TENET HEALTHCARE CORP

Previous wording

Our Hospital Operations segment is comprised of our acute care and specialty hospitals, a network of employed physicians and ancillary outpatient facilities. At June 30, 2024, our subsidiaries operated 52 hospitals serving primarily urban and suburban communities in nine states. Our Hospital Operations segment also included 148 outpatient facilities at June 30, 2024, including imaging centers, urgent care centers, ancillary emergency facilities and micro‑hospitals. In addition, our Hospital Operations segment provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients through our Conifer Health Solutions, LLC joint venture.

Current wording

Our Hospital Operations segment is comprised of our acute care and specialty hospitals, a network of employed physicians and ancillary outpatient facilities. At September 30, 2024, our subsidiaries operated 49 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 142 outpatient facilities at September 30, 2024, including imaging centers, urgent care centers, ancillary emergency facilities and micro‑hospitals. In addition, our Hospital Operations segment provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients through our Conifer Health Solutions, LLC joint venture.

Previous wording

Our Ambulatory Care segment, through our USPI Holding Company, Inc. subsidiary (“USPI”), held ownership interests in 520 ambulatory surgery centers (each, an “ASC”) (377 consolidated) and 24 surgical hospitals (seven consolidated) in 38 states at June 30, 2024. USPI’s facilities offer a range of procedures and service lines, including, among other specialties: orthopedics, total joint replacement, and spinal and other musculoskeletal procedures; gastroenterology; and urology.

Current wording

Our Ambulatory Care segment, through our USPI Holding Company, Inc. subsidiary (“USPI”), held ownership interests in 520 ambulatory surgery centers (each, an “ASC”), 376 of which are consolidated, and 24 surgical hospitals, seven of which are consolidated, in 37 states at September 30, 2024. USPI’s facilities offer a range of procedures and service lines, including, among other specialties: orthopedics, total joint replacement, and spinal and other musculoskeletal procedures; gastroenterology; and urology.

Previous wording

Unless otherwise indicated, all financial and statistical information included in MD&A relates to our continuing operations, with dollar amounts expressed in millions (except per adjusted admission and per adjusted patient day amounts). Continuing operations information includes the results of all hospitals operated for the entirety, or any portion of, the six months ended June 30, 2024 and 2023, and excludes the results of our hospitals and other businesses classified as discontinued operations for accounting purposes. We believe this presentation is useful to investors because it includes the operations of all facilities in continuing operations for the entire time that we owned and operated them during the relevant period. In addition, continuing operations information reflects the impact of the addition or disposition of individual hospitals and other operations on our volumes, revenues and expenses.

Current wording

Unless otherwise indicated, all financial and statistical information included in MD&A relates to our continuing operations, with dollar amounts expressed in millions (except per adjusted admission and per adjusted patient day amounts). Continuing operations information includes the results of all hospitals operated for the entirety, or any portion of, the nine months ended September 30, 2024 and 2023, including Westover Hills Baptist Hospital (“Westover Hills Hospital”), the new acute care hospital we opened in Texas in July 2024. Continuing operations information excludes the results of our hospitals and other businesses classified as discontinued operations for accounting purposes. We believe this presentation is useful to investors because it includes the operations of all facilities in continuing operations for the entire time that we owned and operated them during the relevant period. In addition, continuing operations information reflects the impact of the addition or disposition of individual hospitals and other operations on our volumes, revenues and expenses.

Previous wording

In certain cases, information presented in MD&A for our Hospital Operations segment is described as presented on a same‑hospital basis, which includes hospitals we operated for the entire six-month periods ended June 30, 2024 and 2023. Same‑hospital basis excludes the results of hospitals not operated for the full duration of both periods, as well as our discontinued operations. We present same‑hospital data because we believe it provides investors with useful information regarding the performance of our current portfolio of hospitals and other operations that are comparable for the periods presented. Furthermore, same‑hospital data may more clearly reflect recent trends we are experiencing with respect to volumes, revenues and expenses exclusive of variations caused by the addition or disposition of individual hospitals and other operations.

Current wording

In certain cases, information presented in MD&A for our Hospital Operations segment is described as presented on a same‑hospital basis, which includes hospitals we operated for the entire nine-month periods ended September 30, 2024 and 2023. Same‑hospital basis excludes the results of hospitals not operated for the full duration of both periods, such as our Westover Hills Hospital, as well as our discontinued operations. Same-hospital information includes the results of operations of the five Alabama hospitals and certain related operations that we divested, as described below, on September 30, 2024. We present same‑hospital data because we believe it provides investors with useful information regarding the performance of our current portfolio of hospitals and other operations that are comparable for the periods presented. Furthermore, same‑hospital data may more clearly reflect recent trends we are experiencing with respect to volumes, revenues and expenses exclusive of variations caused by the addition or disposition of individual hospitals and other operations.

Previous wording

Staffing and Labor Trends—We compete with other healthcare providers in recruiting and retaining qualified personnel responsible for the operation of our facilities. There is limited availability of experienced medical support personnel nationwide, which drives up the wages and benefits required to recruit and retain employees. In particular, like others in the healthcare industry, we continue to experience shortages of advanced practice providers and critical‑care nurses in certain disciplines and geographic areas. Over the past several years, we have had to rely on higher-cost contract labor, which we compete with other healthcare providers to secure, and pay premiums above standard compensation for essential workers. Although we continue to incur a higher level of contract labor expense than we have historically, our recruitment and retention efforts drove a reduction in this expense during the six months ended June 30, 2024 as compared to the same period in 2023.

Current wording

Staffing and Labor Trends—We compete with other healthcare providers in recruiting and retaining qualified personnel responsible for the operation of our facilities. There is limited availability of experienced medical support personnel nationwide, which drives up the wages and benefits required to recruit and retain employees. In particular, like others in the healthcare industry, we continue to experience shortages of advanced practice providers and critical‑care nurses in certain disciplines and geographic areas. Over the past several years, we have had to rely on higher-cost contract labor, which we compete with other healthcare providers to secure, and pay premiums above standard compensation for essential workers. Although we continue to incur a higher level of contract labor expense than we have historically, our recruitment and retention efforts drove a reduction in this expense during the nine months ended September 30, 2024 as compared to the same period in 2023.

Previous wording

Inflation and Other General Economic Conditions—Our business has been impacted by the rise in inflation and its effects on salaries, wages and benefits, as well as other costs. Medical supply prices remain high due to current economic conditions and other factors. In addition, our Ambulatory Care segment continues to be impacted by shipment delays in construction materials and capital equipment with respect to its de novo facility development efforts, which are a key part of our portfolio expansion strategy. In general, supply chain operational challenges may continue or worsen in the future, whether due to geopolitical conflicts, inflationary pressures and the recessionary environment, climate change, weather events or other issues yet to emerge.

Current wording

Inflation, Other General Economic Conditions and Weather-Related Events—Our business has been impacted by the rise in inflation and its effects on salaries, wages and benefits, as well as other costs. Medical supply prices remain high due to current economic conditions and other factors. In addition, our Ambulatory Care segment continues to be impacted by shipment delays in construction materials and capital equipment with respect to its de novo facility development efforts, which are a key part of our portfolio expansion strategy. In general, supply chain operational challenges may continue or worsen in the future, whether due to geopolitical conflicts, inflationary pressures and the recessionary environment, climate change, weather events or other issues yet to emerge.

Previous wording

During the six months ended June 30, 2024, we acquired controlling ownership interests in 49 ASCs and acquired noncontrolling ownership interests in two ASCs in which we did not have a previous investment. We also continue to prioritize increasing our investment in our unconsolidated facilities, acquiring controlling ownership interests in five previously unconsolidated ASCs during the six months ended June 30, 2024, which allowed us to consolidate their financial results. In addition, we opened six de novo ASCs in which we have a noncontrolling ownership interest during the six months ended June 30, 2024.

Current wording

During the nine months ended September 30, 2024, we acquired controlling ownership interests in 49 ASCs and acquired noncontrolling ownership interests in two ASCs in which we did not have a previous investment. We also continue to prioritize increasing our investment in our unconsolidated facilities, acquiring controlling ownership interests in seven previously unconsolidated ASCs during the nine months ended September 30, 2024, which allowed us to consolidate their financial results. In addition, we opened 12 de novo ASCs during the nine months ended September 30, 2024; we hold controlling ownership interests in three of these centers and noncontrolling ownership interests in the remaining nine.

Previous wording

Driving Growth in Our Hospital Systems—We remain committed to better positioning our hospital systems and competing more effectively in the ever‑evolving healthcare environment by focusing on driving performance through operational effectiveness, increasing capital efficiency and margins, investing in our physician enterprise, particularly our specialist network, enhancing patient and physician satisfaction, growing our higher‑demand and higher‑acuity clinical service lines (including outpatient lines), expanding patient and physician access, and optimizing our portfolio of assets. Over the past several years, we have undertaken enterprise‑wide cost‑efficiency measures, and we continue to transition certain support operations to our Global Business Center (“GBC”) in the Philippines. We incurred restructuring charges in conjunction with these initiatives in the six months ended June 30, 2024, and we could incur additional restructuring charges in the future.

Current wording

Driving Growth in Our Hospital Systems—We remain committed to better positioning our hospital systems and competing more effectively in the ever‑evolving healthcare environment by focusing on driving performance through operational effectiveness, increasing capital efficiency and margins, investing in our physician enterprise, particularly our specialist network, enhancing patient and physician satisfaction, growing our higher‑demand and higher‑acuity clinical service lines (including outpatient lines), expanding patient and physician access, and optimizing our portfolio of assets. Over the past several years, we have undertaken enterprise‑wide cost‑efficiency measures, and we continue to transition certain support operations to our Global Business Center (“GBC”) in the Philippines. We incurred restructuring charges in conjunction with these initiatives in the nine months ended September 30, 2024, and we could incur additional restructuring charges in the future.

Previous wording

From time to time, we also capitalize on opportunities to refine our portfolio of hospitals and other healthcare facilities when we believe such refinements will help us improve profitability, allocate capital more effectively in areas where we have a stronger presence, deploy proceeds on higher-return investments across our business, enhance cash flow generation and reduce our debt, among other things. Transactions completed during the six months ended June 30, 2024 included the following:

Current wording

From time to time, we capitalize on opportunities to refine our portfolio of hospitals and other healthcare facilities when we believe such refinements will help us improve profitability, allocate capital more effectively in areas where we have a stronger presence, deploy proceeds on higher-return investments across our business, enhance cash flow generation and reduce our debt, among other things. Transactions completed during the nine months ended September 30, 2024 included the following:

Previous wording

We also seek advantageous opportunities to grow our portfolio of hospitals and other healthcare facilities. We have completed construction of Westover Hills Baptist Hospital, a new 92‑bed acute care hospital located in the Westover Hills area of San Antonio, Texas, and we expect to begin receiving patients in July 2024. In 2023, we broke ground on a new medical campus located in Port St. Lucie, Florida, which will include the 54‑bed Florida Coast Surgical Hospital, as well as medical office space. We expect to complete construction of the Port St. Lucie medical campus in late 2025.

Current wording

We also seek advantageous opportunities to grow our portfolio of hospitals and other healthcare facilities. We opened our newly constructed Westover Hills Hospital, a 92‑bed acute care hospital located in the Westover Hills area of San Antonio, Texas, in July 2024. In 2023, we broke ground on a new medical campus located in Port St. Lucie, Florida, which will include the 54‑bed Florida Coast Surgical Hospital, as well as medical office space. We expect to complete construction of the Port St. Lucie medical campus in late 2025.

Previous wording

In July 2024, our board of directors authorized the repurchase of up to $1.5 billion of our common stock through a new share repurchase program that has no expiration date. Repurchases may be made in open‑market or privately negotiated transactions, at management’s discretion subject to market conditions and other factors, and in a manner consistent with applicable securities laws and regulations. This share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended for periods or discontinued at any time.

Current wording

Repurchasing Stock—In July 2024, our board of directors authorized the repurchase of up to $1.500 billion of our common stock through a new share repurchase program that has no expiration date (the “2024 share repurchase program”). This program does not obligate us to acquire any particular amount of common stock, and it may be suspended for periods or discontinued at any time. From the inception of the 2024 share repurchase program through September 30, 2024, we paid $124 million to repurchase 795 thousand shares of our common stock, an average of $155.95 per share.

Previous wording

Repurchasing Stock—In October 2022, our board of directors authorized the repurchase of up to $1 billion of our common stock through a share repurchase program that is scheduled to expire on December 31, 2024. In the six months ended June 30, 2024, we paid $548 million to repurchase 4,801 thousand shares, an average of $114.19 per share. In total, we repurchased $998 million of our common stock under the program in open‑market or privately negotiated transactions, at management’s discretion subject to market conditions and other factors, and in a manner consistent with applicable securities laws and regulations. We do not intend to make further repurchases under this program.

Current wording

The board had previously approved a $1.000 billion share repurchase program in October 2022 (the “2022 share repurchase program”). During the nine months ended September 30, 2024, we paid $548 million to repurchase 4,801 thousand shares, an average of $114.19 per share, of our common stock. Over the life of the 2022 share repurchase program, we repurchased $998 million of our common stock. We do not intend to make further repurchases under the 2022 share repurchase program.

Previous wording

Total admissions decreased by 8,128, or 6.1%, in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Total surgeries decreased by 8,459, or 9.6%, during the three-month period in 2024 as compared to the same period in 2023. In addition, emergency department visits during the three months ended June 30, 2024 decreased 53,760, or 9.8%, as compared to the same period in 2023. The decreases in our volumes from continuing operations in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 were primarily related to the sales of the SC Hospitals, the OCLA CA Hospitals and the Central CA Hospitals (together, the “Divested Hospitals”).

Current wording

Total admissions decreased by 7,910, or 5.9%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Total surgeries and emergency department visits decreased by 8,333, or 9.7%, and 63,141, or 11.6%, respectively, during the three-month period in 2024 as compared to the same period in 2023. The decreases in our volumes were primarily related to the sales of the SC Hospitals, the OCLA CA Hospitals and the Central CA Hospitals (together, the “Divested Hospitals”). Excluding the impact of these divestitures, total admissions increased by 6,546, or 5.4%, total surgeries increased by 543, or 0.7%, and emergency department visits decreased by 4,895, or 1.0%, during the three months ended September 30, 2024 compared to the same period in 2023.

Previous wording

The increase in our Ambulatory Care segment’s total consolidated cases of 20.0% in the three months ended June 30, 2024, as compared to the same period in 2023, was primarily attributable to incremental case volume from the ASCs we have acquired and same‑facility case growth, partially offset by the impact of the closure and deconsolidation of certain facilities.

Current wording

The increase in our Ambulatory Care segment’s total consolidated cases of 19.0% in the three months ended September 30, 2024, as compared to the same period in 2023, was primarily attributable to incremental case volume from the ASCs we have acquired and same‑facility case growth, partially offset by the impact of the closure and deconsolidation of certain facilities.

Previous wording

Consolidated net operating revenues increased by $21 million, or 0.4%, in the three months ended June 30, 2024 compared to the same period in 2023. The decrease of $178 million, or 4.3%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 2024 compared to the same period in 2023 was primarily due to the sales of the Divested Hospitals. Excluding the effect of these sales, net operating revenues during the three months ended June 30, 2024 were positively impacted by a more favorable payer mix, higher patient volume and acuity, growth in our Medicaid supplemental revenue, and negotiated commercial rate increases.

Current wording

Consolidated net operating revenues increased by $56 million, or 1.1%, in the three months ended September 30, 2024 compared to the same period in 2023. The decrease of $142 million, or 3.4%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 2024 compared to the same period in 2023 was primarily due to the sales of the Divested Hospitals. Excluding the effect of these sales, net operating revenues during the three months ended

Previous wording

Same‑hospital net operating revenues increased by $294 million, or 8.0%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to a more favorable payer mix, higher patient volume and acuity, growth in our Medicaid supplemental revenue, and negotiated commercial rate increases.

Current wording

September 30, 2024 increased by $282 million, or 7.6%, compared to the three months ended September 30, 2023. This increase was attributable to the positive impact of a more favorable payer mix, higher patient volume and acuity, growth in our Medicaid supplemental revenue, and negotiated commercial rate increases.

Previous wording

Net operating revenues in our Ambulatory Care segment increased by $199 million, or 21.1%, in the three months ended June 30, 2024 compared to the same period in 2023. This change was primarily driven by the ASCs we have acquired, an increase in net revenue per case and higher patient acuity in the 2024 period, partially offset by the impact of the closure and deconsolidation of certain facilities.

Current wording

Net operating revenues in our Ambulatory Care segment increased by $198 million, or 21.0%, in the three months ended September 30, 2024 compared to the same period in 2023. This change was primarily driven by the ASCs we have acquired, an increase in net revenue per case and higher patient acuity in the 2024 period, partially offset by the impact of the closure and deconsolidation of certain facilities.

Previous wording

Our accounts receivable days outstanding (“AR Days”) from continuing operations were 52.9 days and 55.4 days at June 30, 2024 and December 31, 2023, respectively. Our AR Days target is less than 55 days. AR Days are calculated as our accounts receivable from continuing operations on the last date in the quarter divided by our net operating revenues for the quarter ended on that date divided by the number of days in the quarter. This calculation includes our Hospital Operations segment’s contract assets and excludes our California provider fee revenues and activity related to divested facilities.

Current wording

Our accounts receivable days outstanding (“AR Days”) from continuing operations were 52.6 days and 55.4 days at September 30, 2024 and December 31, 2023, respectively. Our AR Days target is less than 55 days. AR Days are calculated as our accounts receivable from continuing operations on the last date in the quarter divided by our net operating revenues for the quarter ended on that date divided by the number of days in the quarter. This calculation includes our Hospital Operations segment’s contract assets and excludes our California provider fee revenues and activity related to divested facilities.

Previous wording

Salaries, wages and benefits expense for our Hospital Operations segment decreased by $161 million, or 7.9%, in the three months ended June 30, 2024 compared to the same period in 2023. This change was primarily attributable to the sales of the Divested Hospitals. Excluding the impact of these sales, salaries, wages and benefits expense for our Hospital Operations segment increased during the three-month period in 2024 as compared to the same period in 2023. This increase was the result of annual merit increases for certain of our employees and increased employee benefits, recruiting and retention costs, as well as higher incentive compensation expense, partially offset by a substantial decrease in contract labor expense, during the three months ended June 30, 2024. On a per adjusted admission basis, salaries, wages and benefits expense in our Hospital Operations segment increased by 0.5% in the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Salaries, wages and benefits expense for our Hospital Operations segment decreased by $146 million, or 7.1%, in the three months ended September 30, 2024 compared to the same period in 2023. This change was primarily attributable to the sales of the Divested Hospitals. After excluding the effects of these divestitures, salaries, wages and benefits expense for our Hospital Operations segment increased by $145 million, or 7.9%, during the three-month period in 2024 as compared to the same period in 2023. This increase was the result of annual merit increases for certain of our employees and increased employee benefits costs, partially offset by decreases in contract labor and premium pay.

Previous wording

Supplies expense for our Hospital Operations segment decreased by $29 million, or 4.5%, during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to the sales of the Divested Hospitals. Excluding the impact of these sales, supplies expense for 2024 increased as compared to 2023, principally due to higher patient volumes and acuity. On a per adjusted admission basis, supplies expense increased by 4.0% in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to higher patient acuity during the 2024 period.

Current wording

Supplies expense for our Hospital Operations segment decreased by $28 million, or 4.5%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to the sales of the Divested Hospitals. Excluding the impact of these sales, supplies expense increased by $35 million, or 6.3%, during the three months ended September 30, 2024 as compared to the same period in 2023. This increase was primarily due to higher patient acuity, partially offset by our cost‑efficiency measures.

Previous wording

Other operating expenses for our Hospital Operations segment decreased by $14 million, or 1.4%, in the three months ended June 30, 2024 compared to the same period in 2023, primarily due to the sales of the Divested Hospitals. Excluding the effect of these divestitures, changes in other operating expenses during the three months ended June 30, 2024 included the following:

Current wording

Other operating expenses for our Hospital Operations segment decreased by $22 million, or 2.3%, in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to the sales of the Divested Hospitals. Excluding the effect of these divestitures, other operating expenses increased during the 2024 period by $75 million, or 8.6%. This increase was primarily attributable to net gains of $11 million recognized in the 2023 period, as well as increases of $27 million in medical fees and $7 million in legal and consulting costs. These changes were partially offset by lower malpractice expense of $16 million during the three months ended September 30, 2024.

Previous wording

On a per adjusted admission basis, other operating expenses in the three months ended June 30, 2024 increased by 7.3% compared to the same period in 2023, primarily due to the factors discussed above.

Current wording

On a per adjusted admission basis, other operating expenses during the three months ended September 30, 2024 increased by 6.0% compared to the same period in 2023. Excluding the impact of the sales of the Divested Hospitals, other operating expenses per adjusted admission increased by 5.5%, primarily due to the factors discussed above.

Previous wording

Cash and cash equivalents were $2.880 billion at June 30, 2024 compared to $2.481 billion at March 31, 2024. Significant cash flow items in the three months ended June 30, 2024 included:

Current wording

Cash and cash equivalents were $4.094 billion at September 30, 2024 compared to $2.880 billion at June 30, 2024. Significant cash flow items in the three months ended September 30, 2024 included:

Previous wording

•Net cash provided by operating activities before interest, taxes, discontinued operations, impairment and restructuring charges, and acquisition‑related costs, and litigation costs and settlements of $1.318 billion;

Current wording

•Net cash provided by operating activities before interest, taxes, impairment and restructuring charges, and acquisition‑related costs, and litigation costs and settlements of $1.264 billion;

Previous wording

•Distributions paid to noncontrolling interests totaling $161 million;

Current wording

•Distributions paid to noncontrolling interests totaling $173 million;

Previous wording

•$342 million of advances received from managed care payers;

Current wording

•Repayments of advances received from managed care payers totaling $160 million;

Previous wording

•$270 million of payments to purchase approximately 1,990 thousand shares of our common stock under our share repurchase program;

Current wording

•$124 million of payments to purchase approximately 795 thousand shares of our common stock under our 2024 share repurchase program;

Previous wording

Net cash provided by operating activities was $1.333 billion in the six months ended June 30, 2024 compared to $1.047 billion in the six months ended June 30, 2023. Key factors contributing to the change between the 2024 and 2023 periods included the following:

Current wording

Net cash provided by operating activities was $2.378 billion in the nine months ended September 30, 2024 compared to $1.550 billion in the nine months ended September 30, 2023. Key factors contributing to the change between the 2024 and 2023 periods included the following:

Previous wording

•An increase in net income before interest, taxes, depreciation and amortization, impairment and restructuring charges, acquisition‑related costs, litigation costs and settlements, loss from early extinguishment of debt, other non-operating income or expense, and net gains on sales, consolidation and deconsolidation of facilities of $294 million;

Current wording

•An increase in net income before interest, taxes, depreciation and amortization, impairment and restructuring charges, acquisition‑related costs, litigation costs and settlements, loss from early extinguishment of debt, other non-operating income or expense, and net gains on sales, consolidation and deconsolidation of facilities of $418 million;

Previous wording

•Income tax payments that were $82 million higher in the 2024 period; and

Current wording

•Income tax payments that were $96 million higher in the 2024 period; and

Previous wording

Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan (which includes “Part A” and “Part B”), is a fee‑for‑service (“FFS”) payment system. The other option, called Medicare Advantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), private FFS Medicare special needs plans and Medicare medical savings account plans. Our total net patient service revenues from continuing operations of the hospitals and related outpatient facilities in our Hospital Operations segment for services provided to patients enrolled in the Original Medicare Plan were $518 million and $599 million for the three months ended June 30, 2024 and 2023, respectively, and $1.128 billion and $1.212 billion for the six months ended June 30, 2024 and 2023, respectively. A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided in our Annual Report. Recent regulatory and legislative updates to the terms of these payment systems and their estimated effect on our revenues can be found under “Regulatory and Legislative Changes” below.

Current wording

Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan (which includes “Part A” and “Part B”), is a fee‑for‑service (“FFS”) payment system. The other option, called Medicare Advantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), private FFS Medicare special needs plans and Medicare medical savings account plans. Our total net patient service revenues from continuing operations of the hospitals and related outpatient facilities in our Hospital Operations segment for services provided to patients enrolled in the Original Medicare Plan were $504 million and $583 million for the three months ended September 30, 2024 and 2023, respectively, and $1.632 billion and $1.795 billion for the nine months ended September 30, 2024 and 2023, respectively. A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided in our Annual Report. Recent regulatory and legislative updates to the terms of these payment systems and their estimated effect on our revenues can be found under “Regulatory and Legislative Changes” below.

Previous wording

Medicaid programs and the corresponding reimbursement methodologies vary from state‑to‑state and from year‑to‑year. Estimated revenues under various state Medicaid programs, including state‑funded Medicaid managed care programs, constituted approximately 21.0% and 18.3% of the total net patient service revenues of our hospitals and related outpatient facilities for the six months ended June 30, 2024 and 2023, respectively. We also receive disproportionate share hospital (“DSH”) and other supplemental revenues under various state Medicaid programs. Our total Medicaid revenues attributable to DSH and other supplemental revenues were approximately $286 million and $190 million for the three months ended June 30, 2024 and 2023, respectively, and $625 million and $395 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Medicaid programs and the corresponding reimbursement methodologies vary from state‑to‑state and from year‑to‑year. Estimated revenues under various state Medicaid programs, including state‑funded Medicaid managed care programs, constituted approximately 21% and 19% of the total net patient service revenues of our hospitals and related outpatient facilities for the nine months ended September 30, 2024 and 2023, respectively. We also receive disproportionate share hospital (“DSH”) and other supplemental revenues under various state Medicaid programs. Our total Medicaid revenues attributable to DSH and other supplemental revenues were approximately $268 million and $240 million for the three months ended September 30, 2024 and 2023, respectively, and $893 million and $635 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Total Medicaid and Medicaid managed care net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment were $702 million and $640 million for the three months ended June 30, 2024 and 2023, respectively, and $1.524 billion and $1.312 billion for the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, Medicaid and Medicaid managed care revenues each comprised 51.2% of our Medicaid‑related net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment. All Medicaid and Medicaid managed care patient service revenues are presented net of provider taxes or assessments paid by our hospitals.

Current wording

Total Medicaid and Medicaid managed care net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment were $703 million and $708 million for the three months ended September 30, 2024 and 2023, respectively, and $2.227 billion and $2.020 billion for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, Medicaid and Medicaid managed care revenues each comprised approximately 50% of our Medicaid‑related net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment. All Medicaid and Medicaid managed care patient service revenues are presented net of provider taxes or assessments paid by our hospitals.

Previous wording

Proposed Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems—Section 1886(d) of the Social Security Act requires CMS to update Medicare inpatient FFS payment rates for hospitals reimbursed under the inpatient prospective payment systems (“IPPS”) annually. The updates generally become effective October 1, the beginning of the FFY. In April 2024, CMS issued proposed changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2025 Rates (“Proposed IPPS Rule”). The Proposed IPPS Rule includes the following payment and policy changes, among others:

Current wording

Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems—Section 1886(d) of the Social Security Act requires CMS to update Medicare inpatient FFS payment rates for hospitals reimbursed under the inpatient prospective payment systems (“IPPS”) annually. The updates generally become effective October 1, the beginning of the FFY. In August 2024, CMS issued final changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2025 Rates (“Final IPPS Rule”). In the Final IPPS Rule, CMS deferred taking immediate action on its low wage index hospital policy in light of the U.S. Court of Appeals for the DC Circuit’s decision in Bridgeport Hospital v. Becerra. In September 2024, CMS issued an interim final action with comment period (“IFC”) to implement revisions to the FFY 2025 Medicare wage index values, establish a transitional payment exception for low wage hospitals, and make conforming changes to the FFY 2025 IPPS payment rates following the court decision. The Final IPPS Rule and IFC include the following payment and policy changes, among others:

Previous wording

•A market basket increase of 3.0% for Medicare severity‑adjusted diagnosis‑related group (“MS‑DRG”) operating payments for hospitals reporting specified quality measure data and that are meaningful users of electronic health record (“EHR”) technology; CMS also proposed a 0.4% multifactor productivity reduction required by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), that results in a net operating payment update of 2.6% before budget neutrality adjustments;

Current wording

•A market basket increase of 3.4% for Medicare severity‑adjusted diagnosis‑related group (“MS‑DRG”) operating payments for hospitals reporting specified quality measure data and that are meaningful users of electronic health record (“EHR”) technology; CMS also finalized a 0.5% multifactor productivity reduction required by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), that results in a net operating payment update of 2.9% before budget neutrality adjustments;

Previous wording

•An increase in the cost outlier threshold from $42,750 to $49,237;

Current wording

•An increase in the cost outlier threshold from $42,750 to $46,217;

Previous wording

•A 3.0% net increase in the capital federal MS‑DRG rate;

Current wording

•A 1.65% net increase in the capital federal MS‑DRG rate;

Previous wording

•An increase to the performance-based scoring threshold for eligible hospitals and critical access hospitals reporting under the Medicare Promoting Interoperability Program from 60 points to 80 points beginning with the EHR reporting period in calendar year (“CY”) 2025;

Current wording

•An increase to the performance-based scoring threshold for eligible hospitals and critical access hospitals reporting under the Medicare Promoting Interoperability Program from 60 points to 70 points beginning with the EHR reporting period in calendar year (“CY”) 2025;

Previous wording

•Implementation of a five-year mandatory model known as the Transforming Episode Accountability Model (TEAM) that would begin January 1, 2026 and end December 31, 2030 for certain episodic categories.

Current wording

•Implementation of the Transforming Episode Accountability Model (“TEAM”) that will begin January 1, 2026 and end December 31, 2030 for certain episodic categories. TEAM will be mandatory, with limited exceptions, for all hospitals located within the CMS selected Core-Based Statistical Areas (“CBSAs”). Nine of our acute care hospitals and one surgical hospital are included in the CBSAs.

Previous wording

According to CMS, the combined impact of the proposed payment and policy changes in the Proposed IPPS Rule for operating costs will yield an average 2.4% increase in Medicare operating MS‑DRG FFS payments for hospitals in urban areas and an average 2.6% increase in such payments for proprietary hospitals in FFY 2025. We estimate that all of the proposed payment and policy changes affecting operating MS‑DRG and UC‑DSH Amounts will result in a 2.1% increase in our annual Medicare FFS IPPS payments, which yields an estimated increase of $29 million. Because of the uncertainty associated with various factors that may influence our future IPPS payments by individual hospital, including legislative, regulatory or legal actions, admission volumes, length of stay and case mix, as well as potential changes to the Proposed IPPS Rule, we cannot provide any assurances regarding our estimate of the impact of the proposed payment and policy changes.

Current wording

According to CMS, the combined impact of the payment and policy changes in the Final IPPS Rule and IFC for operating costs will yield an average 2.9% increase in Medicare operating MS‑DRG FFS payments for hospitals in urban areas and an average 3.3% increase in such payments for proprietary hospitals in FFY 2025. We estimate that all of the payment and policy changes affecting operating MS‑DRG and UC‑DSH Amounts will result in a 2.8% increase in our annual Medicare FFS IPPS payments, which yields an estimated increase of $36 million. Because of the uncertainty associated with various factors that may influence our future IPPS payments by individual hospital, including legislative, regulatory or legal actions, admission volumes, length of stay and case mix, we cannot provide any assurances regarding our estimate of the impact of the payment and policy changes.