most efficient site of care in many cases that's outpatient care, not only in our hospitals, but of course, the entirety of USPIs and enormous value-based care opportunity because of the cost -- the lower costs that are incurred in performing surgeries and procedures in a very high service outpatient-based lower cost environment. And that is a primary value-based care strategy for us nationwide. In addition to that, we are active in the Medicare advantage space. We do have certain markets, larger, more integrated markets that have risk based arrangements with payers, accountable care organizations that exist. But we participate in those selectively where the risk is balanced and it's not a transfer of risk entirely from one entity on to us. Josh Raskin: Perfect. Thank you. Operator: Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. Wanted to ask about the labor and inflation environment specifically. What did you see as you went through the quarter, especially as COVID started to moderate, and then, you mentioned a couple of new managed care contracts. One of the big questions, we've gotten out there is around managed care contract, I think, and how your rates might start to increase to reflect some of the inflationary pressures that are out in the market today. So maybe you could tell us how those -- how those newer contracts might have changed versus what you've been signing over the last few years to reflect that. Thanks. Saum Sutaria: Hey, Justin, thanks for the questions. Let me address labor and then I'll pass to Dan on the managed care question. The primary driver of our performance in labor costs during the quarter was really our continued focus on day-to-day operating discipline, length of stay management, productivity management and a month to month, a goal of improving the utilization of premium labor costs. The contract labor market in particular, didn't moderate that much little bit, didn't moderate that much as the Omicron -- as the Omicron cases dropped pretty precipitously after the end of January. So again, our performance was really more driven by the operating platform that we've described over the past few quarters that were utilizing to keep our total SWB costs in check as the volume recovery occur. Dan Cancelmi: And Justin, it's Dan. We were obviously very satisfied that we were able to enter into new contracts with Blue Cross of Texas and Aetna, I would describe it as a very collaborative process negotiations. Your point about inflation, we always take inflation expectations into consideration when we're negotiating contracts. And these are multi-year contracts across the country and covers all of our facilities and providers and for a number of years, as Saum mentioned in his remarks and we're obviously very pleased to have concluded Aetna signed new agreements with both of those parties. Justin Lake: Right. Thanks. Operator: Our next question comes from A.J. Rice with Credit Suisse. Please proceed with your question. A.J. Rice: Hi everybody. I might just try to understand some of the comments you're making about how you saw trends develop in the quarter, and it sounds like you perceived, there's at least in the surgery area, some backlog of volumes. I know in some of your slides, you show that admissions and outpatient visits step back in the first quarter versus which you saw in the fourth quarter, but alternatively, in your prepared remark, you're talking about surgery volumes being strong and overall volumes in February and March being better than pre pandemic. I guess. Can you give us a sense of what the trajectory is toward the end of the quarter, how once COVID dynamics of January eased off, what the business looks like, both from a surgical perspective and then overall volumes, and do you need a further step up to maintain -- to hit your volume targets for the rest of the year? Or are you on a glide path to get there, given what you saw as you exited the quarter? Saum Sutaria: Hey, A.J., thanks for the question and I'll reiterate, in both the hospital segment and the USPI segment, we were pleased to month over month over month improvement in our performance. Our focus on surgeries is consistent with our long-term strategy related to acuity and high acuity procedure-based care. We were, pleased to see both emergent and elective surgeries and obviously mostly elective surgeries in the USPI environment continue to grow and improve each month in that environment. So we feel good about the way we're exiting the quarter. I'm particularly pleased at how rapidly USPI recovered in their surgical case volume. I would say it's been the fastest of prior COVID surges in terms of the ability to really recover those cases and continue to move forward. We also from a volume standpoint, I would highlight that emergency department visits were in particular where we saw the environment lagging in terms of recovery through the quarter, as opposed to our high acuity strategic service lines and that was correlated once again, less to the Omicron cases disappearing, but more to the states, which were more locked down rather than those which were less locked down. And as the state locked down have continued to abate, the recovery has improved. Dan Cancelmi: I'm sorry, just real quick, a little bit more color on USPI, as Saum and Dan mentioned, we were obviously very pleased to see 8% year-over-year growth in our cases, especially considering we had one of the highest cancellation rates we've ever seen at 22.8% in January and overall cancellation rated 19.3% in the quarter compared to 17.8% in Q1 of 2021. So our volume levels have returned to pre-pandemic levels at a 100% of 2019. Volume levels with the acuity normalizing and when we think about volumes going forward, we think will continue to increase our volumes compared to pre-pandemic levels, just really because of the addition of 1500 new physicians across our portfolio this year and of course we continue to focus on service line expansion activities across the portfolio, as well. That said, we believe the volume growth will be consist with our full year guidance at 3% to 4% for the year. Saum Sutaria: And AJ, the only other thing I'd add is in addition to volumes improving as we move through the quarter, earnings improved as we move through the quarter. A.J. Rice: Right. That was a point I was going to ask, is that your commercial percentage improved in the quarter and year to year? Was that more the January COVID volume or is that more the volume you're talking about here with the surgeries coming back that's helping the commercial mix? Saum Sutaria: It's a little bit of both. As well as that line item also does include that Texas money does get routed to manage Medicaid based on the structure of the program. But no, the commercial volumes have been solid, I'd say. We're not back to pre-pandemic levels, but they've been -- those trends have been -- have recovered stronger really throughout the pandemic. But Medicare volumes are beginning to continue to strengthen so that's nice to see as well. Operator: Our next question comes from Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse: Hey, good morning guys. Saum, you touched on your approach to guidance just being prudent, given all the factors that are going on. I just wanted to get a sense if there's any particular areas that you're leaving yourself some more room, whether that's more persistent labor pressures, that lasting for a bit longer than previously anticipated recovery dynamics that maybe being a little bit behind where you might have thought you were at this point, or just the comment on having more information before you update guidance. What are you looking for to have a little bit more confidence in the trajectory? Saum Sutaria: Yeah, thanks Jamie. And I appreciate the question. Look, the approach here is to be as transparent and straightforward as possible. We recognize the outperformance in the quarter and we recognize that we will need to update guidance at some point. And again, I would tell you the primary driver, goes back to what I said around the best approach to making assumptions around that guidance. And, exactly a year ago, we all sat around talking about how COVID with the vaccines in place and the surge disappearing from the holidays, this could be the end of the COVID environment and 2021 was dominated by Delta and then surprisingly after that, Omicron. So, I think this is just more about prudence and transparency around what may lie ahead, given that there are other variants that seem to be circulating the globe already. The only area which we have noted that we are obviously watching carefully is we would've expected contract labor rates and the labor market to have normalized a bit more by the end of this quarter, relative to where we are today. Again, our response to that of course is operating discipline, which we have demonstrated in this first quarter. But I think until we see that materially improving, yeah, as I said, keep our heads down, operate with the same discipline in Q2 and update the guidance coming outta the second quarter. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey, good morning guys. Thanks for taking my questions. A few ones on the ASE side of the business, I guess looking at the first quarter of '21, how much revenue and EBITDA came the urgent care business and the diagnostic imaging business, just so we can understand the baseline growth how did care do in the first quarter versus your expectations, and then to dig in on A.J.'s questions on volumes, can you remind us what you're assuming for ASE volumes for 2022 and what was the extra rate [ph] versus those assumptions? Dan Cancelmi: Hey, Pito, it's Dan. In the first quarter last year, as a reminder, the USPI urgent care business was in the numbers and in terms of the revenues associated with the urgent care business that we ultimately sold in the second quarter as well as the imaging centers of ours were under the USPI umbrella last year in the first quarter as well. We subsequently transferred those to the hospital business in the second quarter last year. So in total, those two businesses in the first quarter last year had over $50 million of revenue associated with them. So that's in, Q1 '21's numbers last year that obviously aren't in this year's first quarter. Pito Chickering: And then on surge center, I guess, how did that do in the first quarter versus expectations and then sort of to AJ's question volumes, what were you assuming in your guidance for 2022 for ASC volumes and kind of, where did you exit the quarter with that? Thanks so much? Ron Rittenmeyer: Yeah. Hey, Pito, related to the ASC facilities look, the portfolio is performing as planned and the physician interest as Saum, mentioned in the buyouts with than the portfolio is strong. We already completed a significant number of buyouts, and we have a large pipeline of buyouts to complete in Q2 and is importantly, we remain confident about achieving the year three multiples we communicated when we announce the transaction. Saum Sutaria: And Pito, the surgical case growth that we're assuming for this year, the entire year is 3% to 4%. Obviously we did a lot better in the first quarter. Operator: Our next question comes from Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin Fischbeck: Great. Thanks. Just wanted to follow up on that labor point that you were making that contract labor, I guess, I think you said was down 20% by March, but not as down as much as you thought. Why think that it hasn't come down as much as you thought so far. And are you still confident in that trajectory as far as yearend and I guess what has to happen between now and yearend for that to get to where you originally thought it would go? Saum Sutaria: Yeah. Hey it's Saum and then I'll start and I'll pass to Dan. I think it's hard to speculate exactly why the contract labor market isn't normalizing more quickly? One reason that we've thought about is that over the past four or five months, some of the contract labor terms have involved, 12 of 13 week contracts and we may be just on a cycle of coming off of those assignments before we start to see even more moderation in the contract labor rates. Again, I think this is a situation where we would've hoped that the contract labor rates would've come down faster. The thing about it is when the contract labor rates come down, that will reduce the incentive for nurses to travel, which will then help to settle down local market nursing supply relative to demand, which will allow more hiring and more permanent nurse placements into the markets and so these things are linked together in the way that it seems to be working. Dan Cancelmi: And Kevin this is Dan. Just a couple numbers and just say you have them, before the pandemic, our contract labor, as a percent of our SWB was typically in the 2% to 3% range last year for most of the year, was running, around 5%, 5% to 6% in the first quarter due to the surge from Omicron. What we saw for the entire quarter was about, 6% to 7% contract labor costs as a percent of consolidated SWB. Well, listen, we did see some moderation. It's just, we'd like to see, more of it obviously as we move through the rest of the year, Kevin Fischbeck: I just want to confirm you guys haven't changed your view about where labor ultimately settled out this isn't a sign in your view that they might end up settling out at a higher rate of just a delay in getting there. Dan Cancelmi: No, not at this point. No. Kevin Fischbeck: Right. Great. Thanks. Operator: Our next question comes from Jason Cassorla with Citi. Please proceed with your question. Jason Cassorla: Great. Thanks. Good morning guys. There's a number of moving pieces between the contract labor that you're discussing now and the inflationary cost backdrop and the continued cost management performance. But I guess I was hoping you could help with maybe just a margin progression expectation for the hospital segment as we move through the rest of 2022. And then just to follow up on that as we lap many of these cost pressures in '22, how should we think about the longer term margin opportunity for the hospital segment specifically in 2023 and beyond if you have any commentary there, that'd be very helpful. Thanks. Dan Cancelmi: Hey, Jason, it's Dan. Obviously, we were we were very pleased with how we manage costs in the quarter in all three of our business units. As I mentioned in my remarks, our SWB costs as a percentage of our revenue were flat year over year, just despite I think it's fair to say a much more difficult labor environment this year, and that's attribute to some of the operators and very effectively managing labor spend as well as Brett and his team and our Conifer team. Listen, margins have improved significantly and even if you exclude the $69 million gain on the sale to medical office buildings, so we're -- obviously we're optimistic about our ability to drive margin improvement. As volumes continue to recover and our focus on higher acuity service lines, whether that's in the hospital business or the ambulatory business and our ability to effectively manage costs we're obviously optimistic that there's opportunities there for further margin improvement. Operator: Our next question comes from Whit Mayo with SVB Leerink. Please proceed with your question. Whit Mayo: Hey, thanks. Dan, just looking at the composite pricing in the quarter 4% growth and the hospital revenue per adjusted admission, and it's a good number, but I think that's a little bit distorted based off the timing of some of these Medicaid supplemental programs. Is there a good way to kind of wrap our head around a clean number to have a better understanding of sort of like a normalized underlying, pricing revenue adjusted admission number? Dan Cancelmi: Hey, yeah certainly the Medicaid money is coming through had somewhat of an impact on our net revenue per just adjusted admission. But one thing, to keep in mind, we did have some of that money in last year's first quarter as well, but so how I would think about it is probably, we've been talking about in terms of our revenue growth on a per adjusted mission basis is, probably, 3% type of area and driven by our managed care contracting strategy as well as our focus on higher acuity service lines. Whit Mayo: Okay. That's helpful. Just squeeze one quick one, just curious, like looking at the return in the ED visits, can you just maybe comment on, level one, two, three, four, five, what sort of happened within the quarter where you're seeing pockets of strength or weakness? Thanks. Saum Sutaria: Yeah. Hey, Whit. It's Saum. Obviously, the higher acuity, ER is volume is less quote elastic, right. And so that's the case. We track that through hospital admissions that go through the emergency department and surgeries, but even those were slow a little bit slower in the quarter in particular when there was that mostly, kind of as you came out of the Omicron surge. I think consistent with what we've seen over the past year and a half markets, which opened up quickly, and I mean opened up, kind of the overall economy, not healthcare economy, recovered more quickly even in emergency department volume and those that were more locked down are recovering more slowly, including in lower acuity ER volume. Operator: [Operator instructions] Our next question comes from John Ransom with Raymond James. Please proceed with your question. John Ransom: Hey, there. The Texas Medicaid payments September to now, how are you -- was that just basically a accrued on a level basis per month? And then what's the go-forward accrual of that for the rest of the year? Thank you. Dan Cancelmi: Hey, John Stan the Texas Medicaid monies in our guidance, we assume the programs would be approved. But we did not assume it. It was in Q1. As I mentioned on our last earnings call the previous program funding for us was, roughly $75 million and then as we thought about our guidance for this year, we did assume that the program would be approved retroactive back to September 1. So our guidance did include the four months of revenue that we were not able to recognize in 2021. So if you look at $57 million, it's it covered a seven month period. So the annual funding on a go-forward basis, roughly a little less than a $100 million. Operator: Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Hey, good morning guys. Hey Brett, just a quick question, just on the ASC side, Brett. Any color you can give us in terms of where you're seeing the most growth and then with the backlog looks like by specialty, maybe, and then I guess kind of follow up just to the SCD questions, now that you've had it, the full asset for a few months, how are you, what are you seeing in terms of the synergy opportunities that remain, whether it's purchasing or on the labor side, or just any color you can give us on the progress you're seeing with SCD. Thanks. Saum Sutaria: Yeah. Hey, Brian. So yeah, just a little bit on some of the recovery in cases, we continue to see strong recovery in cases around musculoskeletal MSK, ortho spine. I think of particular interest was recovery in some of the lower complexity cases in Q1 specifically, ENT for example, increased, the cases increased 34% year-over-year, and our GI cases increased 14% year-over-year. And we also saw a pretty significant similar increase in our ophthalmology and retina cases in Q1 as well. So when we think about the 8% growth we saw in Q1, a lot of that was driven by some of those lower complexity cases coming back compared to Q1 of 2021, when we saw -- really saw some of the more complex cases come back and the lower acuity cases just took a little bit more time to recover. What, was your second question, Brian? Brian Tanquilut: On the SCD side, obviously there's a lot of focus on that. You put up a good same-store number and people are looking at, kind of like top line performance and margin performance as a whole. So maybe any color you can give on what you're seeing at SCD and then the synergy opportunities, are you finding more whether it's supply chain or other operational items. Saum Sutaria: Hey, Brian. In terms of synergies, we based on our experience so far we're very comfortable with our synergy estimates that we've talked about when we announced a transaction. There's been no surprises there at all. Ron Rittenmeyer: Yeah, no only other thing I've add Brian is just related to the integration more broadly. The integration of the first trench of SCD facilities that was completed at the end of 2020 is essentially complete. And they're operating the same fashion as the legacy USPI facilities. The integration of the tranche complete at the end of 2021, is going very smoothly. We continue to hit key milestones and really overall is pleased with how the facilities are operating. And the good news is, there hasn't been any significant surprises. And I think that's largely a result of the due diligence that was done on the portfolio prior to proud of both transactions being completed. Operator: Our next question comes from Stephen Baxter with Wells Fargo. Please proceed with your question. Stephen Baxter: Hi, thanks. Wanted to ask your initial thoughts on the proposed Medicare inpatient role. I guess, thoughts on the initial update itself, and then obviously there's a number of moving parts. One of these, there seem to be some confusion about whether the publicly traded hospital companies are actually seeing a benefit from the higher outlier payments in 2022, that CMS is describing. So I guess, any color on that would be helpful. And then in general, how you're thinking about the prospects for maybe potential approval as we get to the final. Thank you. Dan Cancelmi: Hey, Stephen, it's Dan. In terms of the Medicare update, as you saw the market basket adjustment that was announced was roughly 3.2% for hospitals. However, there are two other items somewhat offset that namely the outlier threshold was increased quite a bit, which was surprising as well as the disproportionate share funding levels. So all in what we're projecting for us is roughly about a 2.3% net increase under the existing proposal that would go into effect October 1. However, we and others will be working with the appropriate parties to see if there can be any further improvements to that given the environment that we're operating in. Operator: Our next question comes from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix: Thanks. just wondering if you give just a little bit more detail on specific labor cost management measures that have helped you keep SWB flat in this increasingly difficult backdrop in Omicron, and also the extent to which those measures could present a run rate tailwind going forward in a more normalized neighbor or baseline labor backdrop. Thanks. Saum Sutaria: Yeah. Hey, Saum. I'll comment on that briefly and then pass it to Dan for anything he may want to add. Obviously, it was our intention a few years ago, as we redeveloped our operating strategies in the company, including deployment of hospital by hospital, floor by floor analytics for our cost structure including labor that we were building a foundation to utilize for the long term. This wasn't -- this is not a platform that is somehow COVID-specific.. Utilization of the platform during COVID has been very, very helpful because as you know, the labor environment became more complex very quickly with the utilization of contract labor with high rates, and then a lot of other premium pay and retention strategies that were required as well as active decisions about which capacity to staff and which to take down when the volume may not have been available. So, look, I appreciate the question because it is very much our intent to continue to operate with this kind of discipline and utilization of the analytics platform that's been built in order to manage a complex SWB line in the hospital segment. In the short term, until the contract labor rates begin to normalize, we will continue to employ the strategies that we have around productivity, length of stay management, and ultimately, some proactive decisions not to bring capacity back online yet when the marginal cost of that labor is incredibly high. Operator: Our next question is from Sarah James with Barclays. Please proceed with your question. Sarah James: Thank you. So your guidance implies a little bit more front end loaded EBITDA and consensus was expecting, and I want to make sure I understand some of the assumptions transitioning 1Q to 2Q. So you talked about a month over month improvement in surgical volume in February, and again in March. Do you expect that to continue to trend up monthly through second quarter? And then on the temp labor utilization being the 7% to 8%, are you assuming any kind of improvement on that in your 2Q guide and what are you assuming for supply cost pressure? Dan Cancelmi: Hey, Sarah, it's Dan. Let me lemme try to address that. Yes, we are assuming further moderation in contract labor, as we move through the year. The question ultimately becomes the timing of that, but assuming there's no other significant COVID surges that we would expect that there would be moderation as we move through the year. It's just in our mind, it's just a question of timing. Will we get back to pre-pandemic levels by the end of the year? We haven't said that, and we're not assuming that, but we do expect some moderation as we move through the year. In terms of… Sarah James: Supply cost and surgical volume… Dan Cancelmi: Well obviously, we're up to a good start from a surgical volume perspective, particularly on the USBI side. As I mentioned, we're assuming 3% to 4% growth this year. We outperformed that in the first quarter and so we'll obviously keep evaluating that and once we close the second quarter, we'll certainly reevaluate our guidance at that point. Operator, next question. Is there anyone have a question? Operator: Our next question comes from Andrew Mok with UBS. Please proceed with your question. Andrew Mok: Hi, good morning. Maybe just a follow up to the SCD question. Can you quantify the inorganic revenue contribution from the second SCD deal in the quarter, and how should we think about the timing and progression of SCD revenue synergies for the balance of the year? Thanks. Dan Cancelmi: Hey, Andrew, it's Dan. We're not going to get into to the specific numbers related to each one of our centers or, or group of centers. As we mentioned at the beginning of the year that you we're estimating approximately $140 million this year of EBITDA related to the SCD centers and as Brett and Saum have mentioned, integration is going well and we remain very optimistic about the synergies. Ultimately those centers, it, once they're fully ramped, we're sticking with our estimate that it'll be roughly $275 million of EBITDA once the centers are fully ramped by year three to four. So very pleased with a great transaction and this five year partnership and development agreement is also very optimistic as well. Saum Sutaria: Yeah. And Dan, towards that point, we're actually, we, said at the beginning of the year or when the transaction was done, that we expected to do probably 10 centers -- de novo centers a year in partnership with SCD without getting into specifics, we're ahead of or already ahead of plan at the end of Q1, as it relates to those 10. So, very pleased with not only the number of facilities, but the quality of facilities that SCD is bringing to us as potential partnership opportunities. Operator: We have reached the end of the question-and-answer session. This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.

Operator: Good morning. Welcome to Tenet Healthcare's Fourth Quarter 2021 Earnings Conference Call. After the speaker remarks, there will be a question-and-answer session for industry analysts. . Tenet respectfully asks that analysts limit themselves to one question each. I'll now turn the call over to your host, Mr. Dan Cancelmi, Executive Vice President and Chief Financial Officer for Tenet. Mr. Cancelmi, you may begin. Dan Cancelmi: Thank you, Operator. Good morning. We're pleased to have everyone join us this morning. Tenet's senior management with me on today's call include Ron Rittenmeyer, our Executive Chairman; and Dr. Saum Sutaria, our Chief Executive Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent Tenet management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the Risk Factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Ron. Ron Rittenmeyer: Good morning. Thank you, Dan. And thank all of you for joining us today regarding our fourth quarter earnings, and also all of 2021. Before I turn this over to Saum and Dan, briefly I would like to touch on a few aspects of 2021 and highlight what we believe are fundamental and sustainable changes we've made over the last several years that will continue to carry us forward. As I stated in my comments in the earnings release, the fourth quarter delivered strong, consistent results with adjusted EBITDA of approximately $1 billion for the quarter and very strong cash flows, both ending 2021 above guidance. We closed the significant SCD transaction on another 86 centers, established an exclusive development relationship with their team for the next five years, and acquired their ASC service group to further muscle build the USPI organization. Additionally, our internal development team also added more than 20 centers. This further solidifies USPI as the market leader and we are projecting approximately 50% of our earnings to come from this sector of the business by the end of 2023. Hospital performance except for Massachusetts due to the strike which is now settled performed above expectations across the board, while dealing with a continued COVID surge. And Conifer continues a positive delivery of consistent results, while expanding its offerings and gaining additional point solution opportunities in the marketplace. When you reflect on the overall Tenet business, it clearly has made a paradigm shift from the end of 2017. The fundamentals built on an analytical data-based approach, coupled with detailed and disciplined expense management in every aspect of our business, have proven our ability to handle volatility effectively. Every hospital group has now achieved positive contributions consistently. USPI should, as we said, continue to represent a larger more in fact, impactful portion of our earnings, and Conifer has improved its margins by over 1,000 basis points in the last four years. Coupled with consistent strong core growth, detailed and objective portfolio management as represented by the number of divestitures in ambulatory acquisitions we've successfully accomplished, supported by a stronger and well-designed balance sheet, the Tenet Enterprise is now positioned to be an organization with multiple consistent sources of revenue, free cash flow, EBITDA growth quarter-after-quarter, looking forward and then year-after-year. Having said this, I just have to comment, it is somewhat difficult to understand why Tenet remains classified mostly as a hospital company. The recognition of USPI's growing contribution, and Conifer's cash flow generation, for some reasons seem lost in the broader question of Tenet being recognized as more than a hospital company, with corresponding dialogues and/or multiples remaining caught in this time lapse. It appears that the transition of what Tenet has become and the de-leveraging we've accomplished are not fully recognized in the valuation of the company. We believe it's a point of view worthy of consideration. So with those comments now, I would like to turn it over to Saum. Saum Sutaria: Hi, thank you, Ron, and good morning, everybody. I'd like to start off with a personal thank you to our physicians, nurses and staff, their resolve to deliver high quality care through the recent surge of Omicron has been nothing short of excellent. Turning to our release, as you saw in the report posted yesterday, we ended the year with strong results. In Q4, we delivered adjusted EBITDA of more than $1 billion and $877 million excluding Cares Act funds. This is higher than the midpoint of our outlook and higher than consensus. We also drove a strong companywide EBITDA margin of 18.1% in the quarter. We continue to manage effectively through COVID. In Q4, COVID admissions were approximately 7% of the total. While the highly transmissible nature of Omicron had a greater impact on staffing, our operators continue to effectively balance resources and maintain strong COVID safety protocols. In addition, we remain focused on quality and safety across the portfolio. Serious safety events and hospital acquired infections declined in the fourth quarter despite the COVID surge. Average length of stay in our emergency departments was reduced given our focus on better patient service and easier access. And finally, USPI's surgical hospitals had zero hospital acquired infections in the fourth quarter. Our accomplishments in the quarter and the year reflect a commitment to executing our strategy and a continued positive trajectory for Tenet. At USPI, we acquired interest in or opened approximately 160 facilities since December of 2020. This included the SCD acquisitions, the acquisition of Compass, buy-ups in multiple surgical hospitals in addition to tuck-in acquisitions and de-novos. I want to reiterate a few points about the SCD acquisitions. We anticipate the portfolio of 135 centers from the two SCD transactions will have approximately $540 million in EBITDA and $360 million in EBITDA minus NCI at run rate. This is expected to deliver more earnings at a much stronger EBITDA margin as a small portion of the total USPI enterprise than other available surgery comps. USPI operations continue to perform at a high-level during the quarter. Due to the continued COVID surges, patient scheduling, cancellations, and physician and staff availability were all affected. Despite this, USPI delivered sequential month over month growth through the fourth quarter. USPI had a 4.4% year-over-year increase in the same facility system-wide surgical cases and a 3.2% net revenue increase per case, resulting in a strong 7.7% year-over-year net revenue growth. The segment ended the year with a quarterly EBITDA margin of 46% excluding grants up from 44.7% in the fourth quarter of 2020. Our Hospital segment outperformed again in Q4, with nearly all markets exceeding our expectations. This was supported by high patient acuity from continued investment in clinical technology and service line enhancements. In Q4, as an example to demonstrate the resilience of our business, our non-COVID medical and surgical discharges increased 3% over prior-year. Our operators maintained active cost management making real time adjustments using our analytics platform to optimize staffing, length of stay and capacity utilization. This once again helped us maintain good performance in our labor costs, while maintaining the high standards of quality I described before. Conifer also had strong performance and another quarter of margin enhancements. We continue to modernize Conifer's technology offering and globalize Conifer's operating model to deliver results. We also signed new clients and renewals for revenue cycle management and value-based care services. Our 2021 results reflect the commitment to continuous improvement developed over the past several years. We raised guidance three times and outperformed the midpoint of our guidance and midpoint of consensus. We've deployed over $2.5 billion in capital investment at USPI's since December of 2020, scaling USPI to be the leading ambulatory surgery platform. We also welcomed over 3,400 physicians to USPI's medical staff and started approximately 90 new high acuity service lines. We anticipate strong returns from the high caliber investments we've made. We also increased investments to expand high acuity care at our hospital markets. We're expanding capacity in Palm Beach and El Paso and we remain on track to open our hospital in South Carolina in the summer of 2022. We also announced two exciting new developments in San Antonio and one in Phoenix to meet the growing healthcare needs of those communities. Additionally, we continue to foster an ecosystem of high quality physicians supporting advancements in neurosciences, cardiovascular and surgical services. Looking ahead, we expect continued growth in 2022, with adjusted EBITDA outlook midpoint of $3.475 billion. This represents a 6% increase from 2021 excluding grant income. Let me outline a few key priorities in our 2022 plan. Year-over-year core growth in USPI's adjusted EBITDA, excluding grant income, and excluding the SCD acquisition is projected to be a healthy 11.8%. This reflects our optimism that as the Omicron wave subsides; we will be able to return to normal demand at USPI as we've demonstrated after previous COVID surges. We're continuing to integrate the SCD portfolio and complete physician buy-ups. These are on track to proceed throughout 2022 and we guide to approximately $140 million in adjusted EBITDA for the year as an estimate on the current portfolio of 86 centers closed and the timing of buy-ups for the portfolio acquired in December of 2021. There is no change in our run rate estimates despite the six centers excluded from what we provided at deal closing. These new centers are performing very well. We have integration management capabilities in place to successfully realize the anticipated synergies. Year-over-year core growth in the Hospital segment adjusted EBITDA is projected to be 3.3%. As COVID subsides, we expect returning to a more normal but not completely normal operations in labor market. Our teams will remain focused on recapturing postponed care and continuing to advance our high acuity service lines. We will continue to deploy capital and execute strategic investments across our business segments. This is supported by a well-balanced offensive capital plan with a focus on accelerating clinical technology enhancements across our hospital markets. We have a robust portfolio of external spend reduction initiatives that will improve our supply and purchase services spend over the next few years, while we also continue to actively focus on labor management. Conifer's adjusted EBITDA growth is projected to be 2.8% for 2022. We plan to continue to automate offshore activities to realize further efficiencies in our operations. As Ron discussed, Conifer's margins have improved over 1,000 basis points over the last four years, and it continues to be a productive part of Tenet. We continue to evaluate market conditions, opportunities for growth, the impact of COVID on the business, and the interest rate environment as it relates to Conifer's overall positioning as a part of our total enterprise. It is a topic we review frequently with our board of directors. Finally, I will reiterate the resiliency we are building in the Tenet's business. Our balance sheet is in better shape, our secured debt capacity and line of credit insulate us from a somewhat more volatile high yield market, and we continue to improve our free cash flow generation, which our diversification into the Ambulatory Surgery segment will continue to support over time. Underpinning this, we will continue to build an environment focused on motivated talent, analytics-based insights and strong ethics and compliance with the goal of maintaining a positive trajectory for Tenet. I'll now turn it over to Dan for a more detailed look at our financial results and our 2022 outlook. Dan Cancelmi: Thanks, Saum and good morning, everyone. To echo Ron and Saum's comments, I'm very pleased with how we finished the year with fourth quarter adjusted EBITDA coming in well above our expectations. Our outperformance was particularly notable given the many challenges we faced, including the spike in COVID cases due to the Omicron variant and the continuing inflationary wage and labor availability pressures providers across the industry are facing. For the fourth quarter, we generated consolidated adjusted EBITDA of $1.017 billion, which was $183 million or 22% better than the midpoint of our Q4 guidance. Even excluding the $140 million of grant income we earned in the quarter, our consolidated adjusted EBITDA was $877 million or $43 million higher than the midpoint of our guidance. For the full-year of 2021, we produced consolidated adjusted EBITDA of $3.483 billion, and a 11% increase over 2020, and a beat of $183 million compared to the midpoint of our most recent guidance. As a reminder, we raised our guidance three times during 2021 based on our outperformance each quarter, and we outperformed again in Q4. Our strong results for the year were driven by high patient acuity, a favorable payer mix as well as very effective cost control. In fact, our consolidated SW&B costs in Q4 as a percentage of revenue was lower than Q4 2020, about 45% in Q4 2021 compared to 45.3% in Q4 2020. Also our consolidated EBITDA margin for 2021 was 17.9%, an improvement of 510 basis points compared to our 2017 margin of 12.8%. I'd also like to highlight a few key items for each segment beginning with USPI. USPI delivered a solid 3.2% increase in surgical revenue per case in the quarter and surgical cases were 4.4% higher than Q4 2020. Q4 cases were 100% of pre-pandemic levels despite the impact of COVID. And USPI's adjusted EBITDA margin excluding grant income continues to be very strong at 46.2% for the quarter, which was 150 basis points higher than Q4 2020. Turning to our Hospital business, our hospitals delivered another very good quarter. Our labor management continues to be extremely effective. Our case mix index remains strong as we continue our strategic focus on investments in higher acuity higher margin service lines. Our non-COVID admissions were up 1.7% compared to Q4 2020 and our hospital adjusted EBITDA margin, excluding grant income for Q4 improved about 200 basis points compared to full-year 2019 before the pandemic. It really was a great year of performance for our hospitals as substantially all of our markets significantly outperformed our expectations. Turning to Conifer, they also had another good quarter and produced $355 million of adjusted EBITDA for the full-year and a strong margin of 28%. Moving to Slide 11, our cash flow, balance sheet and capital structure position us very well to continue our growth momentum. Our cash flow generation in 2021 was strong even as we began repaying Medicare cash advances and made the first installment payment of the deferred company payroll taxes from 2020. We generated free cash flow of $910 million in the year or $1.550 billion excluding the repayment of $640 million of Medicare advances and deferred payroll taxes. We continue to maintain more than sufficient cash resources and available liquidity under our line of credit. At year-end, we had about $2.4 billion of cash on hand and no borrowings outstanding under our revolver. Also, our year-end leverage ratio was about 4x EBITDA compared to about 6x EBITDA at the end of 2017. Let me now turn to our outlook for 2022. Slide 14 in our presentation provides a walk forward of our adjusted EBITDA from 2021 to our projections for 2022 on a consolidated basis, and by business segment. Our projected consolidated adjusted EBITDA for 2022 is $3.475 billion at the midpoint of the range. This outlook represents year-over-year core consolidated growth of 6.2% as described on the slide, including almost 12% core growth in our USPI surgery center business. Let me mention a few other assumptions related to our 2022 outlook. We are not assuming we earn any grant income this year. We expect to achieve future annual cash interest savings of approximately $53 million once we retire our 7.5% $700 million of senior secured notes in Q1 that we announced in our release. Our 2022 adjusted EPS is approximately $6.46 per share at the midpoint of the range. As we mentioned in our release our EPS this year does include a headwind of about $0.50 per share related to a change in the IRS interest expense limitation regulations. As many of you are aware, certain Texas Medicaid supplemental funding has not yet been approved by CMS. The state is working with CMS to resolve this and our outlook assumes the funding is approved this year. However, we have not included any of this funding revenue in the first quarter as we're assuming it is approved in the second quarter or later in the year, which is when we would recognize the revenue. This funding for us is approximately $75 million annually. As you'll see on Page 11 of our release, compared to 2021 we're assuming that 2022 hospital admissions are flat to up 2%. Hospital adjusted admissions increased 2% to 4% and USPI surgical case has increased 3% to 4% and USPI net revenue per case increases 2.5% to 3.5%. Again, those are growth increases compared to 2021 not 2020 as we received a few questions about that disclosure in the release last night. I also want to mention our outlook for the first quarter of this year assumes consolidated adjusted EBITDA will be $750 million at the midpoint of the range as disclosed in the release. This guidance reflects an assumption of the impact of the increase in COVID cases so far this year, due to Omicron and the unknown timing of when certain elective cases will be scheduled or rescheduled. Also, as I mentioned earlier, we are not assuming any of the Texas Medicaid supplemental funding is recorded in Q1. From a cash flow perspective, we are targeting another strong year of free cash flow generation of $1,558 billion at the midpoint excluding the repayment of Medicare advances and the deferred payroll taxes. I did want to point out that we anticipate our income tax payments this year will be about $150 million higher than 2021 due in part to the change in interest expense limitation rules that I mentioned, and the fact we expect to fully utilize the remainder of our federal net operating loss carry-forwards this year. Our cash flow generation has improved substantially over the past several years. And the final repayment from about $1 billion in aggregate for the Medicare advances and deferred payroll taxes will be made this year. Assuming about $1.5 billion of free cash flow as a foundation to build upon in 2023 and beyond, we believe this, and our capital structure, including about $3 billion of currently available secured debt capacity, and no borrowings outstanding under our line, provide us a lot of flexibility as we think about future capital deployment options. We plan to continue allocating capital to grow our surgery center business, enhance our hospital growth opportunities including the continued focus on higher acuity service offerings, evaluate opportunities to retire, and refinance debt depending on market conditions, and possibly, in 2023 or beyond evaluating share repurchases, depending on market conditions, and other investment opportunities. And with that, we're ready to begin the Q&A. Operator? Operator: Thank you. At this time, we'll be conducting a question-and-answer session. . Our first question comes from Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin Fischbeck: Okay, great. Thanks. I wanted to go to a comment I guess that Saum made about the outlook for labor. Saum, I think you talked about labor returning back towards normal, but not being normal as COVID recedes. Can you talk a little about where you expect, I guess what you're seeing right now as far as labor growth or wage growth and kind of where you expect that to shape up and stabilize? How should we think about that heading into 2022 and 2023? Saum Sutaria: Yes. Thanks for the question. I think that we're still in the throes of this current COVID surge. And so labor rates are higher than you -- otherwise like them to be, in particular, for contract labor. And then the shortages of staff that Omicron is created, because the staff have been affected by Omicron just exacerbates. And that's a pretty -- I mean, that's unique relative to what we saw with Delta or other COVID waves. And so I think the -- what we anticipate is that by the end of the first quarter, assuming that there are no more COVID surges that come up, with new therapies available, and other things that affect hospitals. So substantially, we ought to see the labor market start to normalize a bit. And it's a combination of both the rates and the stability of the staff that we're really looking for. I mean, during the surges, the rates become the biggest issue. As the surge goes away, and we refocus our energies on building the business back and managing to capture things that may have been deferred or delayed. Obviously, the availability of staff becomes the paramount issue at that point, and being able to get that staff in and retain them at that point. So that's kind of how it looks. I think it'll be the end of the first quarter before we have a real read on what the impact will be for the rest of the year. Operator: The next question is from Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: Hey good morning, guys. Thanks for taking my questions. If you could give us a bit more color on the first quarter guidance what are you seeing at this point on surgeries rebounding back as COVID cases decline? As you look at your OR scheduling for February are we seeing a similar rebound, what we saw during the first quarter of 2021? Saum Sutaria: Hey, it's Saum. Again, I think it's a little bit early to say, the COVID surge is declining, I mean, the new incidence of cases, but it's still actually pretty high. I mean, relative to before this surge, we're still sitting at 4x the number of inpatients that we had. So I'm a little bit cautious about projecting forward. We still have states like Massachusetts that have elective surgery bands or effectively elective surgery bands. So we've -- some have suggested, we may be a little bit cautious in our Q1 guidance, but there's a lot going on right now, both from a regulatory perspective and an Omicron perspective. Now, that being said, we have put a premium on making sure that we are allocating staff into the service areas that we think are most important to remain open from an access standpoint. And as obviously in an acute care hospital organization that's focused on higher acuity service lines, we're putting a premium on allocating staff to operating room ICU and other places that that we think it would be important to maintain access. We feel very good about our outpatient surgery volumes in the hospitals, for example, at this stage of the game, and it's just a result of how we're allocating staff. Let me ask Brett to comment a little bit further on USPI. Brett Brodnax: Yes, thanks, Saum. No, on the USPI side of things very consistent with what Saum shared. Obviously, in January, we did see the impact of Omicron in terms of volume, in terms of staffing, but we are starting to see that subside a little bit going into February and starting to see the schedule folk up at the end of February and going into March. Pito Chickering: Okay. And then a follow-up question on the margin side. Excluding sequestration, you're guiding hospital margins to be increasing year-over-year, despite a very strong comp from COVID in 2021. I guess, besides being able to deliver dynamic how should we think about margins as it relates to the favorable commercial mix you've had with a high acuity mix today, as you know, it's an expensive more into government and in the lower acuity settings? Thanks so much. Dan Cancelmi: Hey, Peter it's Dan. Listen, we still obviously, very good about our margin improvement in our hospitals over the past several years, as I mentioned in my remarks, 200 basis points improvement about. And we're -- that's what we're continuing to focus on, driving improved margins. Obviously, this year the sequestration obviously does have an impact on year-over-year basis, but we would continue to focus on growing the higher acuity higher margin services, that's been an area of focus, and it's going to continue to be an area where we allocate capital and we think that's really beneficial. That's an addition to all the other cost management initiatives that we've been focused on over the past several years, whether it's in the supply chain side or in our other operating expense line where we've been going through renegotiating contracts, terminating contracts, if we don't get the right terms. There's more to do there. As we've talked about, we've been transitioning rules to our global business center in Manila. That's going well, and there's more to do there. And listen, we think we're well-positioned from a contracting perspective too whether its supply chain or with insurance plans. Operator: Our next question comes from Sarah James with Barclays. Please proceed with your question. Sarah James: Thank you. So just kind of following up on the questions in the moving pieces. You guys gave us a lot of detail around the bridge from 2021 to 2022 and there's different portions of it that are under your control, like what you guys are doing with supply expensing your strategy on labor. So I'm wondering if you can give us some insight on how you think about the seasonality first half versus second half compared to a normal year compared to last year. Just how you see some of the moving pieces that are under your control seasonal ? Dan Cancelmi: Hey Sarah, it's Dan. I think I caught everything it was sort of hard to hear. But I think your question relates to, how we view seasonality this year, maybe versus other years. Certainly starting the year off, obviously, as we mentioned, we have seen an increase in COVID cases so far this year, even compared the end of December, and there was an elevated cases in December as well. So, that's we've taken that into consideration. I mean, there's some math be related to some items that we won't be able to recognize, in all likelihood in Q1 that I pointed out the Texas funding, but we're assuming that that comes back, and it gets approved, and we'll recognize that later in the year. So that will impact the timing of and the earnings as we move through the year depending on when it ultimately gets approved. But as COVID cases wane and assuming we don't have another big spike, we think, as we move through the year, there will be growing earnings second, third, fourth quarter. Now third quarter is typically, seasonally, somewhat softer than the other quarters. So, you need to take that into consideration, but also we've fully expect the fourth quarter to be very robust. That's typically the strongest quarter for our ambulatory business. And so that's the -- that's how we're viewing this year from a -- just sequential basis. Sarah James: Great. And in your negotiations with the payers are you think any recognition of the current labor environment come into play as you think about price escalators and in future years? Dan Cancelmi: We I don't think we want to get into specific negotiations with payers. The only thing I would say is there hasn't been any material changes in terms of negotiations. Operator: Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. I wanted to follow-up on a couple of the moving parts for 2022. Specifically, you gave us a lot of detail on sequestration. I'm curious about, the benefit you saw you had in 2021 from the extra COVID bump that 20% plus HRSA payments, and how you're thinking about those and what's built in for 2022 assumptions? Dan Cancelmi: Hey, Justin, it's Dan. Let me take that one. For our assumptions, in our guidance this year, for COVID cases, let's start with that, assumes COVID cases for the full-year, we'll be roughly 5% or less, first quarter could be a little bit north of that, depending where how this ultimately lands. But so, we're assuming that there are level of COVID case. If not at the same level as 2021, when there was about 8%, or certainly not 2020. But, we are assuming, again, 5% or less of total admissions. In terms of the funding, and as I pointed out in my remarks, we are not assuming any grant income in our guidance. Any of the -- if there's additional funding, we'll have to evaluate whether we earn it. But right now, we're not assuming that. In terms of your other point about, the Medicare add-on. The one thing I would say is that, with that funding, comes a lot of incremental costs, not only for caring for those patients, there -- the expenses associated in the length of stay is typically longer, and the costs are higher. So, if those cases start to come down, then presumably, the expenses associated with those cases also come down. So, again, I think it's sort of a high-level, how we're viewing this year from that perspective. Justin Lake: Okay. And anything on HRSA dollars how much did you get in 2021? And what do you expecting for 2022? Dan Cancelmi: Well, it's the same thing there. Those -- that reimbursement is for patients who have COVID. And that funding, as that funding dissipates, they also those, presumably, those cases also would no longer be there. There is a question as to, how long the funding will be there. Now, we've continued to receive funding, at least so far this year. And we'll see where that will ultimately lands this year. Again, it'll be depending on available funding, as well as the level of cases obviously. Operator: Our next question comes from Josh Raskin with Nephron Research. Please proceed with your question. Josh Raskin: Great, thanks. Good morning. Trying to figure out sort of long-term, sort of days for earnings and sort of within the 2022 guidance how you're thinking about the net impact of COVID, I've heard a couple of things. So I understand 5% of total volumes, et cetera. But I'm trying to weigh sort of those admissions and treatment against, the typical pause that you've seen in utilization and sort of what the totality of the impact of COVID is, on Tenet overall. And do you think that, that pause in utilization that you tend to see with surges will be less impactful in the future, as Tenet just continues to get better and better at managing through it? Saum Sutaria: Hey it's Saum. Let me attempt to address that, which is projecting, I mean I'm cautious because it projects forward and understanding of what types of variants may emerge, and that's where Omicron I think, surprised us a bit relative to Delta in terms of the nature of it's clinical course, right, it's been more of a broad infection not as severe, but based upon the number infected, it drove hospitalizations up again in a way that we might not have expected. So here's -- here a few things I would say. One is the therapies that have become available to treat COVID even on an outpatient basis, if those drugs are available from a supply chain standpoint that will probably reduce hospitalizations going forward. In my view, that's probably, among the primary things, other than the vaccinations, which have been by far the most impactful things in reducing COVID hospitalizations, and mortality. The new drugs are probably the second, most impactful things that will reduce the impact of COVID in the hospital environment. So at some point, I think we're going to return to a world where COVID hospitalizations become like other respiratory illnesses that we end up seeing that affect the hospitals probably to some extent, becoming seasonal as well, just like the flu from that standpoint. Dan's -- the point that Dan makes is really important. The way we have setup ourselves and just kind of the hospital industry to take care of COVID has involved adding a lot of costs to do that, right. It's significant isolation, expenses, et cetera, et cetera. The question becomes when this becomes, can you take care of COVID as a more regular respiratory virus infection that ends up in the hospital without all of those extra costs over time. And that'll probably help manage the ongoing impact of the COVID expenses on the hospitals. I mean, that's really where we have to get to. The other big point I would make is COVID dissipates. There is an unknown about when utilization in the sector will return to normal, like pre-COVID levels. Is it going to spring back immediately? Or is it going to take some time for those cases to come back? We obviously are making an assumption into 2022 that those other non-COVID cases will spring back partially as a result of utilization and demand and partially as a result of our strategies. And that's why we're tracking those non-COVID volumes carefully as I described. Josh Raskin: Okay, I understand it's an impossible question, I guess, at this point. But just, it doesn't sound like COVID is necessarily a big impact one way or the other. It sounds like, yes, you see the increase in volumes and revenues. But there seems to be a lot of cost against that. Am I reading your comments right on that net-net COVID is not a big impact on the totality of $3.5 billion of EBITDA? Saum Sutaria: For 2022, it's not I mean, it's not it's -- the cases are declining. Dan's guided to less than 5% is what we're assuming. And a lot of what it will take to deliver on the $3.475 billion is our strategies in the hospital segment and the ASC segment delivering the kind of growth that we've described and then the ongoing efficiency initiatives that we have at Conifer. Operator: Our next question is from A.J. Rice with Credit Suisse. And also -- thank you. Saum Sutaria: Hi, A.J. A.J. Rice: Hello, Conifer sounds like that the bate case is probably no longer a spend sometime this year it sounds like it's an ongoing evaluation. I just wanted to see the clarify that a little more and what you're taking on maybe change in that direction slightly is. And then I'm sympathetic with Ron's comments at the very beginning, but you've created a lot of value seemingly in the USPI operation, the inventory business in the market has been slow to give you credit for it. I'm sure, private equity guys and other guys are noticeable about the opportunities commensurates your current valuation with that. And also even your leverage gains is your view on that, if you're just going to let time pass and as you prove out the SCD transaction upside and so forth, that hopefully the market recognize it or do you have any sense of urgency that maybe we need to look and figure out ways to unlock the value that we believe we've created more near-term? Ron Rittenmeyer: Well, this is Ron. I'll talk about Conifer a bit separately. We think we've already unlocked value in terms of the performance and returns we've had. We're not out there looking for other vehicles or other ideas at this stage. I mean, the company is performing well. We think there's still more for us to do. And we'll keep doing it, or I think our focus is more on how do you have -- how do you keep evaluation backdated, when in fact, you've had consistent year-over-year and month-over-month, quarter-over-quarter performance that would suggest that or not suggest, but prove that what we said is true. And all we're -- the only comment I was really trying to make was, at some point, the thought process has got to leap forward. And especially when you have other surgery centers valued at unbelievable at these high numbers. And our numbers don't reflect any of that. It just makes no sense. So let me just stop there on that. On Conifer. Look we're not going to answer the question, what's the plan today. We spent a lot of time on this, and have spent a lot of time. I always go back to the same statement. 2018 at JPMorgan, we agreed to do this, because the army was at the door. And our performance did not support ignoring them. Today, going ahead, we haven't ignored the Conifer asset by any means. 1000 basis points, I can't imagine a lot of companies that wouldn't feel good about that, especially given the size of Conifer. But clearly COVID has slowed us down in terms of the accomplishments we wanted to make with Conifer. Partially because you can't be out in the marketplace selling at the same level we've really been working on the IT side of it, and building that up, which we're making great progress on. And we've changed out management a couple of times, looking for the right mix of leadership and down in the organization. We've also turned out that organization, and we've moved the material amount of it offshore, which should have been done earlier, but it wasn't. So when I looked at Conifer as a business, it is a very good business. Now, you're spinning it out. Yes. I mean, we've talked about doing that. But at the same time, it said balance between what does the spin give us as a company and our shareholders, versus if there's more to do when we have a greater valued asset for the years out. So I mean that's the debate. And that is the focus, then you've got the market conditions, interest rates going up, other types of things going on, that you got to balance into this. And look, this isn't my decision on an earnings call to make a call. This is a board level decision. And you know, we've got advisors and the board, looking at this, and we're -- we've been talking about it. We have a board meeting at the end of the month. I mean, at some point, soon we're going to have to make a call what we really think is the best decision. But I would tell you, that decision is not final. And yes, there's items in question that need to be resolved. And there's things that we need to fully debate to think about, and we have people working on that type of analytics. You also got to remember, go back four years, our analytical strength was I don't want to say it's not existed, it wasn't very good. Today, we've got a very strong analytical group couple that with the advisors we're using we feel very good that we will come up with the right answer, or at least the answer for ex number of years going forward. Look we're public company. I've said this before, nothing is forever, right. I mean, ultimately, everything's for sale, and everything is what it is. And we're going to continue to do the stuff we're doing. So long way to try to answer your question, but I just can't give you a definitive answer. Operator: . Our next question comes from Jason Cassorla with Citi. Please proceed with your question. Jason Cassorla: Great, thanks. Good morning, guys. Most of my questions have been asked already. But maybe could you delve into trends around payer mix in the quarter and how sustainable those trends are going forward? And maybe what the puts and takes out of payer mix as we think about 2022. Just to that point, does 2022 guidance assume any consideration around the resumption of Medicaid determinations at this point? Thanks. Dan Cancelmi: Hey, Jason, it's Dan. The payer mix in the quarter was pretty consistent with what we've saw pretty much throughout the entire year commercial trends more favorable than our overall aggregate trends. And some of that is makes sense given the concern of certain individuals to seek care and unless it's absolutely necessary. So, no major change in payer trends in the quarter compared to what we were seeing throughout the year and really the back half of 2020 as well. And then that sort of position, we took that into consideration when we were developing our guidance for this year, although, we do anticipate some of the lower acuity cases recovered stronger than they have so far. So that'll have some impact on the mix. But the trends in the quarter were not surprising and they were pretty much consistent with our expectations. Operator: Our next question is from Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Hey, good morning, guys. I guess my question is for Brett. As I think about total joint performance across USPI, both in the legacy businesses and SCD assets. How should we think about the opportunity to embed the SCD skillset so to speak into USPI's ASCs we have heard one of the commercial payers flagged a 55% shift in joint replacements to outpatient. So just trying to figure out how you can harness that opportunity and expand it across portfolio and how you think, how much opportunity you see ? Thanks. Brett Brodnax: Hey Brian thanks for the question. This is Brett. And look I mean, we have continued to experience a significant growth in our total joint business I mean you think about for the year, and as Saum mentioned that we added 89 new service lines across the portfolio in 2021 and a significant number of those related to total joints. And just to put that into context with some numbers, total joints in Q4 showed significant improvement growing 146% over prior-year, and 130% year-over-year growth for 2021. And so, I think in any context, those are pretty significant growth rates. Obviously, SCD does a great job, has historically done a great job in expanding their total joint footprint. And of course, we're going to continue to learn from them and vice versa in terms of how we expand not only in total joints, expand across a wide variety of higher acuity specialties, including spine, including cardiac. So we'll continue to learn from one another as we integrate their business into ours. And obviously, with our five-year partnership with SCD, we will continue to work together as they build out their portfolio and partner together on a go-forward basis with essentially everything they do from a development perspective over the next five years. Saum Sutaria: Hey, Brian, let me just add one other point to that which is that just remember the strategy working with SCD in orthopedics was very deliberate, I mean USPI's core platform in orthopedics was already the leader in the Ambulatory Surgery space. So our ability with Brett and team to build and grow in the orthopedics, bone and joint pain and other related spaces is not limited to the portfolio of centers that we've recently partnered with an SCD, it's the whole portfolio. And that's why we think this aspiration that we had of being the unquestionable leader in outpatient orthopedic surgery, including innovating and adding new procedures in the USPI environment has been very important strategically, to where USPI is headed. Operator: The next question is from Ben Hendrix with RBC Capital Markets. Please proceed with your question. Ben Hendrix: Hi, good morning. Thank you for taking my question. Just had a quick one to follow-up on Justin's earlier question. Is it possible for you to quantify kind of what you had received in 2021 in total from the COVID-related subsidies, 20% add-on the sequester relief and HRSA and then kind of what do you have baked into guidance, at least from a magnitude perspective and directionally for 2022? Thanks. Dan Cancelmi: Hey, Ben, it's Dan. We haven't put a specific number out there for the Medicare add-on, or HRSA. I would here's the thing, the funding yes it has been very helpful, let's take HRSA for example very helpful for patients who otherwise would be uninsured. But it's Medicare reimbursement for patients that we're providing care for. And again, the cost profile for caring for those type of patients is higher than a typical admission. And so, yes, the funding is there, but also the costs are there. So it's not necessarily a matter of all the funding goes away, and then but the cases are still there. We certainly hope that's not the case. But we'll ultimately have to wait and see in terms of where the funding ultimately lands. So I would tell you that we get the question a lot. The HRSA funding is approximately for 2021 was approximately $75 million. But again, there's costs or you just, you can't assume that, okay, the revenue goes away and that's a massive headwind. We certainly hope that's not the case. Operator: Our next question is from Whit Mayo with SVB Leerink. Please proceed with your question. Whit Mayo: Okay. Two really quick ones. First, just a clarification on the SCD disclosures, what's the difference in the old guidance of $175 million and the $140 million that you're getting to now? I wasn't clear and then if you could give us an update on the Baylor put call, thanks. Dan Cancelmi: Hey Whit, it's Daniel. In terms of the difference between the $175 million and the latest estimate of $140 million, keep in mind when we announced the deal, and in November, we were targeting 92 centers based on subsequent due diligence. We made a determination not to invest in six of those centers. So that's a fairly large portion of the difference. And then other thing, too, is based on, is we learned further information on timing of buy-ups that also was a factor and updating the estimate. More importantly, is the fact that our overall fully ramped, consolidated EBITDA estimate from the portfolio, which is six centers smaller than originally planned is 86 versus 92, we still feel very comfortable with our overall fully ramped estimate of $275 million, fully ramped. So even though six centers aren't there, we think long-term, years three to four, we will still achieve $275 million. In terms of your other question about the Baylor USPI call put, we'll obviously when we get to the point of finalizing that, we will disclose that. So there's nothing really to add at this point. Operator: Our next question is from John Ransom with Raymond James. Please proceed with your question. John Ransom: Hey, good morning. How many ASPs do you think you end up consolidating this year through buy-out versus unconsolidated at the start of the year? Saum Sutaria: John, just to clarify, are you asking vis-à-vis the latest SCD transaction? John Ransom: Yes, how many centers you think to buy-out this year to get the majority position? Saum Sutaria: So John, we've accomplished well over -- well about 16 year-to-date. And we expect to do another 30 this year, 30 plus this year. John Ransom: Does that gets to your end goal, are there more to do after the end of this year? Saum Sutaria: It gets us to our estimate, our expectations. I think over time, if you go past 2022, we'll end up consolidating more of the portfolio then that as you know there's a total of 86 facilities but quite a few of those facilities that are part of the 86 are yes less than a year old and some of them are still under development. So when you go into 2023, 2024 we will consolidate, we will end up consolidating more of the portfolio as those centers mature. Operator: Our next question is from Andrew Mok with UBS. Please proceed with your question. Andrew Mok: Hi, good morning. CapEx in the quarter accelerated meaningfully to $200 million. Can you help us understand where you allocated the growth CapEx in the quarter? And how do you view the runway to expand higher acuity service lines within your hospital portfolio? Saum Sutaria: Well, I mean, the runway to continue making the -- I mean, this is a longer-term strategy for us, right. And it was one that we haven't stopped. So, it obviously has multiple prongs capital, infrastructure expansion, but very thoughtful. Clinical technology is probably the heart of it. And getting the right complement of caregivers to be able to deliver essentially high acuity services in a community hospital based setting, that's really the foundation of what we're trying to do. And there's plenty of runway there. I mean, the cardiovascular neurosciences, surgical suite of procedures are all growing and developing. And it's also true at USPI, I mean we stay on top of the number of things that are being innovated in an ambulatory setting, and then we work to create the right environment for that to happen safely. So we think there's a lot of room to continue along with this technology and service evolution that's going on in the high acuity space. The other thing about high acuity is you have to be focused on medical cases, not just surgical cases as well. And obviously, that's more of a hospital based, hospital based priority. Ron Rittenmeyer: Okay, operator, we're going to have to end it now. Thanks. Thank you so much everyone for joining us today. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Operator: Good morning, and welcome to Tenet Healthcare's Third Quarter Earnings Conference Call. I'll turn the call over to Tenet's Vice President of Investor Relations, Regina Nethery. Regina Nethery: Thank you. We're pleased to have you join us for a discussion of Tenet's third quarter 2021 results, as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman; Dr. Saum Sutaria, Chief Executive Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes an accompanying slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent Tenet management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Ron. Ron Rittenmeyer: Thank you, Regina and thank you all for joining us to discuss the third quarter. As you can see in the results we posted, it was a very, very strong quarter, company-wide. Performance, which continues to be driven by database decision making has continued to provide consistency in every business segment. Our year-to-date results continue ahead of our expectations and as a result, for the third time this year, we are raising the midpoint of our adjusted EBITDA guidance by $100 million to reflect the continued strong year-to-date performance we have achieved and what we believe is a positive trajectory for the remainder of the year. This reflects the foundational strengths we have invested in over the past few years and as these are established across the enterprise, support the success, continued success of the ongoing transformation. What we achieved in the third quarter is notable along many dimensions, but particularly given the significant surge of COVID cases in many of our markets. And while we have actually begun to see a reduction in cases, I mean our peak was clearly pushing up closer to 1000 today, where we're still at about 700 plus cases across the company but even given the continued peaks or not to continued peaks but to continued improvement, we continue to cycle through these peaks and valleys of the pandemic, and we continue to navigate the challenges of various variants. We are consistent in applying the learnings from each event and have been successful in expanding this important information quickly and effectively across all markets. Our operators have done really a great job dealing with these rapid changes, adapting and adjusting their go-forward past. The associated expenses have obviously increased driven by the greater number of cases, but our approach has been very effective in managing these impacts efficiently across all impacted markets. We've done very well in ensuring appropriate PPE availability along with other suppliers by timely managing our supply chain in anticipating where and when we need to increase inventories in our warehouses and our locations. Also ensuring the right level of staffing by balancing needs, adjusted schedules and maintaining a continued vigilance on safety. Our True North has been sticking to our strategy that encompasses ongoing service line depth, capacity expansion, adding and working with quality physicians, remaining conscientious about efficiency gains, investing an ambulatory and changing and maintaining a very strong commitment to quality, all of these foundational areas have been consistent over the past few years as we transform the overall company and remain focused on our strategy, which is consistent and has shown to be very effective. Across the portfolio, we're pleased with the consecutive quarters of improvement in our performance being driven in our hospitals. In addition to disciplined expense management, we're seeing higher patient acuity both in mix in our hospitals and in USPI. We've also broadened our network of top quality positions, which we believe is a sign of the quality and safety of our care environment and our effective management of the pandemic. USPI's continued to identify important partnership opportunities with some notable transactions in recent weeks. These deals bring us together with experienced surgeons across multiple specialties giving us deeper scale or a new market entry point with a runway for growth. And Conifer, continues to achieve solid margins, executing against their plan and finding opportunities for future expansion through the point solution model. We had a few additional items of note during the quarter from an enterprise perspective. We completed the sale of our five Miami area base hospitals and related operations, very significant. We also took the proceeds from that divesture to repay $1.100 billion of our outstanding debt and lower future interest payments by $50 million. As you know, in August we announced promotion of Saum to Chief Executive Officer and my role to remain as Executive Chairman of the Company and of the Board. This decision by the Board was made to ensure our transition period a lot smooth and effective period where we could continue the collaborative relationship that has made the transfer based on tenant a success over these last few years. I can honestly report today, that we have continued to operate as an effective team, as Saum steps actively into the role of CEO, without the slightest slippage in performance. We will continue to work closely together and have the opportunity to maintain this approach for at least the next 14 months that will make this transition truly a success. So with that, I'll turn it over to Saum, our CEO to share his perspective on the quarter. Saum? Thank you, Ron. And I'll echo those comments, I'm very pleased with how the enterprise performed in an environment that remains challenging, but full of opportunity. Despite the COVID spike in the quarter, our operations remain disciplined and focused. This performance demonstrates that we are building upon the momentum of earlier quarters and we did in fact outperform in Q3. Hospital segment performance was excellent and substantially, all of our groups exceeded our expectations in the third quarter. Margins were strong at 12.3%. Despite the COVID surge, these volumes represented just under 10% of the admissions in the quarter below levels we have seen in prior COVID spikes. The most substantial challenge in the market today is in the area of clinical staffing. Our operations supported by real-time analytics continue to mitigate these cost pressures. In turn, this allowed us to focus on better patient care with strong length of stay management and a staffing process match to acuity. Contract labor costs were stable from prior quarters that also had COVID spikes despite a much tougher labor market. We made active decisions to rebalance and optimize capacity based on available patient demand match to service. Our ongoing initiatives in managing supplies and purchased services costs also continue to yield benefits. We remain focused on executing our strategy of delivering high acuity services on both in emergent and elective basis. I want to spend a few minutes highlighting some items of note from the quarter. Emergency department volumes continue to improve. Surgical procedure saw an uptick from the prior year on an absolute basis. Cardiac interventions are recovering back to 2019 levels and we were able to perform elective procedures in our hospitals, even during the COVID spikes across our markets. During the past few months, we've also been accelerating investments to remain ahead of service in our demands. This includes, robotic expansion in over 20 hospital supporting general surgery, cancer services and bone and joint programs. Expanded procedural room capacity in multiple markets, including Palm Beach in Phoenix. Enhanced in-patient capacity for new services in multiple markets, including San Antonio and El Paso and expansion of trauma accreditations, most recently at one of our hospitals in the Coachella Valley. We strengthened our employed physician network with new additions to establish groups in cardiovascular, neurosciences and orthopedics. We also realigned reputable physicians, including the establishment of a large general surgery group in Palm Beach. While some broader supply chain challenges remain within selected clinical equipment and technology orders, we are well positioned to respond and manage given the actions that we took early on. Overall, based on our multi-year journey of improving performance in our hospitals, I feel our platform is adapting well to higher acuity and proving that it is flexible to accommodate returning volumes in the ER as well as the ups and downs of COVID. Let me transition to USPI. USPI continues to deliver results with high margins and produce strong cash flows. Volumes in Q3 of 2021 increased to a 101% of 2019 levels and it's also important to note that this metric has sequentially improved each quarter of this year. We are encouraged by the fact that net revenue per case is almost 10% higher than 2019 demonstrating that our higher acuity services are showing an even enhanced growth rate. Orthopedics for example, saw our growth rates up 22% compared to a year ago. In musculoskeletal care, we have completed more than 535,000 procedures to date and joint replacement surgeries have more than doubled from prior year. Meanwhile, our focus on efficiency at USPI has led to EBITDA margins that are approximately a 100 basis points better than the third quarter of 2019. Despite this performance, the COVID surge during the quarter did impact select markets. We saw an increase in cancellations with the COVID spike and some deferral of care as doctors' offices slowed a bit. The impact of this was felt mostly in states with stronger lockdowns on the two coasts while in other markets such as Texas and Florida volumes grew ahead of our expectations. As with prior recoveries, we expect to capture deferred care over the following quarters. Our 2021 USPI plan was originally built assuming no COVID this year after the early January, February spike and that's simply hasn't been the case. The business is performing very well on all dimensions. We continue to complement our existing USPI medical staff with new doctors. We've added a total of 1700 new physicians to date including roughly 580 in the third quarter. It's important to note that these are independent physicians choosing to come and work at our facilities. Our acquisition pipeline remains active as we partner with physicians and health systems in attractive markets. The SCD acquisition from the end of last year has gone smoothly and surpassed all of our major milestones of integration. This includes the acceleration and increase in our expectation of synergies. In addition, since the initial announcement last December, we've continued to augment the portfolio with a handful of other SCD facilities to increase scale in some of our markets. Outside of that, last week we announced the signing of a definitive agreement with Compass Surgical Partners to acquire their interest and management responsibilities in 9 ASCs. This was a competitive process in which USPI was the selected partner. The potential for value creation is attractive as we expect, we can drive the EBITDA less NCI multiple under five times by year three, demonstrating the compelling cash flows we expect to deliver from this deal. There are many other great things about this deal, but in particular, the partnerships we are forming with 125 independent surgeons who are well-regarded for their expertise predominantly in high acuity procedures. Roughly 60% of the case mix is coming from musculoskeletal surgery including a focus on spine and total joints. The remainder of that mix is distributed among our typical ambulatory service lines The transaction includes 5 ASCs in Tampa extending our presence as the leading provider of lower cost surgical care options in the State of Florida with 48 facilities. We are also increasing our presence in North Carolina, with 3 high quality centers and forming partnerships with some of the largest musculoskeletal practices in the state. North Carolina is the CON state and the portfolio offers an immediate opportunity to provide access to services in the community in a market that has a higher barrier for entry. We believe there are attractive opportunities to expand our presence further in that state. And finally, the transaction also adds another site to our platform in Texas, which is our largest state for ASC operations. Importantly, the Compass transaction expands USPI's strategy of acquiring and growing well established facilities. It also supports our expertise in buying centers which are more in the start-up in earlier stages of development as we can accelerate the ramp-up process and deliver operating efficiencies in a shorter period of time. In fact, six of these nine centers either opened within the last year or are expected to open before the end of this year. Altogether, this strategy further cements USPI as the partner of choice for physicians, health and health systems in ambulatory surgical operations. Shifting to Conifer. As we spoke about several months ago, Conifer leadership has been focused on the growth pipeline through point solutions model further building out the sales force and investing in technology. In September, we were pleased to enter into a new multi-year service agreement with Providence Health System. Under the terms of the agreement which began in September, Conifer will provide select AR services for 45 hospitals in six states. We are looking forward to this partnership which will allow us to support the hospitals, primarily in the area of aged small balance inventory revenue cycle management. It's also a great example of our point solutions model that provides an entry point to share our broader range of Conifer capabilities. Conifer's operating performance remains strong through Q3 delivering materially in line with EBITDA expectations. Despite significant issues with COVID in the countries where our offshore operations are located, Conifer's team has adapted and productivity remains high in a mixed work from home or office model. And we have imported vaccine through appropriate channels to support building immunity in our international workforce. We also remain on track with the activities for Conifer's spin-off. At the enterprise level, our collaboration in the new leadership structure is working well and we are fully focused on executing our strategy. And with that, I'll turn it over to Dan to review our financial results and improvements in capital structure after the successful closing of our Miami transaction. Dan Cancelmi: Thanks, Saum. And good morning, everyone. Our third quarter results continued to demonstrate our ability to manage through the challenges associated with the variation in COVID cases from quarter to quarter, while keeping the safety of our patients, physicians and employees at the forefront. We generated net income from continuing operations for our shareholders of $448 million in the quarter compared to a net loss of $197 million in last year's third quarter. We produced adjusted EBITDA of $851 million, excluding $4 million of grant income, which was $126 million better than the midpoint of our guidance for the quarter. With very strong outperformance by our hospital business complemented by solid results for both the USPI by and Conifer. Our strong hospital results were driven by high patient acuity, a favorable payer mix and cost control. Despite continuing external cost pressures due to the pandemic such as temporary labor rates and PPE costs, our hospital operators are partially mitigating these pressures with disciplined, real time labor management, other cost actions and a focus on growth of higher acuity, higher margin services. Our consolidated adjusted EBITDA margin in the quarter excluding grant income was 17.4%, an improvement of 380 basis points compared to last year's third quarter and 100 basis points improvement sequentially compared to the second quarter of this year. The key driver of this margin growth was our hospitals, which produced margin improvement of 450 basis points compared to last year's third quarter and 140 basis points sequentially compared to this year's second quarter. As you can see on Slide 6, based on our strong performance this year, we have generated compounded annual growth rates each quarter in the range of 9% to 15% excluding grant income. Based on our continuing outperformance, we are increasing our 2021 Adjusted EBITDA outlook for the third time this year, which I'll discuss further in a few minutes. Let's now look at the performance of our individual business segments as detailed on Slide 7 and our volumes on Slide 8. As you'll see on Slide 7, grant income was not a meaningful factor this quarter, in our hospitals or ambulatory facilities. As Ron and Saum pointed out, the Delta variant did impact us in the quarter as COVID admissions accounted for about 10% of our hospital admissions in the quarter compared to about 4% in the second quarter. Despite the increase in COVID cases, in the seasonal nature of the third quarter, our hospitals still produced sequential EBITDA growth of about 11%. As I mentioned earlier, the strong hospital performance is attributable to high patient acuity, favorable payer mix and cost control. In fact, our case mix index for the quarter and year-to-date is about 11% and 13% higher than the same periods in 2019 due to our focus on higher acuity service lines and the impact of the pandemic. Turning to our ambulatory business. USPI continues to deliver stellar margins of about 41%. Surgical cases as a percent of 2019 volumes improved in the quarter despite us seeing an increase in cancellation rates in Q3 as Saum mentioned due to the pandemic. Turning to Conifer, we were pleased that they continue to produce strong margins, about 27% in the third quarter. On Slide 8, we provide specific detail on our volumes compared to recent quarters. Despite the spike in COVID cases, our volume performance was encouraging compared to pre-pandemic levels, particularly when you look at the volumes in the third quarter compared to the last spike in COVID cases in the first quarter of this year. Let's now turn to Slides 9 and 10 to discuss our liquidity and cash flows. You can see our liquidity remains strong. Our cash on hand at the end of the quarter of about $2.3 billion was slightly higher than June's balance of approximately $2.2 billion. We also again ended the quarter with no borrowings outstanding on our $1.9 billion line of credit. Our cash flow generation continues to be encouraging as we generated $321 million, free cash flow in the quarter, or about $500 million before the anticipated repayment of Medicare advances we received last year. So far this year, we have produced $857 million of free cash flow or almost $1.2 billion before the repayment of Medicare advances. Also, as Ron mentioned, we repaid $1.1 billion of debt in September with the proceeds from the sale of our Miami hospitals which will save us approximately $50 million of annual interest in the future. From a leverage perspective, we ended the quarter with a leverage ratio of about 3.5 times, quite an improvement from 6.4 times if you go back 4 years ago to the third quarter of 2017. Even if you normalize this leverage ratio for the grant income we recognized in Q4 last year, the ratio would be about 3.93 times using our projected full-year 2021 EBITDA of $3.3 billion. Let's now turn to Slide 11 and review our updated 2021 EBITDA guidance. Similar to last quarter, this slide shows the key factors that have contributed to us raising our 2021 adjusted EBITDA outlook each quarter this year. As you can see, we've raised the midpoint of our guidance by $100 million each quarter. Our adjusted EBITDA outlook for 2021 is now projected to be $3.3 billion at the midpoint, which is $300 million higher than our original outlook at the beginning of the year. Let me now preview 2022 for a minute. Although it is premature to discuss our thoughts on 2022 in detail at this point, we do feel confident in our ability to generate continuing consolidated EBITDA growth next year. I do want to mention, there are 2 items that will impact our 2022 guidance when we share with you next year. As we previously discussed, our Miami hospital sold in August added approximately $75 million of EBITDA in 2021 which will not recur next year. Additionally, should Congress not act to extend the moratorium on sequestration, we project that would result in approximately $80 million of lower revenues next year. Obviously, it is difficult to say how the pandemic will impact next year but as we've demonstrated throughout the pandemic, we have risen to the challenges during each surge and believe we will effectively respond again should we experience similar challenges next year and be able to generate consolidated EBITDA growth. We look forward to sharing more information about next year when we release our fourth quarter 2021 results next February. Our consistently strong quarterly results together with ongoing enhanced operational execution increases our confidence that we are on the right strategic path and in our ability to deliver our projected results. Before I turn it back over to Ron, I want to thank and say how proud we are of all of our patient caregivers and their colleagues in non-clinical roles across the company. Their teamwork and the level of diversion continues to be exceptional. Ron? Ron Rittenmeyer: Thanks, Dan. Really not much more to add, it was a very good quarter. I think we've covered the key points and we'll just let operator open it up for questions, which I think will be more efficient and effective. Operator? Operator: [Operator Instructions] Our first question comes from the line of Jamie Perse with Goldman Sachs. Please proceed with your question. Jamie Perse: I wanted to start with the staffing situation that's obviously on a lot of peoples mind these days. Can you give us a sense just across at license level, scale level, pay level where you're being the most stressed in the market and also across setting, if there's differences between ICU, ER, operating rooms, that sort of thing? And bottom line maybe should we be penciling in more wage growth in the model going forward? Saum Sutaria: Jamie, it's Saum. A couple of things. From a traveling wage perspective, it's really the areas of the ICU, a little bit the ERs and some of the specialty areas like operating rooms and procedure rooms where you don't have as much reserve in the staff where the pressure is highest. But I would say that this past quarter, even though the COVID spike wasn't what we saw back in January, February, the labor market was much more disrupted across the board in clinical staffing in particular with our ends and that's why I highlighted our work mostly and how we thought about deploying that premium in contract labor as well as length of stay management. I don't think you can overturn the market, you just have to manage the operations. Jamie Perse: Okay, thanks for that. And I'm going to ask about the ER volume trends that remains to 97% of pre-COVID levels. That's actually ahead of where admissions and hospital surgeries are versus 2019. There has been some concern that as that low acuity volume comes back pressure, it pressure your margins, but that seems to if we're just looking at 3Q not happened. So how should we be thinking about the margin rate going forward as these various types of volumes return to normal? Saum Sutaria: Yes, I mean you're right that ER volumes have rebounded pretty quickly and to the extent there is an analogy to draw between length of stay management, the low acuity work that comes into the ER, at least in our operations, in our emergency departments is handled in fast track settings, so that we minimize the intra-ER length of stay and costs and you got to - I mean you have to accommodate that, right. I mean, I think we all knew that low acuity work would come back in the ER and the impact of it is dependent on two things, how much low acuity and what's the payer mix. And as that comes back into the fold and becomes a normal part of 2022, we're just going to have to deal with it and manage it and find offsets. I mean you're right that, that puts pressure on the revenue line, on a relative basis given the cost of staffing today. Operator: Our next question comes from the line of A.J. Rice with Credit Suisse. Please proceed with your question. A.J. Rice: First is, maybe just to ask about the - I know you're not ready for '22 guidance, but at least comment on the Q4 outlook. I think you're - even if you normalize for the loss of the Florida hospitals, you're looking at EBITDA stepping down $100 million to $120 million or so. Is the assumption just that there is not much COVID volume and it's slow to backfill with the non-COVID? Have you made any unusual assumptions about labor or was there any unusual items in the third quarter, either state payments or other accrual adjustments that may be won't recur in the fourth quarter? Just give us a little bit more on your perspective because it seems like you're being conservative and that may be the right way to be in this environment, but I just want to get any more color there is on the fourth quarter outlook. Dan Cancelmi: Hey A.J. it's Dan. Good morning. To your question about whether there is anything unusual that doesn't necessarily repeat. No, there is nothing like that. Here's - listen, the hospitals turned in a great quarter and they've been performing incredibly well during the year. The cost control remains very diligent and tight. Pricing, the yield has been strong, driven by the growth in higher acuity services, as well as the pandemic, let's be clear about that, that drives incremental revenue per case. Although there are extra costs associated with those cases. We're in a very strong contracting position from a managed care perspective that's also helping on the revenue line. Listen, we outperformed by over $100 million in the third quarter and when we looked at the fourth quarter, we're not ready quite at this point to declare victory and say, we're going to outperform a $100 million again in the fourth quarter, but we feel very good about how our hospitals are operating. And when we looked at it, we came in by $125 million ahead of our midpoint of our guidance about $100 million above the high-end of our range and we thought it was appropriate to increase our guidance about $100 million for the full year. We feel good about how all three of the business segments are performing. A.J. Rice: Okay. And maybe just a quick follow-up. Congratulations on getting the leverage below 4 times, it's been a while, so you're now on a path to have that on a sustained basis it looks like. With enhanced financial flexibility I know, adding in the ASC businesses and development on that side has been a priority. Do you see that accelerating now that you have more financial flexibility? Are there other priorities for capital dollars going forward? Saum Sutaria: A.J. just a couple of comments there. First of all, as I indicated, we have not stopped investing through the pandemic in our strategies, which include capital from a high acuity service line standpoint. That's the first thing, I mean we're very nimble with deployment of clinical technology in particular when their service needs in our communities and that's been an important driver of our growth and frankly, improvement in margins that we see. Remember, we do have, and have announced a couple of pretty significant market expansion building projects on the hospital side, in particular in Fort Mill, South Carolina and in San Antonio. So, there are important and from our perspective, very much better vetted capital priorities on the hospital side where we are very happy with the potential returns that we'll get from those. And then obviously, on the ambulatory side with USPI we're pleased with the strong pipeline, we have, we're confident about how we deploy capital there. And again, I would highlight the nuance in this deal that we announced with Compass Surgical Partners, which is the operating model that USPI is at this point so advantaged in our view in the industry that our ability to go deploy capital on both mature centers and centers that are still developing but actually generate returns faster as a better natural owner that is going to expand the set of opportunities for us at USPI and it comes on the basis of the confidence we've built in building and operating model at USPI over the past few years that has taken one that was really good and made it even better. And now that we have that confidence, we're expanding our aperture for the types of centers we go after, and again, I think that's going to allow us to increase the deployment of capital into the USPI segment. A.J. Rice: Okay, great. Thanks a lot. Dan Cancelmi: Yes, one other point A.J. on the capital deployment. We have various tranches of debt that we can retire including $700 million of 7.5% notes that we issued at the outset of the pandemic. So, we'll obviously be looking at that, those are higher interest rate notes and we could obviously target them in terms of from a capital deployment perspective. Operator: Our next question comes from the line of Brian Tanquilut with Jefferies. Please proceed with your question. Brian Tanquilut: Congrats again. Just a follow-up I guess on the guidance comment you made for 2022, just how we should be thinking about that. I guess, Dan, if I think of it, am I thinking of it the right way, take out the Miami hospitals and then you think you can grow. If I take out sequester or is that with the sequester in there, the $80 million? Dan Cancelmi: No, without the sequestration deferral. Right now we're assuming that the sequestration deferral will not be extended. We obviously believe it to be. But right now we're assuming that it will not be and that would as I mentioned in my remarks, that would reduce revenue next year, $80 million. But even with those headwinds, how we're looking at it is, we believe we can continue to deliver consolidated EBITDA growth. Brian Tanquilut: And then Saum, just to follow up on your last comment on the USPI kind of like model, right. So is it right to think that going forward, the focus will be more on the development side, right, pursuing some of these acquisitions that are centers that are still ramping up and like you said, it's a natural home for these assets and we're shifting away from true de novo developments. Is that a good way to think about that, where it's a higher - a quicker ramp and higher ROIC? Saum Sutaria: No, not at all. I mean, so what's interesting is that the way I described it is for us it's broadening the aperture right. So, there are mature centers that obviously we can deliver synergies and growth into. There are health system partners that we continue to develop centers with many of which are de novo. There are true two way de novo partnerships that are part of our development pipeline and now we're adding a fourth segment that we have built some confidence in being able to ramp up. And look, importantly for us, we look at the world from the standpoint of what is the multiple on a post ramp-up in synergy basis. So if it kind of years, 2 and 3 we're generating multiples that are below 6 or whatever, that's very attractive. Brett, you may want to add to some color at all that, how you're thinking about it. Brett Brodnax: Yes, thanks, Saum. Brian, I would say, to your point, no, our pipeline outside of the acquisitions that Saum was alluding to both de novos and acquisitions, new health system relationships remains stronger, stronger than it's ever been. As a result of that, we're actually increasing the number of resources we have on our development team just to keep up with the level of activity we have in the company. And of course, we're very focused on making sure that we're executing against our pipeline going into Q4, but as importantly, make sure that we have a stronger pipeline as possible so that we can deliver on significant amount of growth in 2022. RonRittenmeyer: We're also chasing quality, higher quality opportunities. Brett Brodnax: Absolutely. Operator: Our next question comes from the line of Kevin Fischbeck with Bank of America. Please proceed with your question. Kevin Fischbeck: Want to just go back to the labor cost for a minute. I guess, you mentioned the shortage that you were seeing, I guess, what are your thoughts, broadly speaking about what that labor market backdrop looks like, do you expect it to be this elevated for this long or do you think that you will see moderation in labor pressure into next year as COVID wanes? Saum Sutaria: I'll give you my observation. In the earlier phases of COVID, when there were COVID spikes and the labor market was distorted, the impact was short and it correlated with the COVID spike and so, when that spike came and went, the labor market normalized more quickly. That didn't happen during this Delta spike or it hasn't happened yet. We're still kind of living through it. And as Ron described, despite the COVID cases still being there but being a little bit less than half of what the spike peaked at, the labor market really hasn't improved that much. It did-- it has forced us to go even further in our approach to trying to manage the operations and identify offsets, look at other sources for nursing, think about some longer-term contracts at better rates that we would be able to put in for traveling nurses into certain markets, I mean you just got to diversify the approach and tighten up the operations. I'm sure we'll see some inflationary pressure from this prolonged traveling nurse market going into the fourth quarter and next year. I mean I think our plan is, we're just got to accept that and figure out how to manage through it. Kevin Fischbeck: Okay. And then maybe just a question on costs generally and then your ability to price for them. I think it's pretty clear that over time, hospitals can get sufficient rates but I guess I was worried that inflation is going to start to pick up, wages are starting to pick up. How do you think about the potential lag between when you see those pressures and when you're able to get Medicare, Medicaid and commercial rate updates to reflect underlying cost growth? Saum Sutaria: Well, let me make one comment and then I'll pass to Dan. One thing that we did at the beginning or kind of March-April of 2020 is we set up our - what I called our COVID operating model back then. And we kind of established different work tracks within the company, one of which was to begin to look at longer term savings opportunities on the theory that we were going to have to generate more efficiencies because we saw so much volume contraction in the early days of COVID. And that involved our Global Business Center in Manila. It involved a broader supplies and purchased services agenda where you can't turn that stuff overnight and other physician staffing contracts and other things we've just deepened partnerships with fewer vendors. So, I think you're right in the thesis behind your question. For us that track of work that began back in the middle of 2020 is paying dividends now in '21 and looking into '22 as we re-sign contracts or narrow our vendors with deeper partnerships at better rates and so, we're going to see the benefit of some of that longer-term cost management approach hopefully into '22. Operator: Our next question comes from the line of Justin Lake with Wolfe Research. Please proceed with your question. Justin Lake: Couple of things here. First, can you talk a little bit about the headwinds that you talked about in terms of sequestration and the Miami sale or in the hospital business? So, do you think you can grow the hospital business in 2022 from an EBITDA perspective? And then, do you-- is there any other offsets to the good that you're thinking about in terms of, for instance, I know you bought some surgery centers recently that could kind of help offset that 150 headwind? Dan Cancelmi: Justin, it's. Dan, let me start off on this one. As I mentioned in my remarks, we do believe we can drive consolidated EBITDA growth next year. We were anticipating, obviously managing through sequestration being implemented again, as well as the loss of the Miami EBITDA. Listen, we feel very confident in the hospital's ability to continue to perform well, control costs. We have very good visibility into pricing next year from a commercial perspective, 80% of our commercial book is already under contract, as you've probably seen recently we just extended our contract with Cigna. We did renegotiate a new contract with United earlier in the year. So, we know where we're at from a contracting perspective and we feel really good about that. From a Medicare perspective and in between in outpatient, the rate updates are about 1% to 2%. Listen, we're going to continue to efficiently manage the business and the focus on - and capital deployment into the higher acuity service lines will help to mitigate some of the pressures from sequestration going back into effect as well as the Miami earnings not necessarily repeating next year. As Brett and Saum mentioned, the pipeline for the USPI ambulatory business is strong. The existing business is performing well. We feel confident in ability to continue to drive organic growth and within that book of business. So we'll obviously share more specific detail in February next year but that's sort of a high level summary of how we're thinking about next year at this point. Justin Lake: Okay. So overall, flat to up seems reasonable in the acute business? Dan Cancelmi: I'm not going to comment about guidance by segment, Justin. Justin Lake: And then the question I've been getting this morning you've gotten some questions on the fourth quarter and I think it's reasonable that you're saying, we don't know that the strength of COVID and everything else is going to continue in the acute business from Q3 to Q4. But it does seem a little bit at odds versus you're talking about in the ability to grow through almost a 5% headwind on EBITDA in your acute business. I'm talking about consolidated now but the - if you're - I guess, can you explain why you're kind of cautious on Q4 and the continuation of these trends but think that it's not going to present a tough comp and you can grow through it into 2022? Dan Cancelmi: Well, here, let me, as I mentioned earlier. Here is how we looked at the guidance for the rest of the year. We outperformed in the third quarter, $100 million above the high-end of our range. When we look at the fourth quarter, listen, we don't know for sure how COVID will evolve and the impact as we move into the winter season. So, as I mentioned, we're not going to declare victory quite yet and say, we're going to outperform again in the hospital business by a $100 million in the fourth quarter. So, we increased our guidance $100 million, we feel that's appropriate at this point in time, but we feel really good about how our hospitals are performing. Operator: Our next question comes from the line of Sarah James with Barclays. Please proceed with your question. Sarah James: To kind of continue on this topic of trying to understand the step down here. So, in 3Q some of your Texas competitors like Scott Baylor, Texas Medical shut down their elective procedures, you guys did not. Was that a contributing factor to the strength in 3Q? And is there, I guess any assumption that it doesn't continue in 4Q, is that part of the step down? Dan Cancelmi: Sarah, it's Dan. Let me start off and then Saum or Brett can weigh in. In terms of that having any significant impact on our facilities, the USPI centers in Texas are performing well and they have been performing well throughout this pandemic time period. And so, was there some impact of that? There probably was some. I'm not sure how significant it was, but the USPI centers in this part of the country are doing very well. Brett Brodnax: Yes, Dan. And the only thing I would add that if you think about our - just on the USPI side, this is Brett, our overall same-store growth was up 6.8% year-over-year and that represents 13 of our 17 markets, reflecting positive case growth over prior year. And then if you dig a little bit deeper into specific markets, DFW, for example, same-store volume increased by 7%. Houston's same-store volume increased by 15.2% year-over-year. So, you asked specifically about Texas. I've just given you a little bit of color on how those specific markets which of course, two of our largest, well they actually are, our 2 largest markets in the Company are performing from a growth perspective, very, very solid. Sarah James: Great. And then just reading into your conservatism in guidance in 4Q relating to COVID, does that have implications on what the cadence could look like for '22 so, being different than '21 given the COVID pressure might be more in the first half of the year? Dan Cancelmi: Hi, Sarah, it's Dan. Well, we'll have to see. That's obviously a variable and unknown at this point, we're optimistic that we won't see quite the same type of surges, but we don't know. If you go back several months, I don't think many people thought we were going to experience the surge that we saw in the third quarter. So that's one of the things when we think about our guidance assumptions for next year, we obviously are taking that into consideration. As Saum mentioned, from a labor perspective, from a traveling nurse perspective, there likely will be rate pressures, continuing into next year. Saum Sutaria: Yes. The other thing I'd add is, I think to Dan's point, it's not just the COVID, it's - I don't think we ever predicted this variant and how quickly it took hold and whatnot. So, obviously there is some cost - one would think about the winter months and be uncertain about where that goes. And then the labor market, as I indicated before, look, we view it as acuity and mix may change into '22 and we've got an operating platform that's going to manage through that. And it's the labor market and then the uncertainty around COVID that we're just thoughtful of because we did not predict delta. Operator: [Operator Instructions] Our next question comes from the line of Josh Raskin with Nephron Research. Please proceed with your question. Joshua Raskin: I got thrown off by one question only. So, USPI was impacted more by the COVID deferrals, it sounded like in the quarter, but yet you still move from 100% of pre-pandemic levels to 101% from 2Q to 3Q. So does that mean 4Q or kind of whenever we see a cleaner quarter sort of 4Q to date so far, should we be expecting that number to be sort of well ahead of a 100 at this point, just build on that? And then, is the sort of thinking about the quality of that 101%, isn't that already significantly better I feel like there has been a huge increase in acuity and mix has gotten a little bit better as well. Saum Sutaria: You're definitely right about that latter piece. I mean at the 101% of 2019 level, with the kind of as I pointed out, the net revenue per case in the acuity, the growth in those areas and that mix improvement is terrific. And by the way, that's why we pointed out that despite the COVID surge, the margins continue to improve impressively at USPI. So, I agree with that. I don't know, Brett if you want to comment on the first part or. Brett Brodnax: Yes, the only thing I would add Saum and Josh, good to talk to you. First, it's always worth noting that going into Q4, that is obviously our busiest quarter of the year. And the midpoint of the guidance assumes 32% of our annual EBITDA in this quarter, which is very consistent with prior years. And as Saum mentioned earlier, we're very encouraged by the performance of a significant number of our markets that are in regions that opened up earlier than others. And we believe some of those markets are an indication of the type of performance we should expect system-wide is other markets reopen to the same level. So, we're very encouraged about that and also, as you alluded to with the continued increase in net revenue case throughout the year, we expect those trends to continue as well. That's given us comfort with the revenue projections. Operator: Our next question comes from the line of Pito Chickering with Deutsche Bank. Please proceed with your question. Pito Chickering: I understand the fourth quarter hospital guidance but can I ask specifically about how would you think about the, I guess, like acuity durability versus payer mix versus labor inflation for the fourth quarter? And any color on that for 2022? And just a yes or no question, just to be super clear, will 2022 EBITDA growth will be more than 2021? Thanks. Dan Cancelmi: Pito, it's Dan. So, let me get to your second question there, will 2022 EBITDA be higher. That's what I said, that we expect to grow consolidated EBITDA from '21 to '22. In terms of your first point about payer mix, acuity levels, etc., one of the things that's been pretty consistent this year from a payer mix perspective is that the commercial trends have been positive, more positive than the aggregate overall metric. And that's obviously encouraging. It's also attributable to the fact that some of the service lines that we've been focusing on contribute to that as well. But let's be clear as we mentioned many times in the past, some of the Medicare business hasn't necessarily recovered at the same levels as the commercial mix. So, we obviously think about that as we move through the fourth quarter and ended into next year. The overall acuity, as I mentioned in our case mix up, it's in double-digit 11% to 13% depending on what time period you look at back to - I'm comparing that to 2019 not last year. And so, we'll see. I think it's fair to say that we're not going to continue to see double-digit case mix in growth in perpetuity. I mean, it's not - you know that. So as the lower acuity business does come back, we'll see some moderation in our overall case mix. Operator: Our next question comes from the line of John Ransom with Raymond James. Please proceed with your question. John Ransom: Dan, I just wanted to understand the math on the sequester headwind next year. If I look at the proposed rule of the 2.8% increase. And so, plus 2.8 minus 2, I know there some other adjustments, but let's just say for argument's sake Medicare revenue next year is kind of flatish to maybe up 0.5%, is that really a headwind? Dan Cancelmi: Well, you have the fee-for-service rate update for us is about 1.3% overall. That's our projection and that adds about $25 million of additional revenue just on the fee-for-service. There would be a corresponding additional lift on the MA or the Medicare Advantage side too. What I was talking about the $80 million that's just in isolation, just related to the sequestration impact, if the deferral is not extended. Operator: Our next question comes from the line of Ralph Giacobbe with Citi. Please proceed with your question. Ralph Giacobbe: Great, thanks, good morning. Just quickly back to the 2022 commentary, I guess I'm a little surprised you only called out the Miami sale and sequestration headwinds. I guess what about COVID contribution and government funding including HRSA payments in the 20% add on? I mean, do you expect that to continue, or is it just that rollover of COVID tailwinds this year essentially is going to be totally offset by non-COVID or core all the way back next year? Thanks. Dan Cancelmi: Ralph, it's Dan. The HRSA funding, if COVID cases continue to be there, we would certainly hope that funding would continue; if COVID cases drop off significantly and there is very little COVID, then presumably, you don't necessarily have those patients either because we're just getting that reimbursement for patients who present with COVID. So, we'll see, it's not definitive whether that funding would continue or not, but we're optimistic and hopeful that it does as we move into next year. In terms of your other point about the other COVID business, ultimately the economics on caring for COVID patients obviously depends on the payer mix, commercial mix is obviously more attractive from an economics perspective and then uninsured or government but we are caring for all patients. And COVID cases, there are incremental costs associated with providing that care. Operator: Our next question comes from the line of Frank Morgan with RBC Capital Markets. Please proceed with your question. Frank Morgan: Yes, just a clarification, you had made some comments about looking at changing how you structure your contracts with travelers or agency labor. Just curious if you could provide some more color on what that would look like and what kind of terms you would be looking for? And then, just related to that, you mentioned recently negotiated contracts with Cigna United, were those at a point in time where you were able to reflect in that pricing some of this wage inflation you're starting to see? Thanks. Dan Cancelmi: Well, this is Dan, I'll address the managed care contract negotiations or the new contracts. Listen, we were very pleased to be able to early renew our contracts with both United and Cigna this year. It gives us very good visibility into our contracting positions and service lines focus and what we believe the yield will be over the next several years as we think about how we will continue to manage the business. I'm not going to get into specific rate increases in those particular contracts, but we were obviously, we were pleased to wrap up, there is negotiations and continue to partner with those organization. Saum Sutaria: This is Saum. To your first question, the primary example that would maybe help illustrate what I was speaking about, we've had pre-pandemic what we call the TRA, the Tenet Resource Agency that we have invested now in building up and what we do - what we can do with that is that there are segment of nurses that seek, let's just call it more stable type travel arrangements, months at a time, etc., that we can invest in and bring on board and then deploy into our markets, when we have a need. Obviously that helps with stability, it helps with in a market where the price fluctuation is high, helps to stabilize that, give us a little bit more predictability. So, that would be the primary example I would give you. Operator: Our next question comes from the line of Whit Mayo with SVB Leerink. Please proceed with your question. Whit Mayo: I've got just a quick one. Dan, I just want to make sure I get these numbers right. How much have you repaid if we want to call it that, on the accelerated payments year-to-date? And what is the expectation this year? And then also, the Baylor put call, have you funded that and is there a number that you can share? And then the last sort of piece of the question is, just given some of the cash commitments, should we expect that the cash balance can grow in 2022? Thanks. Dan Cancelmi: Whit, it's Dan. In terms of the Medicare advances, that we've repaid at this point, it's about $350 million in aggregate and by the end of the year, as we've talked about, between the Medicare advances and they're paying half of the deferred payroll tax we will have paid off this year about $650 million to $700 million between those two in total. In terms of the, the Baylor put, we haven't provided any specifics in terms of the specific dollar amount. We're obviously having conversations with Baylor and will come to certainly a mutually agreeable solution on that and totally fair value for that interest. And we do have intention to exercise one-third of their interest and repurchase that from them. In terms of your other question about specific cash balances next year, I'm not going to get into that, but hopefully everyone can see that we're generating a pretty strong free cash flow from our business. We are paying back the Medicare advances and the payroll taxes that were deferred last year, but we have that cash on the balance sheet and it's already reserved for. So, we would anticipate to continue to generate growth and our free cash flow. Operator: We have time for one last question. Our last question comes from the line of Andrew Mok with UBS. Please proceed with your question. Andrew Mok: Thanks for squeezing me in here. I wanted to follow up on some of the labor comments that you made earlier. I understand that you're managing labor productivity and contract usage well, but it sounds like you're planning for higher underlying wage inflation as well. Can you speak specifically to the trends in underlying wage inflation? And what level of wage increases you're expecting as you look ahead to 2022? Thanks. Saum Sutaria: It's Saum. I'm not going to comment specifically we have union negotiations and other things. I'm not going to comment specifically on those. We have - over the course of the pandemic, we've settled over 25 different contracts which play out into the coming years including 2022 and over the course of the next year or two we'll have a few more to work through. Look, our nurses are critically important to us. It's, the reason that we've worked so diligently in those 25 plus situations to settle fairly and amicably in those contracts. And we'll continue to work towards that in other situations. There is going to be some wage inflation and some wage pressure in that segment and also in other clinical frontline segments that will occur, but again with good relationships, with multi-year arrangements, we think that we can manage through that. Operator: There are no further questions in the queue, I'd like to hand the call back to management for closing remarks. Dan Cancelmi: Well, thank you everyone for joining us and enjoy your day. Ron Rittenmeyer: Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Operator: Good morning, and welcome to Tenet Healthcare’s Second Quarter Earnings Conference Call. All participants are in a listen-only mode until the Q&A session begins. [Operator Instructions] Tenet asks that callers limit themselves to one question to allow for as many people to get through the queue as possible. I’ll now turn the call over to Tenet’s Vice President of Investor Relations, Regina Nethery. Regina Nethery: Thank you. We’re pleased to have you join us for a discussion of Tenet’s second quarter 2021 results, as well as a discussion of our updated financial guidance for the year. Tenet’s senior management participating in today’s call will be Ron Rittenmeyer, Executive Chairman and Chief Executive Officer; Dr. Saum Sutaria, President and Chief Operating Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes an accompanying slide presentation, which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent Tenet management’s expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today’s presentation, as well as the risk factors discussed in our most recent Form 10-K, subsequent From 10-Q filing and other filings with the Securities and Exchange Commission. With that, I’ll turn the call over to Ron. Ron Rittenmeyer: Thank you, Regina, and thank you all for joining us to discuss our second quarter. Start with as we take a look at our results, I wanted to offer somewhat of a look back on where we are, particularly in the context of what we set out to do as part of our transformation a few years back, and even how that transformation has pivoted considering COVID, other challenges, we have managed through and the opportunities we’ve captured as recently as second quarter. The cornerstone of our strategy remains our commitment to our four pillars of compliance, quality, service, and safety, which drives consistent improvements resulting in the performance trajectory we have noted for the last several quarters. The results thus far provided a solid first half of this year. And you can see how we are building a truly unique and diversified operation. Following the strategy, we discuss the last few years. The results are in line with the strategy, which we have closely followed, whichever resulted in greater diversified EBITDA streams, targeted inflection points for growth, top quality environments for our patients, and the addition of highly skilled physicians covering important and high demand specialties. The output is greater financial strength with greater cash flow generation and a more agile setting overall at every level of the enterprise. And importantly, we have incorporated community based programs, which are bolstered our ESG commitments, ensuring our sustainability has broad and a strong race going forward. The second quarter and the first half of 2021 have been better than expected on many fronts. This was largely driven by the continued commitment of our strategy, our extensive use of data and analysis, which have allowed us to trace deviations quickly, take action as needed and thus insured a focus on execution at every level. We’ve created an environment as COVID cases decreased in which doctors and patients are comfortable coming back to our hospitals and ASCs. And we continue to invest in our service lines and community relationships, which helped ensure a very accessible health system over the last year. We certainly believe, and the results support that this approach has been successful. We also believe we have more to accomplish to ensure the approach remains a solid part of our foundation going forward. Please realize we’re not claiming any victory. And we’re not relaxing other than the recognize the trends remain strong and importantly consistent and underscore our commitment to continuing this development and ensure deeper roots are generated system-wide. I would like to take a moment to comment from our perspective on the current COVID situation. Clearly, the variance coupled with the unvaccinated individuals has resulted in an uptick certain parts of the country. Our COVID inpatient numbers remain in well roughly 4% of our total cases as of now, and while we’ve seen increases in selected markets, given our experience, we really able to manage through this like we did when we were hit with other ways earlier last year. We have sufficient PPE on hand. We have sufficient capacity across every market and facility. And we remain vigilant to any changes that occur taking appropriate action to continue to process cases effectively based on current and anticipated conditions. Vaccinations continue to play a crucial role in bringing down the number of COVID inpatients and the number of patients once infected, who become seriously ill. We continue to support the vaccination rollout on our own employees and the public at large advocating for and communicating the significant benefits of vaccinations and other necessary precautions to everyone in our communities. In addition, all of our COVID safety protocols remain in place in our field locations and have been highly effective in continuing to ensure staph infection rates remain low. Focusing back now on the second quarter performance, there are several strategic and financial highlights, which deserved some discussion. As you can see in the numbers, we are delivering a much stronger growth trajectory on the hospital side, in terms of admissions, outpatient visits, ER volumes and surgeries. In particular, the higher acuity work that we have been focused on with general surgery, cardiovascular, ortho, neuro, et cetera, have been steadily progressing in key markets across the country. For example, last week in El Paso, we announced expansion effort to increase capacity and serving growing needs along the Eastern regions of the city. The new project to be carried out over the next year and a half. We’ll include the addition of 30 telemetry units, third cath lab, equipped to provide a higher level of care for patients with stroke symptoms, enhanced capacity to the NICU and continued efforts to expand trauma services and robotics. San Antonio, we will soon move forward on our plans to build a new medical campus as the city continues to expand. This multi-phase project is slated to begin later this year and will include medical office buildings and ASC, an acute care hospital with a potential for additional medical and retail entities in the future development phases. We plan to invest in critical services, including cardiovascular, maternity and surgical care at a scale that is commensurate with the needs of that area. Oncology is another area of focus. As we recently announced a new affiliation between Memphis based Saint Francis Healthcare and world-class West Cancer Center and Research Institute, which is an independent, comprehensive cancer center. The project will include a new cancer urgent care center at Saint Francis, the first of its kind in the area, as well as a specialized hospital within our hospital with dedicated oncology beds and an investment in the latest treatments. All staffed by professionals, trained in cancer care. In addition, Saint Francis has the largest number of surgical robots in one location in the Mid-South, which the surgeons of West Cancer will use to perform minimally invasive surgeries that can lead to shorter hospital stays and faster recoveries. Our commitment to attracting and retaining quality physicians remains a critical element of our growth strategy, that efforts expands multiple service lines across our hospital portfolio and especially in USPI. For example, in Palm Beach, we’re completing the build out of a large physician group focused on general surgery with specialization of care and a team environment to best serve the larger community. In Phoenix, we have a highly talented group of physicians and are build more cardiology group, and we’ve been working to significantly expand their in market presence. In Palm Springs, we’re building a top quality multidisciplinary orthopedics and foot surgery, spine and trauma group. And with USPI, we’ve added more than 570 physicians joining our medical staffs during this quarter, bringing the number now that have joined to 1,100 year-to-date. These are only a couple of examples and there’s more to come. Together, with the investments I mentioned earlier on expansions, these activities are actively supporting our current performance and we see a long runway in front of us. Finally, focusing on our hospital portfolio, as you know, we recently announced the sale of our Miami-based hospitals, which is compelling for several reasons. We received an attractive multiple for the transaction from a credible and experienced buyer who will support the continued development of these facilities. Conifer remains the revenue cycle provider post-sale. Florida remains a very important part of our portfolio as our five Palm Beach hospitals, which continue to grow and improve, couple was more than 40 Florida Ambulatory assets, ensures a very strong viable network in our continue – in this continually growing area. This is supported by our successful physician recruitment efforts in the state and specifically in the greater Palm Beach market. As we focus investments on procedural care modernization program – programmatic service line development, market branding, and overall expansion to meet current and future community needs. Strategically, the Miami transaction also continues the objective of diversifying our EBITDA further to our ambulatory segment, which we project to be approximately 43% or so by the end of the year. Our hospital portfolio is now positioned as the number one or two in 70% of our markets. And with the Miami sale that number will edge higher. Now let’s take a minute and move the USPI. USPI had a very good quarter in line with our expectations. And the mix of business continues to be weighted towards higher acuity cases in comparisons to 2019. The integration of SCD facilities has been going well. And in terms of other development activity, we added four facilities to USPI in Q2. We continue to pursue the same type of opportunities we spoken about previously. And we have a healthy and strong pipeline that we’re working to deploy. That includes USPI’s traditional three-way model, as well as a greater two-way opportunities, both of which foster direct collaboration between USPI and local physicians. And we are continuing our historical strong efforts on developing de novos in which we handle all aspects from syndication the first patient. Organic growth opportunities continue to remain substantial throughout the balance of the year and beyond USPI. USPI has in-house a very advanced service line and development team. And in the second quarter, for example, we added 25 new starts for service lines across the range of specialties, bringing that total to 45 year-to-date. We also remain a leader in musculoskeletal surgery, and the depth of our platform across other types of procedures keeps expanding. Allowing our facilities continue to hit important milestones, servicing the needs of their respective communities. Quality remains a cornerstone of Tenet’s overall mission as a company, and USPI given its more intimate patient experience, continues to set a high bar in this area. USPI’s patient experience results have again earned important recognition in the last year. For example, all but one of our eligible surgical hospitals are into four or five star rating in the most recent age gaps survey. Let’s take a minute and talk about Conifer. Conifer continues to deliver strong margins remain on track with our growth plans and we made some opportunistic hires at all levels as our pipeline has begun to expand. We are in the middle of a more targeted and efficient tech transformation to Conifer as well as the Global Business Center, both defining and accelerating our innovation roadmap. Technology as an offering has moved to the forefront and become one of our main strategic pillars. And we recently hired a new Chief Technology Officer at Conifer who advanced these efforts significantly. Operationally, we continue to deliver strong cash collections on behalf of our clients at Conifer over the last year. And we remained very pleased with that performance. So in closing my remarks, the second quarter was a very tangible example of how clear and direct business fundamentals properly adjusted for the situations we face result in sustainable performance. We are a data driven real-time analysis company, who properly executes on a consistent trajectory. And when you reflect on the last year, our results have been consistent and directionally aligned with our strategy and above all transparent. So with those comments, let me now turn it over to Dan for discussion of a quarter in greater depth and discuss our guidance. Dan? Dan Cancelmi: Thanks, Ron, and good morning, everyone. Let’s begin on Slide 6. Following a strong first quarter, we produced another very good quarter as we generated adjusted EBITDA in the quarter of $834 million, which was $109 million better than the midpoint of our expectations. Consistent with the themes in the first quarter, each of our three business units delivered solid results in the quarter. Our hospital and ambulatory volumes improved across the board, patient acuity remain strong and cost continued to be well-manage, all of which contributed to a sequential margin improvement in all three of our businesses. Looking back to the second quarter of 2019, our consolidated adjusted EBITDA this quarter represents a compounded annual growth rate of about 12% and our adjusted EBITDA margin increased 170 basis points, excluding grants. As a result of another strong performance in the quarter and some additional grant income, which was not forecasted, we increased our 2021 outlook for the second time this year, which I’ll discuss further in a few minutes. Let’s now turn to Slide 7, which provides more detail about the performance of our individual business segments. I’ll begin with our hospitals, which produce another very strong quarter. Substantially, all of our 20 hospital markets exceeded our expectations for the quarter, including 14 markets that exceeded our internal EB forecast by more than 10%. Surgical volumes, ER visits and outpatient visit volumes, during the quarter, returned at a faster pace in patient acuity remained at higher than normal levels and pricing yield remained strong as well. Our case mix index in the quarter was about 10% higher than the second quarter of 2019. These positive trends were further supported by our continuing cost control initiatives to yield further operating efficiencies, to help mitigate the impact of incremental cost pressures as a result of the pandemic, such as elevated temporary contract labor and PPE costs. Our hospital adjusted EB margin excluding grants was 10.9% in the second quarter, which was 50 basis points higher than in the first quarter of this year and 150 basis points higher than the margin we reported in the second quarter of 2019. As a reminder, our hospital margins do not include the results of our very strong margin ambulatory business, which has reported separately. Turning to our ambulatory business, USPI continues to deliver on its value proposition, providing high quality care and a consumer friendly, low cost environment, while producing attractive financial results. USPI generated EBITDA of $295 million in the quarter, which included $20 million of grant income. USPI’s EBITDA in the second quarter, excluding grants represent a compounded annual growth rate of about 15% looking back to the second quarter of 2019. Surgical volumes this quarter recovered to 100% pre-pandemic levels, patient acuity and revenue yield remained strong and cost continue to be well-managed. USPI’s EBITDA margin, excluding grants of 41.4% was 190 basis points higher than the second quarter of 2019. Also we anticipate approximately 43% of our consolidated adjusted EBITDA in the second half of 2021 will be from our USPI business, demonstrating further progression toward our goal of approximately 50% by 2023. Turning to our revenue cycle management business, Conifer generated $90 million of adjusted EBITDA and continued to deliver strong margins of 28.2%, which was 50 basis points higher than the first quarter. Also Conifer’s cash collection performance for our hospitals continues to be an important contributor to our strong cash flow results so far this year. Let’s now look at volume for the quarter on Slide 8. Our hospital and ambulatory volumes improved significantly in the quarter compared to last year due to the dramatic impact on volumes in Q2 last year due to the pandemic. And as I mentioned earlier, volumes rebounded stronger across the board compared to pre-pandemic levels in 2019. These volume trends demonstrate notable improvement from the trends in the first quarter of this year. Let’s now turn to Slide 9 and review cash flows and liquidity. We continue to be in a strong liquidity position. We ended the quarter with about $2.2 billion of cash on hand and no borrowings outstanding on our $1.9 billion line of credit. We generated $123 million of free cash flow in the quarter or about $275 million before the repayment of over $150 million of Medicare advances we received last year at the outset of the pandemic. Year-to-date, we’ve produced $536 million of free cash flow or about $688 million before the Medicare advance repayment. As we previously discussed, we began to repay the advances as scheduled in April this year. Our leverage ratio at the end of the second quarter was 4.17 times adjusted EBITDA and 4.86 times adjusted EBITDA minus NCI expense. Also we refinanced $1.4 billion of notes during the quarter, which will result in $13 million of future annual cash interest savings and we realized over $100 million of cash proceeds during the quarter from the sale of our urgent care centers, a medical office building and some other property. Let’s now move to Slide 10, which highlights key cash flow sources and uses during the quarter. We’ve provided this information since the beginning of the pandemic to illustrate that we’re generating net positive cash flows, when you exclude non-routine cash received or used related to stimulus funding and cash inflows and outflows from non-routine transactions, such as early retirement of debt, acquisitions or assets sales. Turning to Slide 11, let’s review our updated 2021 guidance. This slide shows the key factors that have contributed to us raising our 2021 adjusted EBITDA outlook twice this year. As you can see on the slide, we raised our guidance $100 million after the first quarter, due to our strong performance and grant income that we were able to recognize, which was not assumed in our original guidance. Similar to the first quarter raise, we are again increasing our 2021 guidance, primarily as a result of our outperformance in the second quarter. The other item to call out is that we are assuming the sale of our Miami area hospitals will be completed during the third quarter, which will result in about $55 million of earnings being removed from our previous guidance. Our adjusted EBITDA outlook for 2021 is now projected to be $3,200 million at the midpoint, which is $200 million higher than our original outlook at the beginning of the year. Since we are assuming that the sale of our Miami hospitals will occur on August 1 this year, we removed approximately $22 million of Miami EBITDA from our Q3 EBITDA outlook an approximately $167 million of revenue. After normalizing for the Miami sale, the midpoint of our Q3 EBITDA is slightly above the current EBITDA consensus for Q3 and the midpoint of our revenue outlook for Q3 is also in line with the current consensus for Q3. For the last five months of the year, we removed $55 million of EBITDA from our outlook due to the planned sale and we removed about $418 million of revenue from our outlook due to the planned sale. Listen, that’s a lot of numbers, but we believe it’s important to point out, our Q3 guidance is in line with current Q3 consensus after you normalize for the planned sale of Miami hospitals. And to reiterate, we’ve raised our full year 2021 guidance for the second time this year with our full year EBITDA midpoint, now $200 million higher than the start of the year. We also provided various updated guidance assumptions in our press release for volumes, revenues and EPS. I want to point out that our updated outlook includes a pre-tax book gain of about $400 million for the anticipated sale of the Miami hospitals, but this gain is not – it’s not included in our adjusted EBITDA or adjusted EPS guidance. As for cash flows for the year, at the midpoint, we anticipate generating free cash flow of about $1,275 million and adjusted free cash flow of $1,400 million this year at the midpoint. Before taking into consideration, the repayments we anticipate making in 2021 of approximately $700 million for Medicare advances and the deferred payroll tax match. While we have – we will have to repay the Medicare advances and the taxes this year, we have already sufficiently reserved for that amount in our balance sheet cash. Free cash flow for the year of $1,275 million before the repayments of the advances and the taxes, less expected cash NCI payments of $470 million results in positive net cash flows of about $800 million this year. Also, I wanted to mention our income tax payments for 2021 are anticipated to be approximately $150 million. The increase in expected tax payments in the back half of the year is due in large part to about $50 million of federal and state taxes related to the gain on sale of our Miami hospitals. I do want to remind you that utilization, net operating loss carry forwards from the two most recent years are limited to 80% of taxable income for 2021 tax filing purposes. The underlying free cash flow generation of the company has significantly improved over the past several years and we continue to maintain sufficient liquidity to continue to invest in growth opportunities. Our strong second quarter results together with our ongoing enhanced operational execution, increases our confidence that we are on the right strategic path and our ability to deliver consistent results. Before I turn it back over to Ron, I want to thank and say how proud we are of all of our patient caregivers and their colleagues in non-clinical roles across the company. Their teamwork and level of devotion continues to be exceptional. Ron? Ron Rittenmeyer: Thanks, Dan. I really don’t have any other closing comments. I think we’ve covered the lot up front here. So I think we ought to just move to questions in the time remaining. So, operator? Operator: Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question today is from Pito Chickering of Deutsche Bank. Please proceed with your question. Pito Chickering: Good morning, guys. So I guess one question here. Can you talk a little bit more about the normal 3Q seasonality? What do you guys assuming in your guidance versus 2019. And importantly, kind of what have you seen in June and July in any sort of color on or scheduling in August? Thank you so much. Dan Cancelmi: Hey, Pito. This is Dan, good morning. Couple of things on that, from a sequential standpoint, from the second quarter or the third quarter, when you look at our numbers in Q2 versus our – midpoint of our outlook for Q3. The one element that results in a sequential decline in the EBITDA is due to the sale of our Miami hospitals that’s planned on August 1. So that’s about $22 million of EBITDA. And then we have assume some normal seasonality patterns with Q3 being somewhat softer than historically with Q2 looks like. So that has been embedded in our Q3 outlook. Pito Chickering: And then any color on June and July and/or scheduling for August. Saum Sutaria: Hey, Pito. It’s Saum. June and July, June looks, and the numbers was strong and we had improvement through the quarter and we feel very good about where July looks now on a forward-looking basis as well across the hospitals and USPI from a surgical and procedural standpoint, in addition to just general admissions and continue positive trends in the outpatient and emergency department areas. Pito Chickering: So then, is it fair to say that the seasonality that you’re assuming is more maybe conservative versus what you’re actually seeing in the marketplace today? Dan Cancelmi: Well, we’re assuming Pito is, there is – we’re assuming there is some typical seasonality impact in the third quarter. Listen, the business units were running very well. I think that’s pretty evident. And we’re very confident. We obviously raised our outlook for the second time this year. And we feel good. We have obviously increases our confidence as we think about the back half of the year. Pito Chickering: Right. Thanks so much. Dan Cancelmi: Thanks. Operator: The next question is from Justin Lake of Wolfe Research. Please proceed with your question. Justin Lake: Thanks. Good morning. Couple of things on the ambulatory side, first, can you give us an idea of how things progress through the quarter as you saw it kind of ramp up for the quarter, do a 100% of 2019. And then what you’re thinking in terms of versus 2019 for the rest of the year and then secondly, the sale of the Miami facilities the proceeds there. Can you give us an idea of how you’re thinking about deploying that in terms of, are there – do you see a pipeline out there of ambulatory deals that will help you get to that 50% number you’re talking a bit out versus potential debt pay down. Thanks. Saum Sutaria: Hey, Justin. It’s Saum. So as I indicated on the hospital side and the USPI side, we saw a nice progression through the quarter in terms of our volume surgeries in the USPI portfolio specifically, I’m sorry, if that wasn’t clear. It’s both for the hospitals and the USPI surgical portfolio that strengthening continues. And the comments about feeling good about July and our bookings looking forward included both business units as well. Dan Cancelmi: Justin, in terms of the anticipated proceeds from the sale of the Miami hospitals, we – what we’ve been talking about and what we’ve been thinking about internally is, obviously, there’s a couple of different alternatives. There we have some debt that’s – that can be called at a reasonable premiums. We continue – we will continue to look at investment opportunities in the ambulatory business, as well as the – in the hospital portfolio in terms of continuing to make investments to grow our higher acuity service lines in our markets. Ron Rittenmeyer: Yeah. But as far as, is there a robust pipeline, there’s a robust pipeline in USPI. But like all things, it’s a function of price and timing. And we are very active, like, we always have been and obviously we’re not going to disclose that activity in nouns and verbs, but the reality is we’re very active. We’re always on the hunt. We have people who do it full time and are very good at it. So the proceeds, first, we got to get them. I always believe you ought to have it first before you decide and tell people where you’re going. And then the second point is, there is obviously opportunities to pay down selected debt if we wanted to do that and then go get fresh money if we wanted to use more debt. So I think we have a lot of opportunities here, where we’re heading in that expect. But it’s really reinvesting in the company, I think is our biggest objective at this point. So… Justin Lake: Got it. Thanks. Ron Rittenmeyer: Yes. Operator: The next question is from A.J. Rice of Crédit Suisse. Please proceed with your question. Ron Rittenmeyer: Hey, AJ. A.J. Rice: Hi, everybody. Just maybe I’ll ask about the labor markets. I know we’ve got some crosscurrents, where some of the premium rates paid to cover COVID surges are sort of abating. But it sounds like there’s still a pretty tight supply. Can you give us a sense of what you’re seeing in terms of turnover rates, wage increases, other vacancy rates, whatever in the labor market and just how you’re thinking about the rest of the year from that perspective. Saum Sutaria: Hey, AJ, it’s Saum. Thanks for the question. And first of all, as I’ve said before, this is a challenging time for all caregivers and we are very focused on ensuring that we have a safe high quality environment of care, not only for our employees and caregivers, but also for our patients. That dictates that we need to be very thoughtful in partnership with our caregivers to think about how we manage our staffing and what is clearly a tight market nationally. And so our approach to this has been to balance our core staff with additional and incremental staff that we have contracted with to bring in from a contract labor standpoint, as well as putting in place incentives for our existing staff, who may choose or want to work additional hours in the hospitals. And if you look at what we have accomplished in this area based upon good, safe productivity management, partnering with our caregivers to think about length of stay improvement opportunities, which by the way is better for patient safety. And also at the same time reduces the demand for contract labor. Those strategies have been effective. Despite the market tightness, we have remained consistent and have not had increases on a relative basis for contract labor in our numbers. So we feel like we’re managing this very actively, very tightly, but in a way that is partnered with our caregivers and focused on quality and safety. And we will continue to do that going forward through the balance of this year. A.J. Rice: Okay, great. Thanks. Operator: The next question is from John Ransom of Raymond James. Please proceed with your question. John Ransom: Hey, good morning. Just wanted to ask about Conifer, as your multiple has improved, and yes, just the asset continues to do well in terms of your own business and generate high margins and high cash. Has there been any retaking that may be keeping Conifer at the end might be the best way to go versus trying to spin it up? Ron Rittenmeyer: This is Ron, John. I would say that, look, we’re still on the pathway that we’ve announced publicly and that’s the pathway we’re going to keep on at this point. Obviously, we don’t live in a bubble, so we always have new thinking and new looks and new discussions. But the reality is we’re committed to the pathway that we’ve stated and all the moves we’re making are directionally in that direction. So, I mean, we – I don’t know how to answer that, I’ll tell you that, we’re going down the same path, if something would change, we will obviously discuss that. But as of right now, I would say, that the company is openly committed to the statements that we’ve made in the past. And I don’t see any need to change it at this point. John Ransom: Okay, thanks. Operator: The next question is from Jamie Perse of Goldman Sachs. Please proceed with your question. Jamie Perse: Hey, good morning, guys. I wanted to see if I could get you to talk about what you’re seeing in different regions in the country. You’re obviously in Texas, Florida, California, if you could come in on some of those markets, Michigan. And Dan, you called out some geographies, where you’re outperforming from an EBITDA perspective as well. So, again, just wondering if you can comment on what you’re seeing regionally, both from volume perspective and what’s driving EBITDA outperformance in certain markets. Saum Sutaria: Yes. Hey, Jamie, it’s Saum. It’s a really good question, because as you know, not all parts of the country are opening up at the same pace and the same manner. And in addition, the impact of COVID was not exactly equal through the country. So yes, we do have a portfolio. We have a portfolio of states and markets that are operating differently. Probably the most important signals from my perspective is we think about the strength of the business and the comments we’ve made is that the markets that have been most open have performed very, very well. And if you think about the averages that we’ve put out there, we don’t report market specific volumes or market specific earnings, but if you think about the portfolio and the markets that have opened up have been more open or have opened up more quickly. You can safely assume that our performance is above average there. And in the states that have been slower have had more of a prolonged lockdown or have had perhaps in some cases, some more difficulties with vaccination in urban areas and things like that. They’re probably a little bit behind the average. We feel great about the month-to-month improvement in the volumes. And we feel very confident about the fact that our highest performing markets are performing well above our expectations given the recovery. And so that means over time as the economy recovers more fully, we actually expect the full portfolio to continue to move in that direction of being ahead of anything that we saw in 2019. Jamie Perse: And if I could just follow-up on that comment for one second, if you think about the level of openness that you were describing, did that – did the delta between areas of the country that were more and less open. Did that change much across the month of the quarter? In other words, was it more similar by the end of the quarter than at the start of the quarter? Saum Sutaria: No, I don’t think – I mean, I think, look, most places are opening up a bit more all the time. But the delta between some of those areas still remains. I mean, it’s not – what I mean, the difference in their recovery path still remains. Ron Rittenmeyer: It’s incremental. It always incremental, right, in terms of how we move forward, so. Operator: The next question is from Josh Raskin of Nephron Research. Please proceed with your question. Ron Rittenmeyer: Hey Josh. Josh Raskin: Hi, thanks. Hey guys, good morning. So USPI volumes you mentioned are back to pre-pandemic levels for the full quarter, maybe even trending slightly above, I guess later in the quarter. So do you expect USPI volumes to exceed those 2019 levels in the second half? And I guess if so, is that just continued movement of sort of that pipeline of pent-up demand? Where do you think this has something to do with patients and providers just being more interested or feeling better about care in an outpatient setting? And then if I could just sneak in any impact on the changes of the inpatient only procedures rule. Brett Brodnax: Yeah. Hey Josh, it’s Brett. So yes, couple things, I would say that we saw in 2020, as you probably heard, we saw the addition of 3,700 new physicians in our portfolio last year. And some of that a good part of that quite honestly was a result of physicians determining that, they had a preference for a lower cost setting in the ambulatory environment either they did specifically as physicians or their patients did. So we saw quite a bit of physician additions to our portfolio last year. As a result of that, we’re seeing that in 2021, as well as you heard from Dan and Ron, we’ve added over 1,000 physicians to the portfolio so far this year. We think that will continue as we enter into the second half of the year. In addition to that, we’re – we’ve significantly increased the number of new service line additions to the portfolio. And that’s some of the higher complexity business, such as spine and ortho and total joints, which approved over a 100% quarter-over-quarter. So again, I think combination of all those things results in that’s feeling really good about the second half of the year from the volume perspective and outpacing the volume that we saw in 2019. As it relates to CMS’s guidance over the last couple of days, I would say that for us, that’s going to be quite honestly a slight net positive as opposed to a negative. We only saw about 130 procedures representing $100,000 to $200,000 that will be impacted that on the ASC side. On the flip side, some of the inpatient – the outpatient only procedures that are going to go back to inpatient, there’s actually a nice tailwind, so the net of that for a surgical hospital, so the net of that is actually going to be a positive for USPI and 2022. Josh Raskin: Interesting. Thanks. Operator: The next question is from Kevin Fischbeck of Bank of America. Please proceed with your question. Kevin Fischbeck: Great. Thanks. Just wanted to follow-up maybe on the volume commentary, I guess specifically we are seeing COVID start to rebound in certain markets. Is there anything that you’re seeing today about the core utilization in those markets where COVID is spiking versus the return of volume in markets where it’s not? Saum Sutaria: Hey, Kevin, it’s Saum. No. At this point, while the COVID inpatient cases have increased a little bit, there’s been no impact on our ICU capacity, total hospital capacity, stress on the testing, or frankly even access points to the emergency department and otherwise, we’ve learned how to manage this. The volumes are not really that high at this point. And so we’re very vigilant about it. We’re making sure that we continue to put back in place all of our care protocols on an active basis locally and nationally. But we’re not seeing any impact on our ability to schedule or even looking forward scheduling other types of elective care. Kevin Fischbeck: Okay. So obviously your ability to manage the cross, I mean, to manage the utilization and capacities is not affected yet, but you’re saying that the patient demand, you’re not seeing any downstream, cancellations or issues with your physicians or anything like that volume in. Saum Sutaria: That’s correct. We’re not seeing any increased either patient demand for cancellations or physician concern leading to cancellations. One of the things that is different now than in the last spike of course is that in our facilities across the Board, USPI and the hospitals and our physician practices, our vaccination rate of our staff is very, very high. And so that’s led to a pretty significant change in the tone around our ability to manage this. And then the other thing is, unlike in the rapid sequential phases of the pandemic, starting in early 2020, there’s been a bit of a break with COVID. And so the entire company staff is very well aware of the stockpile of all forms of PPE that are available. So there are no concerns among staff, physicians, et cetera, about potential shortages that might occur. Now we didn’t have shortages through the pandemic, but of course, people read about them in hospitals, which created some concern. But I think now people are very comfortable with the fact that all of the available supplies are there with stockpiles of many months of supplies available. Ron Rittenmeyer: And they’re given our number of patients that are showed up with COVID too. I think some is equally – it’s just not a big enough number across our whole system to have created some of the concerns you’re mentioning at this point. Kevin Fischbeck: All right. Great. Thanks. Operator: The next question is from Brian Tanquilut of Jeffries. Please proceed with your question. Brian Tanquilut: Hey, good morning, guys and congrats on the quarter. Ron Rittenmeyer: Good morning. Brian Tanquilut: I guess my question is just on the ASC, any color you can share with us in terms of what you’re seeing with the SCD assets that you’ve acquired. And then kind of related to that, as we think about, the opportunities from the ASC rules over the last two years, right with MSK and cardio, how are you positioning to drive growth and expansion in your MSK capabilities? And maybe expanding further into cardio into that ASC? Saum Sutaria: Hey, this is Saum. Let me start, and then I’ll pass to Brett. First of all, on SCD, we continue to March forward very much in line with our expectations on the integration of those facilities. We’re not reporting SCD in any way separately from the total portfolio of USPI. But the strength of those facilities, the quality of those facilities, the physicians that are partnered in those facilities continue to perform very nicely just like the overall USPI portfolio. We’re very pleased with the assets that we received. And we’re also very pleased with the opportunities we see looking forward to work with those assets to grow and diversify them. So we’re happy all around. Brett can comment more specifically on that. The second point is, it’s important to just, and I’ll just lay the foundation and pass to Brett, but USPI prior to the SCD acquisition was already the leader in musculoskeletal care on an ambulatory basis. This has really just added to that capability. And obviously with some of the specific numbers that we put into the slide deck, you can see how rapidly we’re expanding our portfolio in those areas. Brett Brodnax: Yes. Thanks, Saum. I don’t know how much more I have to add after that answer, but I would say just to echo Saum’s comment, the integration with SCD is going very smoothly. We continue to hit our integration milestones and overall very pleased with how the facilities are operating. There hasn’t really been any significant surprises for us. And that’s largely, I think a result of the significant level of due diligence that was done on the portfolio prior to closing. As it relates to the second question about MSK, I mean, we’re pulling a number of different levers in order to continue to grow the amount of MSK revenue in our business. One of which, we’ve talked quite a bit about, and that’s just our service line development activity, a good part of the 45 new service lines that we added in the first half of year. And the 73 that we added in 2020 were related to MSK specialty type procedures, whether it’s total joint, whether it’s spine, whether it’s other types of high complexity, orthopedic procedures. Just to kind of give you a sense of that, just in Q2 2021, the growth in our total drug business was over 120% over Q2 2020. Spine was up 21%. And then if you look at some of the other specialties like bariatric is up over a 100%. And we had an ENT procedure that’s relatively new. That was up quite honestly almost a 1,000%, although on smaller numbers. So that’s one lever we’re pulling in terms of increasing the amount of MSK business and that’s our service line development activity. And then of course, we continue to look for acquisition opportunities with physicians that are driving those businesses that are high quality, great physicians from a reputation perspective, that’s the second lever. And then of course, the third level is just the amount of de novo activity we have in the MSK space, that will continue to produce nice improvements in MSK revenue quarter-over-quarter. We see for the remaining part of this year as well as next year. Brian Tanquilut: Awesome. Thanks, guys. Operator: Your final question is a follow-up from John Ransom at Raymond James. Please proceed with your question. John Ransom: bringing : Dan Cancelmi: Hey John, certainly some of the facilities that we’ve divested in the past had higher than the company average in terms of MedMal type of experience. So that that’s been helpful. Listen to the – there’s been positive trends in that area. The costs have been coming down. And we diligently manage that, not only from a financial perspective, from a quality perspective, a clinical perspective, root cause analysis. So we’ve been spending a lot of time, and there’s a lot of attention focused on it. And we think that’s an opportunity for continued upside as we move into the future. John Ransom: What’s embedded in your guidance this year versus last year for MedMal. Dan Cancelmi: We haven’t set a specific number, John, just for some obvious reasons. But listen to the – what I would say is, when we put out our 10-Q the MedMal numbers are in – will be in there. But we don’t want to project and at least publicly for some obvious reasons what’s the MedMal cost could be. But I would just say reiterate the trends have been improved in terms of claims. John Ransom: Yes. Great. Thanks. Ron Rittenmeyer: Any other questions? Operator: There are no additional questions at this time. I’d like to turn the call back to management for closing remarks. Ron Rittenmeyer: All right. This is Ron Rittenmeyer. Thank you very much. I think we covered everything and of course, we’re available for any follow-up. And so thanks and have a good day. Thank you, operator. We’ll disconnect. Operator: Thank you, sir. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

Company Representatives: Ron Rittenmeyer - Executive Chairman and Chief Executive Officer Saum Sutaria - President and Chief Operating Officer Dan Cancelmi - Executive Vice President and Chief Financial Officer Brett Brodnax - CEO and President of USPI Regina Nethery - Vice President of Investor Relations Operator: Hello, and welcome to Tenet Healthcare Corporation First Quarter 2021 Earnings Conference Call and Webcast. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder this conference is being recorded. Regina Nethery: Thank you. We're pleased to have you join us for a discussion of Tenet's first quarter 2021 results, as well as a discussion of our updated financial guidance for the year. Tenet's senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman and Chief Executive Officer; Saum Sutaria, President and Chief Operating Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes an accompanying slide presentation which has been posted to the Investor Relations section of our website tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent Tenet management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K, and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Ron. Ron Rittenmeyer: Thank you, Regina, and thank you all for joining us this morning. I have a few comments on the quarter and we’ll then turn over to Dan for more specifics on our performance and forward guidance. Reflecting on the first quarter, as it happens many times, there were a series of events and issues that emerged. The issue is not whether these occurrences happened unexpectedly, but rather whether we can develop an organization that can adjust, flex and importantly, make decisions that are immediately actionable. Our objectives over the past few years have been focused on transforming the entire business into an agile and responsive unit, built on sustainable fundamentals which are improved by both experience and via learnings. This allows us to learn as we go forward and provides an action-oriented mindset to solving, not just reacting to issues that we face but cannot always anticipate. So let me touch on a few highlights of the quarter. First, strong business fundamentals supporting the first quarter EBITDA that was above the high end of our outlook and above consensus, even excluding grant income, outperformance in substantially all of our hospital market, and very solid results at USPI, both amidst continued COVID challenges and severe weather impacts created by winter storm Uri. The storm presented challenges across major parts of our system and our response was immediate, focused and it resulted in a quick recovery. Dan Cancelmi: Thanks Ron and good morning everyone. Let's begin on slide six. Our financial results in the first quarter came in well above our expectations, despite a strong COVID surge early in the quarter and the impact of winter storm Uri in February. We produced adjusted EBITDA of $777 million compared to $585 million in the first quarter of last year and $623 million in the first quarter of 2019. This equates to a two year compounded annual growth rate of approximately 12%. All three of our businesses performed very well in the quarter, in particular our hospitals. As Ron noted, nearly all of our hospital markets exceeded our expectations. Our hospitals are performing more consistently month-to-month, continue to diligently manage costs despite a myriad of incremental expense pressures due to the pandemic and continue to be more disciplined and forward looking in strategy development and capital allocation decisions. These actions are contributing to hospital margin improvement. Our hospital margin in the quarter without grants was about 100 basis points higher in calendar year 2019 before the pandemic. I do want to remind everyone that our hospital margins include all of our corporate overhead costs and do not include the results of our very strong margin, ambulatory business, which is reported separately. Although hospital volumes have not yet recovered to pre-pandemic levels, especially lower acuity cases, our focus on higher acuities service line development has been a very important driver of historically high net revenue yield per adjusted admission, which increased about 19% year-over-year. Needless to say, we're very pleased with how our hospitals are performing, which gives us a lot of optimism as we think about the rest of the year and beyond. USPI also continues to deliver strong results and the integration of the SCD portfolio of centers we acquired last December is going very well. Patient acuity remains elevated as net revenue per surgical case increased about 5% compared to the first quarter of last year. USPI generated $257 million of EBITDA in the quarter, EBITDA minus NCI expense was $165 million compared to $99 million in last year's first quarter and $109 million in Q1’19 before the pandemic. Let me be clear, even though USPI recognized $13 million of grant income due to the impact of the pandemic, which was not in our guidance, USPI produced a strong quarter, especially in light of the challenges from the winter storm in February that closed many of our centers for up to a week. We remain confident in USPIs robust guidance for 2021 and its future growth opportunities. Ron Rittenmeyer: Thanks Dan. Look, I live in the pollen’s capital of the work. Look, the quarter was a good quarter. We feel we delivered and delivered well, and overcame the challenges that of course you know you don't anticipate just by definition. So I think with that Regina, we’d be more served to get questions and see if we can give ample time to the question period rather than any more comments. Regina Nethery: We are now ready for questions. Operator: Thank you, Regina. We will now be conducting a question-and-answer session. . Our first question is coming from Josh Raskin from Nephron Research. Your line is now live. Josh Raskin : Hi. there, good morning. Ron Rittenmeyer: Hi Josh. Josh Raskin : Hi, good morning guys. So question here is, we keep hearing more and more about these new sort of provider organizations that are focused on value-based care and sort of every single one of them just points to the significant reductions in bed days per 1,000 and that’s sort of one of their key. So I know it’s still early and I feel like we haven't really seen an impact for Tenet and maybe that speaks to your sort of higher acuity focus in the service line expansions you guys been sort of proactively speaking. But what's the strategy in terms of taking share of in the hospital segment? And then maybe conversely, how are you working with these companies to accelerate the growth on the ambulatory side? Saum Sutaria : Hi Josh, its Saum, let me start. First and foremost, our commitment to value-based care is very strong. I mean, we obviously operate very efficiently. We provide a very good value to both commercial and government payers on the basis of the efficiency and obviously quality and safety of the care we provide. We’re substantial participants across the country in Medicare Advantage, which is probably the most mature value-based program that exists. And as we mentioned before, we are, if not the largest, among the largest participants in the BPCI program and continue to remain very relevant and successfully relevant in that space. I think there's a couple of things with respect to your question specifically around bed days per 1,000. Look, the seniors population obviously over this decade is growing and going to grow substantially. I mean you're talking about in excess of $20 million, $25 million new seniors most likely in the environment and aging from that perspective. So the demand is going to go up and how we use hospital beds is going to be pretty important. There is a lot of variability in bed days per 1,000 around the country, somewhat based upon health status demographics, and somewhat based on value-based care. And in every one of the markets in which we participate, when we do our strategic planning, we're very cognizant of that. We think about the capacity needs. We think about it with respect to the capital we deploy to expand our capacity if we need to expand our capacity. And obviously with USPI, we're at the leading edge of embracing the outpatient environment and seeing what things will move into the outpatient setting. Now last comment I'll make is, the other thing that Brett and team are very engaged in are direct-to-employer value-based contracts, which give access and utilization to the surgery centers. We’re early stages in that type of thing. The market is early stages in that type of thing, but again because of the value we can offer at USPI, we already participate in those types of programs, we feel pretty good about them. It brings USPI centers and doctors, patient from more distant geographies based upon employers that are looking for high-quality and high values. So, I think that touches on four or five ways in which we're kind of active in this market. Josh Raskin : Perfect. Thanks. Operator: Thank you. Our next question is coming from John Ransom from Raymond James. Your line is now live. Ron Rittenmeyer: Hey, John. John Ransom: Hey, good morning. Are you seeing in USPI any material uptick in total joints, given in the new Medicare Act? Brett Brodnax: Hey, John, this is Brett Brodnax. Thanks for the question. Yes, I mean, just to kind of give you a sense of our growth in Q1, our total joint business grew 110% over Q1 of last year. Now a portion of that is related to Medicare hips, but obviously not a large portion of it. I would say that if you think about kind of going forward, you think about the number of total hips that we do in a given year, my guess is – our guess is that approximately 30% of those are going to be Medicare hips, the rest being commercial hips. We're also seeing because the total knee was approved in ASC last year. We've also seen a nice uptick in total knees in our business as well, including Medicare. John Ransom: Thanks a lot. And just as a follow-on for that, and going back to Saum’s comments about value-based care, where are you using the inning analogy. I mean, to me the simple, relatively simple thing to do for Medicare Advantages to package an outpatient total joint with post-acute heavily focused on home care. Where are you in all of this? Are we dreaming that this is actually going to happen or is it not going to happen, if that makes so much sense? Saum Sutaria: This is Saum again. I think a couple of things: First of all, we partner with our physicians in both the acute care setting and in the ASC settings to provide options that are best for the patients, but ultimately the doctor-patient relationship is something that we value greatly. And the physicians, when they bring the patients into the ASC setting in particular, they have a very structured approach to thinking about what post-surgical care upon discharge might be needed, and we participate with them in helping to facilitate that. And I would tell you that it varies greatly today in terms of the type of post-acute care and the post-surgical care that is actually needed. So I'm not sure how to answer the question with proportions or numbers, but more to say that really the physicians are very thoughtful about this before they bring patients into the ASC setting. John Ransom: I guess where I was going, and I'll get off after this is, are you able to create bundled packages where you can go to a payer or an employer and say, gosh, we'll do the whole surgery post-acute care for this bundle price and then you contract downstream with a post-acute provider and invest, get invested along with the payer in terms of steerage to a much lower cost, probably equal quality side of service? Saum Sutaria : John, as I described earlier in the earlier question, there are employers today that we are engaging with in what I would describe as early-stage pilots in those sorts of models. But the fact is, it is not something that we're focused on broad-based within this business, nor is there market demand for that type of focus in this business from what we're seeing today. Brett Brodnax: Yes, and the only other thing I would add John is we have talked to a couple of different payers about this and quite honestly, they would like to do it. They have a vision of being able to bundle the joints going forward. But right now, they are having problems in terms of how to administrate or judicata the claims from all the different providers that are part of the bundle. So until they figure out the technology to do that, maybe some of them have, but others haven't. I think it's going to be really hard to get a lot of traction with the bundled joints. Operator: Thank you. Our next question is coming from Brian Tanquilut from Jeffries. Your line is now live. Brian Tanquilut: Hey, good morning, guys, and congrats on the good quarter. So I just have one question. So as I think about your Q2 guidance, obviously pretty strong, I think you mentioned that we haven't really seen much of the recovery yet or COVID was still an issue in Q1. How are you thinking about the recovery phase as we think about the Q2 guidance and maybe what you can share with us in terms of scheduling? Are we getting people coming into schedule delayed procedures from the last year already? Thank you. Saum Sutaria: Why don’t I start and then Dan can comment on the guidance. Look, the thing I would say is you know December and more so January, we’re probably among the highest COVID, at least in-patient months that we have seen and you know while I won't get into all of the details from a month-to-month standpoint or what's going on in April, what I would say is that as the COVID cases declined, substantially declined through the quarter and to where we are today, we feel very good about the strength that we're seeing in the non-COVID business recovering. You know we had talked before about how we put a lot of effort into building a recovery playbook when COVID cases declined from their peaks and that has been pretty effective for us and we feel very good about the non-COVID business and I would tell you, with particular strength in surgeries, in our acute care setting and it goes without saying in our USPI setting, so. You know people have asked about air pockets. At least for now we're not seeing an air pocket post COVID right now. Ron Rittenmeyer: And the fact that we haven't seen those air pockets gives us confidence with you know some of the assumptions that we built in to our outlook Brian. You know when we developed the outlook at the beginning of the year, we assumed that as we moved through the year, particularly in the second half, that volumes would continue to recover further from the levels that we saw in the third and fourth quarters. You know the first quarter was relatively steady from a volume perspective, but you know COVID cases really spiked early on as we mentioned, and then from the results of the impact of the storm in February, so. You know what we're seeing, we still feel very comfortable with the volume assumptions as we move through the year. The commercial volume trends continue to be more favorable than the overall volume trends, particularly in the surgical side. So you know we feel good about our outlook for the rest of the year. Dan Cancelmi: Yes, and the only other data point I would add is, it's a very relevant data point, especially on the ASC side of the business, the circle side of the business is our cancellation rates for Q1 and obviously a significant result of COVID cancellation rates were about 19.4% for overall quarter, but in March they normalized down to 16%. So I think that's a pretty good indication that you know folks are getting a little bit more comfortable. Once they schedule a case, keeping the case, which should play well as we move into the second quarter. Brian Tanquilut: Awesome! Thanks. Operator: Thank you. Your next question is coming from A.J. Rice from Crédit Suisse. Your line is now live. A.J. Rice: Hi everybody, and thanks for all the details. And it looks like cost trends were well contained, but I might just if it's okay, drill down a little bit more and have you talk about what you're seeing on the labor front in terms of wage updates, turnover rates, we hear about nurse burnout, I wonder if you've seen any of that and use of temporary staff. And then maybe also related to labor a little broader question; the administration seems very pro-union and I'm wondering how that's translating into any discussions you're having or activity you're seeing. Are you seeing a little more of union activity, utilization activity than you previously had seen, maybe under the previous administration as a results of maybe then feeling encouraged by what they get here in Washington. Saum Sutaria : A.J., its Saum. Let me start. I'm going to take your questions in reverse order. First of all look, we realize that in many ways we lead a nursing organization of substantial scale. We respect our nurses, we respect the tremendous work that they did last year and actually we respect the fact that many of them choose to be you know members of unions and actually our track record shows both, during the pandemic and before the pandemic and even in the last few months with the vast majority of unions that we work with, we maintain very positive relationships that have successful negotiations and you know very successful contract renewals that have benefited both parties as we look forward. So in aggregate I feel very good about that. Look, in terms of contract labor, you know as we talked about back in the fourth quarter 2020 call, contract labor rates had increased substantially. The COVID cases obviously had spiked to their highest levels and you know we like others were very focused on making sure that we had adequate nursing for the care that needed to be provided, both COVID and non-COVID. The fact is that you know we made a lot of effort to improve our length of stay over the third and fourth quarter and into this year in order to ensure that patients got good care, but we did not have excessive lengths of stay, which resulted in excessive use of contract labor and that's been a good strategy to manage the demand and also better for the patients and we continue to focus on that. Our contract labor has obviously been more expensive than anybody would have anticipated in a non-pandemic situation, but we've tried to manage it well. Rates are coming down from a contract labor standpoint as the market moves more towards -- I wouldn't say totally normal, but certainly in a direction that is more normal and you know that's a good thing. So I think the nursing community is settling down into more full time and less traveling type of roles. A.J. Rice: Okay. In your own wage updates with your own labor force, is that pretty steady at this point? Saum Sutaria : It’s in-line with our expectations. A - Ron Rittenmeyer: Same with unions. I mean didn't – you know when you look at the total labor force I would say we're in line with the sides of our expectations and relationships. A.J. Rice: Okay, thanks a lot. A - Ron Rittenmeyer: Thanks. Operator: Thank you. Our next question today is coming from just Justin Lake from Wolfe. Your line is now live. Justin Lake: Hey, good morning. I wanted to follow-up on some of the questions around pricing and acuity in the quarter and what you're seeing out there. I think you mention that commercial volumes were better. So maybe is there anything you could tell us in terms of growth in commercial versus overall? I know you give that commercial, but it includes somewhat Medicare or Medicaid. Can you kind of exclude that and tell us what grow is doing there or maybe how that looks relative to 2019. Same thing with higher acuity cases, maybe kind of talk about the low acuity versus 2019 versus the high acuity versus 2019. Anything like that would be helpful. Thank. A - Dan Cancelmi: Hey Justin, its Dan, I can start. The commercial trends that we have been seeing, really since you know the middle part of last year overall are more favorable than the overall aggregate volume trends, which you know may not necessarily be surprising given the Medicare population may have been a little bit more reticent about seeking care, typically before vaccines were started to be delivered. But the commercial trends have been positive in terms of you know comparison to overall trends. In particular as I mentioned earlier, our commercial and surgical trends are particularly encouraging over the past several quarters in not only the USPI business, but also in the hospital business, in particular which has been a key driver of our net revenue growth from a real perspective. So you know when we look at our commercial book of business, we’re essentially fully contracted for this year, about two-thirds contracted next year, so we have very good visibility into pricing from a commercial side across the entire portfolio and our continued focus on higher acuity service line development should continue to generate strong yield as we move through this year and into next year. Justin Lake: Got it, thanks. Operator: Thanks. The next question is coming from Pito Chickering from Deutsche Bank. Your line is now live. Pito Chickering: Good morning, guys, and thanks for taking my question. The rates on the cash you generated this quarter is helping push your leverage ratios down. I know that we didn’t ask this, but once you're in the forex leverage range, waiting for it to delever or will you begin to deploy free cash flow into things like share repo, as you’re always having acquisition candidates. Ron Rittenmeyer: I would say they are going to continue to delever for now, but obviously we are – you know we got a good pipeline in USPI and we are going to continue to look at potentials there. We’ve already talked about our hospital strategy. You know we got a couple of small things. We got online and we'll probably do something in San Antonio, but you know that's more market driven than any other reason. We're going to continue to trim that portfolio, so the strategy has not changed, but I don't think at this stage share repurchase is on the list. I think we're more focused on deleverage our self to a better position and then acquisitions. Pito Chickering: Did you have a leverage ratio where if you don't have enough deal flow you will actually then start to see convert into repo or how should we think about sort of where that limitation really you know starts at this point. Ron Rittenmeyer: Right now I would tell you that we're – we said we'd be below 5, we are below 5. You know there was a time where people looked at us when I said that like we were in la la land. We are there. Some of that is by performing, some of that is by how we restructure our entire capital portfolio. So look, I don't want to give you a number, because then every quarter you’ll be asking me, how I'm doing against 4 point – you know I’verightly done it. You know the reality is we're focused to stay below 5 and we just need flexibility within that range than to go do the things we think are right. You know the last USPI acquisition I think was when we had a lower ratio, more capacity options, we have options and I want to use those options to grow the basis of the business in line with the strategy that we’ve talked about, which is clearly a higher based USPI and maintain the best hospital markets and actually run them the most efficiently and effectively we can and make sure we stay strong in those markets. So look, we're going to deploy capital in the best way possible to get a return to the shareholders over the long term. Pito Chickering: Great! Thanks so much. Operator: Thank you. Our next question today is coming from Ralph Giacobbe from Citigroup. Your line is now live. Ralph Giacobbe: Great. Thanks, good morning. You know there's been a lot of headlines around COVID spikes in Michigan. Just given your presence in Detroit, I was hoping maybe you can give us a sense of trends in that market, both you know COVID related and core. And then more broadly, if you can just give us what COVID admissions were in the first quarter. Thanks. Saum Sutaria : Hey, it’s Saum. Let me start and then, I'll pass it to Dan. So you’re right to note that COVID cases have increased in Michigan, while in most of our markets I would say the COVID volumes are about a fourth to a fifth of the peaks that we saw before. In Michigan were about half of the peak that we saw before. The COVID spike in Michigan, may be one of the reasons we're hearing a lot of noise about it is that unlike the first two spikes which really did hit much more downtown Detroit and some of the more vulnerable communities, while that is the case this time, we put a lot of effort into vaccination and other things there. I think this spike is hitting a little bit more in the suburbs and our operations at the Detroit Medical Center throughout all of the hospitals, both the adult, children and rehab facilities are open. We're not deferring or delaying or canceling any types of procedures at this point and obviously as those suburban hospitals are more affected, we represent a great choice for patients who need care to come to, because our operations are more seamlessly opened. Ron Rittenmeyer: In terms of the COVID admissions or the percent of the titled admissions, you know over the past three quarters they've been running in you know 10 – I’ll call it the 10% to 12% range each quarter. I would tell you in terms of how it evolved during the first quarter this year. Obviously COVID cases were at their highest peak in January and have steadily declined to up roughly 5% in the month of March. Ralph Giacobbe: That’s helpful. Thank you. Operator: Thanks. Your next question today is coming from Kevin Fischbeck from Bank of America. Your line is now live. Kevin Fischbeck: Great, thanks. I was wondering if you did kind of a related talk about the concept of pent up demand. I guess you mentioned that you know you're not really seeing air pockets as far as drafting and coagulation coming back. So I wanted to see what you thought how this would all play out, either you know on the lines you think some COVID continue to drop. What are you seeing as far as your doctors and their backlogs and just interesting to see some of those deferral percentages. You have any color you can give there as far as how you think pent up demand – like is that going to be an overall positive or should we not really expect the line to get above normal by the end of the year. Saum Sutaria : Hi! This is Saum. I’ll start and then others can pile on. So a couple of things, in the acute care segment, you know I do think we're seeing some effective, either whether it's pent up demand or just people who had chronic illnesses that you know deferred or delayed their care and you know some of the higher acuity that we're seeing is probably related to the fact that their underlying conditions got a little bit worse because of the pandemic and you know that to some extent is not surprising. I mean it's the reason that we put a lot of effort into maintaining access for the community in these acute care hospitals and keeping them open throughout the pandemic. I don't see you know a major surge of higher acuity business at this point that is you know going to come washing in to the acute care hospitals or surgical hospital from that standpoint. Now, I think the lower acuity business that’s being deferred, you know it remains to be seen what happens there, because I think that falls into two camps. The example I use every time is one camp is simply that demand that doesn't exist right now, because schools aren't open or you know there's less people on the road, there's less trauma, there's less sports injuries. You know as those activities get back to normal, you would expect that demand to return. And then there's the demand in the second camper bucket that is you know what people are avoiding because of the fear of the emergency department due to COVID and I think that's going to be a much longer ramp back to normal as people get comfortable from that standpoint. Kevin Fischbeck: Okay, what does that mean that as long as that was reflected completely – do you indicate there’s going to be pent up demand given on the outpatient side, not on the in-patient side? Saum Sutaria : Well, specifically what it means is that if I had to guess and this is purely a guess, that as we get into the fall and you know for example schools and other things are most likely fully open around the country, I expect there to be an up-tick in for example outpatient emergency department volume and outpatient visits and other things to some extent, closing the gap between where we are right now and what we saw in 2019. For the remainder of the gap, I expect especially those things where people have to get more comfortable coming back to the acute care hospital, I expect it's going to be a longer ramp for that to come back and you know I… One of the things at least from our standpoint that we try to focus on is not necessarily replicating or trying to achieve the exact volume and patient mix that we saw in 2019, because we're a believer that some of that business either won't come back or will take a long time to come back from a low acuity standpoint. So more important is that we put our energy into building a business where we see the demand, growing market share in those areas, focusing on the high acuity and using that as a way to deliver on the earnings expectations that we have for ourselves and that investors have for us, rather than trying to do it by you know attempting to mimic the 2019 volumes. This is two different approaches. Ron Rittenmeyer: And we also believe the children’s hospitals will pick up volunteers. As the school goes back for student degrees, etc. but right now we're not seeing as much of them. Dan Cancelmi: The only thing I would add to this related to the ASE business is I don't agree with Saum. I don't think we're going to see a big surge in 2021. I do think we'll start to see some recovery and some of the lower complexity business that we haven't seen recovered at the higher complexity business, those specialties like ENT and pain, to a lesser degree ophthalmology and GI, those haven't recovered as quickly as our acuity business like the MSK especially. So we would anticipate some of that business starting to come back in Q2 and the rest of the year, but I would not describe it as a huge pent up demand where we're going to see some massive surge in business. Kevin Fischbeck: Thank you. Operator: Thanks. Our next question is coming from Frank Morgan from RBC Capital Markets. Your line is now live. Frank Morgan: Good morning. Sort of a two part question here. Just to go back to the recovery in volumes that you saw in the month of March, is there any way to parse out how much of that was due to say whether, those deferrals from Texas and Oklahoma versus a return of volumes that were say COVID induced. And then the second part of the question is like on Kevin's. As we think about pricing and this whole concept about how the mix of the business, where does it stabilize, it sounds like you're saying that there's a good chance that pricing, at least relative to historical averages is probably not going back that low, either because of the slowdown in this recovery of low acuity or better pricing and complex procedures. So I’m just curious to – wanted to go with that as well. Thanks. Ron Rittenmeyer: Hey Frank, it’s Ron. In terms of you know the volumes and margins and you know how much those volumes may have included, cases from February that were you know delayed because of the storm, sure there was some of that, not only in the hospital side, but also on the USPI side as well, yes. There is no question about that, because you know, as you know it takes often times several weeks or more for patients and physicians to have cases rescheduled and have them fit into their calendars so to speak. But you know we're optimistic, again as we've been talking about it in terms of our volumes as we move through the remainder of the year. In terms of your question or point on pricing, in terms of – we're not going to state 19% growth in perpetuity, there's a lower acuity. Cases come back, but you know I think here and certainly in the near term and until more lower acuity business does come back, you're going to see you know stronger levels of net revenue yield on a per adjusted admission basis. Again as I mentioned earlier, we have very, very good visibility into our contracting positions across the portfolio, whether it's the hospitals, whether it’s our physicians, whether it’s USPI centers, we're essentially fully contracted this year, next year our acuity is by two-thirds contracted. So we know where we’re at from a pricing perspective and we continue to focus on growing. To Saum’s point, the higher complexity cases, that should be a tailwind in terms of net revenue yield growth down the road. Frank Morgan: Thank you. Operator: Thanks. Your next question is coming from Jamie Perse from Citi. Your line is now live. Jamie Perse: Hi! Good morning. I wanted to just follow-up on the revenue per adjusted admission. I think we guided to minus 3% to minus 5% previously. Just confirming if you're updating that or any change about it, I might have missed that, but that's the first piece and then just on EBITDA you beat by about $100 million this quarter, you're raising guidance by $100 million or so and you know you talked to the hospital out performance in particular, the sequestration, the contract labor rates coming down, all these positive things. So I'm just curious if you are just going to do 1Q and that's about it and not expecting continued out performance or if you do think there could be continued out performance. Dan Cancelmi : This is Dan, let me address it. So in terms of the net revenue growth, as I mentioned, you know we delivered 19% in the first quarter, again this is on the hospital side. The USPI was 5%, but on the hospital side that 19%, we are assuming that comes down as low acuity business comes back. But I would tell you that, you know that metric is going to fluctuate over the courses of the year as volumes ebb and flow due to the pandemic and the recovery, particularly if lower acuity cases rebound stronger than we assume. You know where we could be, it could be you know mid-single digits in terms of pricing growth for the full year, we’ll see. It really is dependent on the primary driver will be the rebound in lower acuity cases and at one level. In terms of our guidance, we increased our guidance $100 million, okay. We had a very strong first quarter. As I pointed out, we did get a benefit, we will receive a benefit from sequestration being suspended through the rest of the year as we pointed out, that was helpful, and we did recognize some grant income. We did have an outperformance in the first quarter; it's early in the year. But what it does give us is a lot of optimism as we move through the year, and as we think about the year that you know we have a wide range and we continued delivering and performance like this, where we can be above the mid-point, but we feel very good about where we're at right now. Jamie Perse: Thank you. Ron Rittenmeyer: One more question operator. Go ahead. Operator: Our last question today is coming from Scott Fidel from Stephens. Your line is now live. Scott Fidel: Hi, thanks. Good morning. So the question, I know this just happened last Friday, so not sure if you have any visibility into this yet, but just if you're expecting any business impact from CMS rescinding the long term waiver in taxes and then if also if we assume that they may do the same thing in Florida as well. Thanks. Dan Cancelmi: Hey Scott, its Dan. We really don’t. What's in the current waiver expires in September of next year. So there's not an immediate threat to current funding. You know CMS, our understanding based on our read of their correspondence was they rescinded the ten year extension, which is rather a long period of time for an extension. That was you know rescinded based on procedural grounds. We fully expect the state will undoubtedly apply for an extension in the coming months and so you know we think it's premature at this point and unreasonable to assume that it's going to result in a significant loss of funding. So we obviously will be following it and then providing our input to the appropriate constituents on that matter. Operator: Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over to management for any further or closing comments. Ron Rittenmeyer: We just appreciate everybody joining and as usual, we are available for follow-ups. So Regina. Regina Nethery : Thank you everyone for joining us and we look forward to chatting with you again soon. Have a good day! Bye! Operator: Thank you. That does concludes today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.