TENET HEALTHCARE CORP

TENET HEALTHCARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Description of Business and Basis of Presentation

Tenet Healthcare Corporation (together with our subsidiaries, referred to herein as “Tenet,” “we” or “us”) is a diversified healthcare services company headquartered in Dallas, Texas. Our expansive, nationwide care delivery network consists of our Hospital Operations and Services (“Hospital Operations”) and Ambulatory Care segments. As of June 30, 2025, our Hospital Operations segment was comprised of 49 acute care and specialty hospitals, a network of employed physicians and 134 outpatient facilities, including urgent care centers, imaging centers, off-campus hospital emergency departments and micro‑hospitals. Our Ambulatory Care segment is comprised of the operations of our subsidiary USPI Holding Company, Inc. (“USPI”), which held indirect ownership interests in 521 ambulatory surgery centers and 26 surgical hospitals at June 30, 2025. USPI held noncontrolling interests in 154 of these facilities, which are recorded using the equity method of accounting. In addition, we operate a Global Business Center (“GBC”) in the Philippines.

This quarterly report supplements our Annual Report on Form 10‑K for the year ended December 31, 2024 (“Annual Report”). As permitted by the Securities and Exchange Commission for interim reporting, we have omitted certain notes and disclosures that substantially duplicate those in our Annual Report. For further information, refer to the audited Consolidated Financial Statements and notes included in our Annual Report. Unless otherwise indicated, all dollar amounts presented in our Condensed Consolidated Financial Statements and these accompanying notes are expressed in millions (except per‑share amounts), and all share amounts are expressed in thousands.

Certain prior-year amounts have been reclassified to conform to the current-year presentation. Grant income is no longer significant enough to be presented separately and is now included in net operating revenues in the accompanying Condensed Consolidated Statements of Operations.

Although our Condensed Consolidated Financial Statements and these related notes are unaudited, we believe all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in our Condensed Consolidated Financial Statements and these accompanying notes. We regularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experience and on assumptions that we believe to be reasonable given the particular circumstances in which we operate. Actual results may vary from those estimates. The financial and statistical information we report to other regulatory agencies may be prepared on a basis other than GAAP or using different assumptions or reporting periods and, therefore, may vary from the amounts presented herein. Although we make every effort to ensure that the information we report to those agencies is accurate, complete and consistent with applicable reporting guidelines, we cannot be responsible for the accuracy of the information they make available to the public.

Operating results for the three and six-month periods ended June 30, 2025 are not necessarily indicative of the results that may be expected for the full year. Reasons for this include, but are not limited to: the impact of the demand for, and availability of, qualified medical personnel on compensation costs; overall revenue and cost trends, particularly the timing and magnitude of price changes; fluctuations in contractual allowances and cost report settlements and valuation allowances; managed care contract negotiations, settlements or terminations and payer consolidations; trends in patient accounts receivable collectability and associated implicit price concessions; the impact of cybersecurity incidents on our operations; fluctuations in interest rates; levels of malpractice insurance expense and settlement trends; impairment of long‑lived assets and goodwill; restructuring charges; losses, costs and insurance recoveries related to cybersecurity incidents, natural disasters and weather‑related occurrences; the potential emergence and effects of future pandemics, epidemics or outbreaks of infectious diseases on our operations, financial condition and liquidity; litigation and investigation costs; acquisitions and dispositions of facilities and other assets; gains (losses) on sales, consolidation and deconsolidation of facilities; income tax rates and deferred tax asset valuation allowance activity; changes in estimates of accruals for annual incentive compensation; the timing and amounts of stock option and restricted stock unit grants to employees and directors; gains (losses) from early extinguishment of debt; and changes in occupancy levels and patient volumes.

Our hospitals and outpatient facilities are subject to various factors that affect our service mix, revenue mix and patient volumes and, thereby, impact our net patient service revenues and results of operations. These factors include, among others: changes in federal and state statutes, regulations and executive orders that effect the healthcare industry directly or indirectly, particularly those impacting government healthcare funding; changes in general economic conditions, including inflation, whether due to geopolitical conflicts, trade tensions, export control rules, tariffs or other factors; the number of uninsured and underinsured individuals in local communities treated at our facilities; cybersecurity incidents, including those targeting our vendors, and other unanticipated information technology outages; disease hotspots and seasonal cycles of illness; climate and weather conditions; physician recruitment, satisfaction, retention and attrition; advances in technology and treatments that reduce length of stay or permit procedures to be performed in an outpatient rather than inpatient setting; local healthcare competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; performance data on quality measures and patient satisfaction, as well as pricing for services; any unfavorable publicity about us, or our joint venture partners, that impacts our relationships with physicians and patients; and changing consumer behavior, including with respect to the timing of elective procedures. These considerations apply to year‑to‑year comparisons as well.

Cash and Cash Equivalents

We treat highly liquid investments with original maturities of three months or less as cash equivalents. Cash and cash equivalents were $2.625 billion and $3.019 billion at June 30, 2025 and December 31, 2024, respectively. At June 30, 2025 and December 31, 2024, our book overdrafts were $179 million and $143 million, respectively, which were classified as accounts payable. Also at June 30, 2025 and December 31, 2024, $124 million and $110 million, respectively, of total cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets were intended for the operations of our insurance‑related subsidiaries.

At June 30, 2025 and December 31, 2024, we had $74 million and $127 million, respectively, of property and equipment purchases accrued for items received but not yet paid. Of these amounts, $59 million and $109 million, respectively, were included in accounts payable.

During the six months ended June 30, 2025 and 2024, we recorded right‑of‑use assets related to non‑cancellable finance leases of $25 million and $30 million, respectively, and related to non‑cancellable operating leases of $212 million and $124 million, respectively.

Goodwill

The following tables provide information on changes in the carrying amount of goodwill for each of our segments:

Other Intangible Assets

The following tables present information regarding other intangible assets, which were included in the accompanying Condensed Consolidated Balance Sheets:

The table below presents our estimated future amortization of intangible assets with finite useful lives at June 30, 2025:

We recognized amortization expense of $79 million and $89 million in the accompanying Condensed Consolidated Statements of Operations during the six months ended June 30, 2025 and 2024, respectively.

Other Current Assets

The table below presents the principal components of other current assets in the accompanying Condensed Consolidated Balance Sheets:

Investments in Unconsolidated Affiliates

As of June 30, 2025, we controlled 393 of the facilities in our Ambulatory Care segment and, therefore, consolidated their results. We account for many of the facilities in which our Ambulatory Care segment holds ownership interests (154 of 547 at June 30, 2025), as well as additional companies in which our Hospital Operations segment holds ownership interests, under the equity method as investments in unconsolidated affiliates and report only our share of net income as equity in earnings of unconsolidated affiliates in our condensed consolidated statements of operations.

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

NOTE 2. ACCOUNTS RECEIVABLE

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

Uninsured and Charity Patient Costs

The following table presents our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity patients:

NOTE 3. DISPOSITION OF ASSETS AND LIABILITIES

In January 2024, we completed the sale ofthree hospitals located in South Carolina and certain related operations (together, the “SC Hospitals”), all of which were held by our Hospital Operations segment. This transaction resulted in the recognition of a pre-tax gain on sale of $1.677 billion in the six months ended June 30, 2024. During the three and six months ended June 30, 2024, respectively, the SC Hospitals contributed $3 million and $1.689 billion (inclusive of the gain discussed above) to income before income taxes in the accompanying Condensed Consolidated Statement of Operations. There was no corresponding amount in the six months ended June 30, 2025.

In March 2024, we completed the following additional sales:

•four hospitals and certain related operations located in Orange County and Los Angeles County, California, including facilities from both our Hospital Operations and Ambulatory Care segments, which resulted in the recognition of a pre‑tax gain on sale of $526 million in the six months ended June 30, 2024;

•two hospitals and certain related operations located in San Luis Obispo County, California, all of which were held by our Hospital Operations segment, resulting in the recognition of a pre‑tax gain on sale of $275 million in the six months ended June 30, 2024; and

•three ambulatory surgery centers located in South Carolina and held by our Ambulatory Care segment, which resulted in the recognition of a pre‑tax gain of $43 million in the six months ended June 30, 2024.

Gains recognized from the disposition of the assets described above are included in net gains on sales, consolidation and deconsolidation of facilities in the accompanying Condensed Consolidated Statement of Operations for the six months ended June 30, 2024.

NOTE 4. IMPAIRMENT AND RESTRUCTURING CHARGES, AND ACQUISITION‑RELATED COSTS

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

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

During the six months ended June 30, 2025, we recorded impairment and restructuring charges and acquisition‑related costs of $43 million, consisting of $25 million of restructuring charges, $15 million of acquisition‑related transaction costs and impairment charges totaling $3 million. Restructuring charges during this period included $10 million of contract and lease termination fees, $7 million related to the transition of various administrative functions to our GBC, $4 million of employee severance costs, $3 million of legal costs related to the sale of certain businesses and $1 million of other restructuring costs.

During the six months ended June 30, 2024, we recorded impairment and restructuring charges and acquisition‑related costs of $56 million, consisting of $32 million of restructuring charges, $22 million of acquisition‑related transaction costs and $2 million of impairment charges. Restructuring charges consisted of $14 million of legal costs related to the sale of certain businesses, $6 million of employee severance costs, $5 million related to the transition of various administrative functions to our GBC and $7 million of other restructuring costs.

NOTE 5. LONG-TERM DEBT

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

Senior Unsecured Notes and Senior Secured Notes

At June 30, 2025, we had senior unsecured notes and senior secured notes with aggregate principal amounts outstanding of $12.662 billion. These notes have fixed interest rates ranging from 4.250% to 6.875% and require semi‑annual interest payments in arrears. A payment of the principal and any accrued but unpaid interest is due upon the maturity date of the respective notes, which dates are staggered from February 2027 through November 2031.

Credit Agreement

We have a senior secured revolving credit facility (as amended, the “Credit Agreement”) that provides for revolving loans in an aggregate principal amount of up to $1.500 billion with a $200 million subfacility for standby letters of credit. Our borrowing availability, which is based on a specified percentage of eligible inventory and accounts receivable, was $1.400 billion at June 30, 2025. On that date, we hadno cash borrowings outstanding under the Credit Agreement, and we had less than $1 million of standby letters of credit outstanding.

Letter of Credit Facility

We have a letter of credit facility (as amended to date, the “LC Facility”) that provides for the issuance, from time to time, of standby and documentary letters of credit in an aggregate principal amount of up to $200 million. At June 30, 2025, we had $106 million of standby letters of credit outstanding under the LC Facility.

NOTE 6. GUARANTEES

At June 30, 2025, the maximum potential amount of future payments under our income guarantees to certain physicians who agree to relocate and revenue collection guarantees to hospital‑based physician groups providing certain services at our hospitals was $151 million. We had a total liability of $130 million recorded for these guarantees included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet at June 30, 2025.

At June 30, 2025, we also had issued guarantees of the indebtedness and other obligations of our investees to third parties, the maximum potential amount of future payments under which was approximately $62 million.

NOTE 7. EMPLOYEE BENEFIT PLANS

The accompanying Condensed Consolidated Statements of Operations for the six months ended June 30, 2025 and 2024 include $41 million and $36 million, respectively, of pre-tax compensation costs related to our stock‑based compensation arrangements.

Stock Options

As of June 30, 2025, there were 186,497 stock options outstanding under our share-based compensation plans, which had a weighted average exercise price per share of $23.76. There wasno activity related to our stock options during the six months ended June 30, 2025. During the six months ended June 30, 2024,155,943 stock options were exercised with an aggregate intrinsic value of $13 million. Other than the exercise of these options, there was no activity related to our stock options during the six months ended June 30, 2024. All outstanding options were vested and exercisable at June 30, 2025, and the options collectively had an aggregate intrinsic value of $28 million.

Restricted Stock Units

The following table presents information about our restricted stock unit (“RSU”) activity during the six months ended June 30, 2025:

During the six months ended June 30, 2025, we granted 317,154 RSUs that will vest over periods ranging fromone tofour years. In addition, we granted 279,769 performance-based RSUs, the vesting of which is contingent on our achievement of specified performance goals for the years 2025 to 2028. Provided the goals are achieved, the performance‑based RSUs that could vest will range from 0% to 250% of the 279,769 units granted, depending on our level of achievement with respect to the performance goals. During the same period, we issued an additional 202,045 RSUs that vested immediately as a result of our level of achievement with respect to previously awarded performance-based RSUs.

During the six months ended June 30, 2024, we granted 274,716 RSUs that vest over periods ranging fromone tothree years. In addition, we granted 297,339 performance-based RSUs, the vesting of which is contingent on our achievement of specified performance goals for the years 2024 to 2026. Provided the goals are achieved, the performance‑based RSUs that could vest will range from 0% to 250% of the 297,339 units granted, depending on our level of achievement with respect to the performance goals. During the same period, we issued an additional 205,075 RSUs that vested immediately as a result of our level of achievement with respect to previously awarded performance-based RSUs.

The fair value of an RSU is based on our share price on the grant date. The fair value of an RSU with a market‑based condition is estimated through the use of a Monte Carlo simulation. Significant inputs used in our valuation of these RSUs included the following:

NOTE 8. EQUITY

The following tables present the changes in consolidated equity (dollars in millions, share amounts in thousands):

Nonredeemable Noncontrolling Interests

The table below presents our nonredeemable noncontrolling interests balances by segment:

The table below presents our income available to nonredeemable noncontrolling interests by segment:

Share Repurchase Program Activity

In October 2022, our board of directors authorized the repurchase of up to $1.000 billion of our common stock through a share repurchase program (the “2022 share repurchase program”). This program allowed for share repurchases to 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. The program did not require us to acquire any particular amount of common stock and could be suspended for periods or discontinued at any time. In July 2024, our board authorized a new share repurchase program (the “2024 share repurchase program”) of up to $1.500 billion of our common stock with no expiration date, under terms substantially similar to the 2022 share repurchase program. We did not make any additional repurchases under the 2022 share repurchase program following the approval of the 2024 share repurchase program.

The table below presents repurchase activity under both the 2022 and 2024 share repurchase programs:

NOTE 9. NET OPERATING REVENUES

Net operating revenues for our Hospital Operations and Ambulatory Care segments primarily consist of net patient service revenues, principally for patients covered by Medicare, Medicaid, and managed care and other health plans, as well as certain uninsured patients under our Compact with Uninsured Patients and other uninsured discount and charity programs. Net operating revenues for our Hospital Operations segment also include revenues from providing revenue cycle management and value‑based care services to hospitals, health systems, physician practices, employers and other clients.

The table below presents our sources of net operating revenues:

Adjustments for prior‑year cost reports and related valuation allowances, principally related to Medicare and Medicaid, increased revenues in the six months ended June 30, 2025 and 2024 by $13 million and $2 million, respectively. Estimated cost report settlements receivable, net of payables and valuation allowances, were included in accounts receivable in the accompanying Condensed Consolidated Balance Sheets (see Note 2). We believe that we have made adequate provision for any adjustments that may result from the final determination of amounts earned under all the above arrangements with Medicare and Medicaid.

The table below presents the composition of net operating revenues for our Ambulatory Care segment:

Performance Obligations

The following table presents revenue from revenue cycle management services that is expected to be recognized in the future related to performance obligations that are unsatisfied, or partially unsatisfied, at the end of the reporting period:

The amounts in the table primarily consist of revenue cycle management fixed fees, which are typically recognized ratably as the performance obligation is satisfied. The estimated revenue does not include volume‑ or contingency‑based contracts, variable‑based escalators, performance incentives, penalties or other variable consideration that is considered constrained. Our contract with Catholic Health Initiatives (“CHI”), now known as CommonSpirit Health and the minority interest holder in our Conifer Health Solutions, LLC joint venture, represents the majority of the fixed‑fee revenue related to remaining performance obligations. Our contract term with CHI is scheduled to end on December 31, 2032.

NOTE 10. INSURANCE

Property Insurance

We have property, business interruption and related insurance coverage to mitigate the financial impact of catastrophic events or perils that is subject to deductible provisions based on the terms of the policies. These policies are issued on an occurrence basis. For both the policy periods of April 1, 2024 through March 31, 2025 and April 1, 2025 through March 31, 2026, we have coverage totaling $850 million per occurrence, after deductibles and exclusions, with annual aggregate sub‑limits of $100 million for floods, $200 million for earthquakes in California, $200 million for all other earthquakes and a per‑occurrence sub‑limit of $200 million per named windstorm with no annual aggregate. With respect to fires and other perils, excluding floods, earthquakes and named windstorms, the total $850 million limit of coverage per occurrence applies. Deductibles are 5% of insured values for earthquakes in California and named windstorms, and 2% of insured values for earthquakes in the New Madrid fault zone, each with a maximum deductible per claim of $25 million. All other covered losses are subject to a minimum deductible of $5 million per occurrence.

Professional and General Liability Reserves

We are self‑insured for the majority of our professional and general liability claims, and we purchase insurance from third parties to cover catastrophic claims. At June 30, 2025 and December 31, 2024, the aggregate current and long‑term professional and general liability reserves in the accompanying Condensed Consolidated Balance Sheets were $1.148 billion and $1.138 billion, respectively. These accruals include the reserves recorded by our captive insurance subsidiaries and our self‑insured retention reserves recorded based on modeled estimates for the portion of our professional and general liability risks, including incurred but not reported claims, for which we do not have insurance coverage. Malpractice expense of $162 million and $183 million was included in other operating expenses, net, in the accompanying Condensed Consolidated Statements of Operations for the six months ended June 30, 2025 and 2024, respectively.

NOTE 11. CLAIMS AND LAWSUITS

We operate in a highly regulated and litigious industry. Healthcare companies are subject to numerous investigations by various governmental agencies. Further, private parties have the right to bring qui tam or “whistleblower” lawsuits against companies that allegedly submit false claims for payments to, or improperly retain overpayments from, the government and, in some states, private payers. We and our subsidiaries have received inquiries in recent years from government agencies, and we may receive similar inquiries in future periods. We are also subject to class action lawsuits, employment‑related claims, commercial litigation and other legal actions in the ordinary course of business, including potential claims related to, among other things, the care and treatment provided at our hospitals and outpatient facilities, the application of various federal and state labor and privacy laws, tax audits and other matters. Some of these actions may involve large demands, as well as substantial defense costs. We cannot predict the outcome of current or future legal actions against us or the effect that judgments or settlements in such matters may have on us; however, we believe that the ultimate resolution of our existing ordinary‑course claims and lawsuits will not have a material effect on our business or financial condition.

New claims or inquiries may be initiated against us from time to time. These matters could, among other things: (1) require us to pay substantial damages or amounts in judgments or settlements, which, individually or in the aggregate, may exceed amounts, if any, that may be recovered under our insurance policies where coverage applies and is available; (2) cause us to incur substantial expenses; (3) require significant time and attention from our management; and (4) cause us to close or sell hospitals or outpatient facilities or otherwise modify the way we conduct business.

We record accruals for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and we can reasonably estimate the amount of the loss or a range of loss. Significant judgment is required in both the determination of the probability of a loss and the determination as to whether a loss is reasonably estimable. These determinations are updated at least quarterly and are adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel and technical experts, and other information and events pertaining to a particular matter, but are subject to significant uncertainty regarding numerous factors that could affect the ultimate loss levels. If a loss on a material matter is reasonably possible and estimable, we disclose an estimate of the loss or a range of loss. We do not disclose an estimate when we have concluded that a loss is either not reasonably possible or a loss, or a range of loss, is not reasonably estimable, based on available information. Given the inherent uncertainties associated with material legal matters, especially those involving governmental agencies, and the indeterminate damages sought in some cases, we are unable to predict the ultimate liability we may incur from such matters, and an adverse outcome in one or more of these matters may be material to our results of operations or cash flows for any particular reporting period.

The following table presents reconciliations of the beginning and ending liability balances in connection with legal settlements and related costs:

NOTE 12. REDEEMABLE NONCONTROLLING INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES

Certain of our investees’ partnership and operating agreements contain terms that, upon the occurrence of specified events, could obligate us to purchase some or all of the noncontrolling interests related to our consolidated subsidiaries. The noncontrolling interests subject to these provisions, and the income available to those interests, are not included as part of our equity and are presented as redeemable noncontrolling interests in the accompanying Condensed Consolidated Balance Sheets at June 30, 2025 and December 31, 2024.

The following table presents the changes in redeemable noncontrolling interests in equity of consolidated subsidiaries:

The following tables present the composition by segment of our redeemable noncontrolling interests balances, as well as our net income available to redeemable noncontrolling interests:

In June 2022, we entered into a share purchase agreement to acquire the 5% ownership interest then-held by Baylor University Medical Center in USPI for $406 million. Under the share purchase agreement, we were obligated to make non‑interest-bearing monthly payments through June 2025. We repaid the outstanding balance under the share purchase agreement in full during the three months ended June 30, 2025. At December 31, 2024, the remaining obligation under the share purchase agreement of $68 million was included in other current liabilities in the accompanying Condensed Consolidated Balance Sheet.

NOTE 13. INCOME TAXES

A reconciliation between the amount of reported income tax expense and the amount computed by multiplying income before income taxes by the statutory federal tax rate is presented below:

The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, resulting in significant changes to the U.S. federal tax code. We are currently evaluating the implications of the legislation, but we do not believe it will have a material impact on current year tax expense. Taxable income and current tax liability will be reduced due to the reinstatement of 100% bonus depreciation and changes to business interest deduction limitations. Under section 740 of the Accounting Standards Codification, the effects of the tax law changes are recognized in the period of enactment, which will be the three months ending September 30, 2025.

Income before income taxes for the three months ended June 30, 2025 and 2024 was $642 million and $587 million, respectively, and $1.407 billion and $3.671 billion for the six months ended June 30, 2025 and 2024, respectively. Our provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective tax rate to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. In calculating “ordinary” income, non‑taxable income available to noncontrolling interests was deducted from pre-tax income. During the six months ended June 30, 2025, we recorded an income tax benefit of $6 million to decrease the valuation allowance, including an increase of $1 million related to interest expense carryforwards and a decrease of $7 million related to a change in realizability of deferred tax assets. During the six months ended June 30, 2024, we recorded an income tax benefit of $178 million to decrease the valuation allowance, including a decrease of $194 million for utilization of interest expense carryforwards primarily due to gains from sales of facilities, and an increase of $16 million related to state interest expense carryforwards.

There were no adjustments to our estimated liabilities for uncertain tax positions during the six months ended June 30, 2025. The total amount of unrecognized tax benefits as of June 30, 2025 was $71 million, of which $69 million, if recognized, would affect our effective tax rate and income tax benefit.

Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our condensed consolidated statements of operations. Approximately $2 million of interest and penalties related to accrued liabilities for uncertain tax positions are included for the six months ended June 30, 2025. Total accrued interest and penalties on unrecognized tax benefits at June 30, 2025 were $10 million.

NOTE 14. EARNINGS PER COMMON SHARE

The following table reconciles the numerators and denominators of our basic and diluted earnings per common share calculations. Net income available to our common shareholders is expressed in millions and weighted average shares are expressed in thousands.

Dilutive instruments during the three and six months ended June 30, 2025 and 2024 consisted of stock options, RSUs, deferred compensation units and dividends on subsidiary preferred stock. During the six-month period in 2024, our dilutive instruments also included RSUs issued under USPI’s restricted stock plan.

NOTE 15. FAIR VALUE MEASUREMENTS

We are required to provide additional disclosures about fair value measurements as part of our financial statements for each major category of assets and liabilities measured at fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities, which generally are not applicable to non‑financial assets and liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as definitive sales agreements, appraisals or established market values of comparable assets. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability, such as internal estimates of future cash flows.

Financial Instruments

The fair value of our long‑term debt (except for borrowings under the Credit Agreement) is based on quoted market prices (Level 1). The inputs used to establish the fair value of the borrowings outstanding under the Credit Agreement are considered to be Level 2 inputs. At June 30, 2025 and December 31, 2024, the estimated fair value of our long‑term debt was approximately 99.9% and 97.8%, respectively, of the carrying value of the debt.

NOTE 16. ACQUISITIONS

We are required to allocate the purchase prices of acquired businesses to assets acquired or liabilities assumed and, if applicable, noncontrolling interests based on their fair values. The excess of the purchase price allocated over those fair values is recorded as goodwill. The purchase price allocations for certain acquisitions completed in 2025 and 2024 are preliminary. We are in the process of assessing working capital balances and lease and other agreements assumed, as well as obtaining and evaluating valuations of the acquired property and equipment, management contracts and other intangible assets, and noncontrolling interests. Therefore, those purchase price allocations, including goodwill, recorded in the accompanying Condensed Consolidated Financial Statements are subject to adjustment once the assessments and valuation work are completed and evaluated. Such adjustments will be recorded as soon as practical and within the measurement period as defined by the accounting literature.

Preliminary purchase price allocations (representing the fair value of the consideration conveyed) for all acquisitions made during the six months ended June 30, 2025 and 2024 were as follows:

The goodwill generated from our 2025 acquisitions, the majority of which we believe will not be deductible for income tax purposes, can be attributed to the benefits that we expect to realize from operating efficiencies and growth strategies. Goodwill recognized related to our acquisition activity during the six months ended June 30, 2025 was entirely attributable to our Ambulatory Care segment.

During the six months ended June 30, 2025, we adjusted the preliminary purchase price allocations of certain acquisitions completed by our Ambulatory Care segment in 2024 based on the results of completed valuations and post-closing working capital adjustments. These adjustments resulted in a net increase in cash paid for the acquired entities of $9 million and a decrease in goodwill of $11 million.

NOTE 17. SEGMENT INFORMATION

The following tables present amounts for each of our reportable segments and the reconciling items necessary to agree to amounts reported in the accompanying Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations, as applicable.

Other operating expenses, net consists of various general and administrative expenses that are integral to supporting our operations. These expenses include, but are not limited to, medical fees, malpractice expense, information technology and software expenses, as well as gains or losses incurred from the disposition of long-lived assets.