TENET HEALTHCARE CORP

Previous wording

Our business consists of our Hospital Operations and Services (“Hospital Operations”) segment and our Ambulatory Care segment. Our Hospital Operations segment is comprised of our acute care and specialty hospitals, a network of employed physicians and ancillary outpatient facilities. At March 31, 2026, our subsidiaries operated 50 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 132 outpatient facilities, namely urgent care centers, imaging centers, off‑campus hospital emergency departments and micro‑hospitals, at March 31, 2026. In addition, our Hospital Operations segment provides revenue cycle management and value-based care services to hospitals and other healthcare facilities, health systems, physician practices, employers and other clients through Conifer Health Solutions, LLC (“Conifer”).

Current wording

Our business consists of our Hospital Operations and Services (“Hospital Operations”) segment and our Ambulatory Care segment. 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, 2026, our subsidiaries operated 50 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 135 outpatient facilities, including urgent care centers, imaging centers, off-campus hospital emergency departments and micro‑hospitals, at June 30, 2026. In addition, our Hospital Operations segment provides revenue cycle management and value-based care services to hospitals and other healthcare facilities, health systems, physician practices, employers and other clients through Conifer Health Solutions, LLC (“Conifer”).

Previous wording

Our Ambulatory Care segment, through USPI Holding Company, Inc. (together with its subsidiaries, “USPI”), held ownership interests in 541 ambulatory surgery centers (each, an “ASC”), 407 of which are consolidated, and 26 surgical hospitals, eight of which are consolidated, in 37 states at March 31, 2026. 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; pain management; otolaryngology (ear, nose and throat); ophthalmology; and urology.

Current wording

Our Ambulatory Care segment, through USPI Holding Company, Inc. (together with its subsidiaries, “USPI”), held ownership interests in 538 ambulatory surgery centers (each, an “ASC”), 405 of which are consolidated, and 26 surgical hospitals, eight of which are consolidated, in 37 states at June 30, 2026. 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; pain management; otolaryngology (ear, nose and throat); ophthalmology; and urology.

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 facilities we operated for the entirety of the periods presented. For the three-month periods ended March 31, 2026 and 2025, information presented on a same‑hospital basis includes the results of our same 49 hospitals and those outpatient centers we operated throughout both periods, and excludes the results of: Florida Coast Medical Center, the acute care hospital we opened in Florida in September 2025; businesses classified as discontinued operations for accounting purposes during those periods; and other ancillary facilities acquired or divested during the reporting periods that have a limited financial or operational impact. 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 facilities we operated for the entirety of the periods presented. For the six-month periods ended June 30, 2026 and 2025, information presented on a same‑hospital basis includes the results of our same 49 hospitals and those outpatient centers we operated throughout both periods, and excludes the results of: Florida Coast Medical Center, the acute care hospital we opened in Florida in September 2025; businesses classified as discontinued operations for accounting purposes during those periods; and other ancillary facilities acquired or divested during the reporting periods that have a limited financial or operational impact. 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

In the Management Overview section of MD&A in our Annual Report on Form 10-K for the year ended December 31, 2025 (“Annual Report”), we describe several key trends that continue to impact the healthcare industry, along with other factors affecting our business environment and operations, including the potential impact of changes in federal and state healthcare laws, regulations, funding policies and reimbursement practices, as well as the influence of geopolitical dynamics, trade tensions, tariffs and export control rules on pricing and availability within global supply chains. These challenges underscore the importance of operational discipline and adaptive cost management as we navigate the evolving healthcare landscape.

Current wording

In the Management Overview section of MD&A in our Annual Report on Form 10-K for the year ended December 31, 2025 (“Annual Report”), we described several key trends that continue to impact the healthcare industry, along with other factors affecting our business environment and operations, including the potential impact of changes in federal and state healthcare laws, regulations, funding policies and reimbursement practices. We continue to monitor developments affecting Medicaid funding, health insurance marketplace enrollment and payer mix, as well as the influence of geopolitical dynamics, trade tensions, tariffs and export control rules on pricing and availability within global supply chains. These challenges underscore the importance of operational discipline and adaptive cost management as we navigate the evolving healthcare landscape.

Previous wording

Improving Profitability—We continue to focus on growing patient volumes and effective cost management as a means to improve profitability. We believe that emphasis on higher‑demand clinical service lines, focus on expanding our ambulatory care business, cultivation of our culture of service and utilizing contracting strategies that create shared value with payers should help us grow our patient volumes over time. We are also continuing to pursue new opportunities to enhance efficiency, including further integration of enterprise‑wide centralized support functions, outsourcing additional functions unrelated to direct patient care and reducing clinical contract variation.

Current wording

Improving Profitability—We continue to focus on growing patient volumes and effective cost management as a means to improve profitability. We believe that emphasis on higher‑demand clinical service lines, focus on expanding our ambulatory care business, cultivation of our culture of service and utilization of contracting strategies that create shared value with payers should help us grow our patient volumes over time. We are also continuing to pursue new opportunities to enhance efficiency, including further integration of enterprise‑wide centralized support functions, outsourcing additional functions unrelated to direct patient care and reducing clinical contract variation.

Previous wording

In the three months ended March 31, 2026, we repurchased 1.346 million shares of our common stock pursuant to our share repurchase program. This program has no expiration date, it does not obligate us to acquire any particular amount of common stock, and it may be suspended for periods or discontinued at any time. At March 31, 2026, there was $1.172 billion available under the program for future repurchases.

Current wording

In the six months ended June 30, 2026, we repurchased 7.021 million shares of our common stock pursuant to our share repurchase program. This program has no expiration date, it does not obligate us to acquire any particular amount of common stock, and it may be suspended for periods or discontinued at any time. At June 30, 2026, there was $2.130 billion available under the program for future repurchases.

Previous wording

Total admissions increased by 809, or 0.7%, total emergency department visits decreased by 15,475, or 2.7%, and total surgeries decreased by 236, or 0.4%, in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Total admissions increased by 3,327, or 2.8%, total emergency department visits increased by 13,986, or 2.6%, and charity and uninsured admissions increased by 1,007, or 19.2%, in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

The 5.3% increase in our Ambulatory Care segment’s total consolidated cases in the three months ended March 31, 2026, as compared to the same period in 2025, was primarily attributable to incremental case volume from newly acquired and developed ASCs and same-facility case volume growth, net of the impact of the closure and sale of certain facilities.

Current wording

The 5.3% increase in our Ambulatory Care segment’s total consolidated cases in the three months ended June 30, 2026, as compared to the same period in 2025, was primarily attributable to incremental case volume from our 2025 and 2026 acquisitions and de novo development, partially offset by a decrease in same-facility case volume and the impact of the closure and sale of certain facilities.

Previous wording

Consolidated net operating revenues increased by $145 million, or 2.8%, in the three months ended March 31, 2026 compared to the same period in 2025. The increase of $19 million, or 0.5%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 2026, as compared to the same period in 2025, was primarily attributable to higher patient volumes, partially offset by a less favorable payer mix during the 2026 period.

Current wording

Consolidated net operating revenues increased by $357 million, or 6.8%, in the three months ended June 30, 2026 compared to the same period in 2025. The increase of $239 million, or 6.0%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 2026, as compared to the same period in 2025, was primarily attributable to higher patient volumes, partially offset by a less favorable payer mix, during the 2026 period.

Previous wording

Net operating revenues in our Ambulatory Care segment increased by $126 million, or 10.6%, in the three months ended March 31, 2026 compared to the same period in 2025. This change was primarily driven by our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities. Higher net revenue per case during the 2026 period, driven by incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines, also contributed to this increase.

Current wording

Net operating revenues in our Ambulatory Care segment increased by $118 million, or 9.3%, in the three months ended June 30, 2026 compared to the same period in 2025. This change was primarily driven by our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities. Same-facility revenue growth, driven byincremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines, also contributed to this increase.

Previous wording

Salaries, wages and benefits expense for our Hospital Operations segment increased by $20 million, or 1.1%, in the three months ended March 31, 2026 compared to the same period in 2025. This increase was primarily attributable to annual merit increases for certain of our employees and higher employee benefits costs, partially offset by lower incentive compensation expense, contract labor costs and premium pay as compared to the 2025 period. On a per adjusted admission basis, salaries, wages and benefits expense in our Hospital Operations segment during the three months ended March 31, 2026 was consistent with the three months ended March 31, 2025.

Current wording

Salaries, wages and benefits expense for our Hospital Operations segment increased by $47 million, or 2.5%, in the three months ended June 30, 2026 compared to the same period in 2025. This increase was primarily attributable to annual merit increases for certain of our employees and higher incentive compensation expense, partially offset by a decrease in health benefits cost as compared to the 2025 period. On a per adjusted admission basis, salaries, wages and benefits expense decreased by 0.6% in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Supplies expense for our Hospital Operations segment increased by $15 million, or 2.5%, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This change was primarily due to higher patient volumes during the 2026 period, partially offset by our continued focus on cost‑efficiency measures. These measures include product standardization, contract management, improved utilization, bulk purchases, focused spending and operational improvements, among others. On a per adjusted admission basis, supplies expense increased by 1.6% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Supplies expense for our Hospital Operations segment increased by $15 million, or 2.5%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This change was primarily due to higher patient volumes during the 2026 period, partially offset by our continued focus on cost‑efficiency measures. These measures include product standardization, contract management, improved utilization, bulk purchases, focused spending and operational improvements, among others. On a per adjusted admission basis, supplies expense decreased by 0.7% in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Other operating expenses for our Hospital Operations segment increased by $11 million, or 1.2%, in the three months ended March 31, 2026 compared to the same period in 2025. This increase was primarily attributable to an increase in medical fees, as well as higher professional and consulting costs, partially offset by a decrease in malpractice expense during the 2026 period. On a per adjusted admission basis, other operating expenses during the three months ended March 31, 2026 were consistent with the three months ended March 31, 2025.

Current wording

Other operating expenses for our Hospital Operations segment increased by $37 million, or 4.0%, in the three months ended June 30, 2026 compared to the same period in 2025. This increase was primarily attributable to increases in malpractice expense and medical fees during the 2026 period. On a per adjusted admission basis, other operating expenses increased by 0.8% in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Cash and cash equivalents were $2.967 billion at March 31, 2026 compared to $2.883 billion at December 31, 2025. Significant cash flow items in the three months ended March 31, 2026 included:

Current wording

Cash and cash equivalents were $2.170 billion at June 30, 2026 compared to $2.967 billion at March 31, 2026. Significant cash flow items in the three months ended June 30, 2026 included:

Previous wording

•Net cash provided by operating activities before payments for interest, taxes, restructuring charges, acquisition‑related costs, and litigation costs and settlements of $1.730 billion;

Current wording

•Net cash provided by operating activities before payments for interest, taxes, restructuring charges, acquisition‑related costs, and litigation costs and settlements of $1.275 billion;

Previous wording

•$318 million of payments to purchase approximately 1.346 million shares of our common stock;

Current wording

•$1.042 billion of payments to purchase 5.675 million shares of our common stock;

Previous wording

•Distributions paid to noncontrolling interests totaling $197 million; and

Current wording

•Distributions paid to noncontrolling interests totaling $201 million; and

Previous wording

Net cash provided by operating activities was $1.641 billion in the three months ended March 31, 2026 compared to $815 million in the three months ended March 31, 2025. Key factors contributing to the change between the 2026 and 2025 periods included the following:

Current wording

Net cash provided by operating activities was $2.226 billion in the six months ended June 30, 2026 compared to $1.751 billion in the six months ended June 30, 2025. Key factors contributing to the change between the 2026 and 2025 periods included the following:

Previous wording

•Interest payments that were $75 million lower in the 2026 period; and

Current wording

•Interest payments that were $34 million lower in the 2026 period;

Previous wording

•Sources of Revenue for Our Hospital Operations and Services Segment

Current wording

SOURCES OF REVENUE FOR OUR HOSPITAL OPERATIONS SEGMENT

Previous wording

Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to reevaluate their financial plans for 2026 and beyond. The OBBBA’s legislative and forthcoming regulatory changes may result in material reductions to Medicaid payments, changes and reductions to Medicaid supplemental payment programs, and payment delays. Federal government denials or delayed approvals of state waiver applications or extension requests could also materially impact Medicaid funding levels, most significantly in those states that have expanded Medicaid.

Current wording

Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to reevaluate their financial plans over the coming years. The OBBBA’s legislative and forthcoming regulatory changes may result in material reductions to Medicaid payments, changes and reductions to Medicaid supplemental payment programs, and payment delays. Federal government denials or delayed approvals of state waiver applications or extension requests could also materially impact Medicaid funding levels, most significantly in those states that have expanded Medicaid.

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 operation of the hospitals and related outpatient facilities in our Hospital Operations segment for services provided to patients enrolled in the Original Medicare Plan were $565 million and $548 million for the three months ended March 31, 2026 and 2025, 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 Updates” below.

Current wording

Our total net patient service revenues from the hospitals and related outpatient facilities in our Hospital Operations segment for services provided to patients enrolled in the Original Medicare Plan were $534 million and $530 million for the three months ended June 30, 2026 and 2025, respectively, and $1.099 billion and $1.078 billion for the six months ended June 30, 2026 and 2025, 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 Updates” below.

Previous wording

Medicaid programs and the corresponding reimbursement methodologies vary from state‑to‑state and from year‑to‑year. In addition to traditional Medicaid programs, we also receive DSH and other supplemental revenues under various state Medicaid programs. All Medicaid patient service revenue is presented net of provider taxes or assessments paid by our hospitals. During the three months ended March 31, 2026 and 2025, revenue from Medicaid programs included $304 million and $326 million, respectively, of revenue attributable to DSH and other supplemental programs. Revenues from Medicaid programs constituted approximately 10% and 11% of the total net patient service revenues of our hospitals and related outpatient facilities for the three-month periods ended March 31, 2026 and 2025, respectively.

Current wording

Medicaid programs and the corresponding reimbursement methodologies vary from state‑to‑state and from year‑to‑year. In addition to traditional Medicaid programs, we also receive DSH and other supplemental revenues under various state Medicaid programs. All Medicaid patient service revenue is presented net of provider taxes or assessments paid by our hospitals. During the three and six months ended June 30, 2026 and 2025, revenue from Medicaid programs included $447 million and $351 million, respectively, and $751 million and $677 million, respectively, of revenue attributable to DSH and other supplemental programs. Revenues from Medicaid programs constituted approximately 12% and 11% of the total net patient service revenues of our hospitals and related outpatient facilities for the six-month periods ended June 30, 2026 and 2025, respectively.

Previous wording

As described in detail in our Annual Report, in addition to payments from government programs, we receive revenue under contracts with commercial insurers, including both managed care arrangements with various HMOs and PPOs and indemnity‑based agreements. These contracts offer varying structures for patient access, utilization and reimbursement. Our top 10 managed care payers generated 67% of our managed care net patient service revenues for the three months ended March 31, 2026. During the same period, national payers generated 47% of our managed care net patient service revenues; the remainder came from regional or local payers.

Current wording

As described in detail in our Annual Report, in addition to payments from government programs, we receive revenue under contracts with commercial insurers, including both managed care arrangements with various HMOs and PPOs and indemnity‑based agreements. These contracts offer varying structures for patient access, utilization and reimbursement. Our top 10 managed care payers generated 66% of our managed care net patient service revenues for the six months ended June 30, 2026. During the same period, national payers generated 50% of our managed care net patient service revenues; the remainder came from regional or local payers.

Previous wording

The amount of our managed care net patient service revenues, including Medicare and Medicaid managed care programs, from our hospitals and related outpatient facilities during the three months ended March 31, 2026 and 2025 was $2.394 billion and $2.400 billion, respectively. All Medicaid managed care patient service revenue is presented net of provider taxes or assessments paid by our hospitals.

Current wording

The amount of our managed care net patient service revenues, including Medicare and Medicaid managed care programs, from our hospitals and related outpatient facilities during the three months ended June 30, 2026 and 2025 was $2.470 billion and $2.423 billion, respectively, and $4.864 billion and $4.823 billion during the six months ended June 30, 2026 and 2025, respectively. All Medicaid managed care patient service revenue is presented net of provider taxes or assessments paid by our hospitals.

Previous wording

During the three months ended March 31, 2026, we recognized $413 million of revenue related to the termination of the revenue cycle management agreement between Catholic Health Initiatives, now known as CommonSpirit Health, and Conifer. See Note 1 to the accompanying Condensed Consolidated Financial Statements for additional information regarding this transaction.

Current wording

During the three and six months ended June 30, 2026, we recognized $413 million and $826 million, respectively, of revenue related to the termination of the revenue cycle management agreement between Catholic Health Initiatives (“CHI”), now known as CommonSpirit Health, and Conifer. See Note 1 to the accompanying Condensed Consolidated Financial Statements for additional information regarding this transaction.

Previous wording

Same‑hospital net operating revenues increased by $6 million, or 0.1%, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily attributable to higher patient volumes, partially offset by a less favorable payer mix during the 2026 period.

Current wording

Same‑hospital net operating revenues increased by $241 million, or 6.1%, during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. This increase was primarily attributable to higher patient volumes, partially offset by a less favorable payer mix, during the 2026 period.

Previous wording

Same‑hospital salaries, wages and benefits expense increased by $11 million, or 0.6%, in the three months ended March 31, 2026 compared to the same period in 2025. This change was primarily attributable to higher employee benefits costs and annual merit increases for certain of our employees. These factors were partially offset by lower incentive compensation expense, contract labor costs and premium pay during the 2026 period. Same‑hospital salaries, wages and benefits expense as a percentage of net operating revenues increased by 20 basis points to 45.6% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Same‑hospital salaries, wages and benefits expense increased by $39 million, or 2.1%, in the three months ended June 30, 2026 compared to the same period in 2025. This change was primarily driven by annual merit increases for certain of our employees and higher incentive compensation expense, partially offset by a decrease in health benefits cost, during the 2026 period. Same‑hospital salaries, wages and benefits expense as a percentage of net operating revenues decreased by 170 basis points to 44.7% in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Same‑hospital supplies expense increased by $14 million, or 2.4%, in the three months ended March 31, 2026 compared to the same period in 2025. This increase was driven by higher patient volumes during the 2026 period, partially offset by our cost‑efficiency measures. Same‑hospital supplies expense as a percentage of net operating revenues increased from 14.6% for the three months ended March 31, 2025 to 15.0% for the three months ended March 31, 2026.

Current wording

Same‑hospital supplies expense increased by $12 million, or 2.0%, in the three months ended June 30, 2026 compared to the same period in 2025. This increase was driven by higher patient volumes during the 2026 period, partially offset by our cost‑efficiency measures. Same‑hospital supplies expense as a percentage of net operating revenues decreased from 15.1% for the three months ended June 30, 2025 to 14.5% for the three months ended June 30, 2026.

Previous wording

Same‑hospital other operating expenses increased by $24 million, or 2.7%, in the three months ended March 31, 2026 compared to the same period in 2025. This increase was primarily attributable to an increase in medical fees, as well as higher professional and consulting costs, partially offset by a decrease in malpractice expense during the 2026 period. Same‑hospital other operating expenses as a percentage of net operating revenues increased by 50 basis points to 22.6% for the three months ended March 31, 2026 compared to 22.1% for the three months ended March 31, 2025.

Current wording

Same‑hospital other operating expenses increased by $51 million, or 5.6%, in the three months ended June 30, 2026 compared to the same period in 2025. This increase was primarily attributable to increases in medical fees and malpractice expense during the 2026 period. Same‑hospital other operating expenses as a percentage of net operating revenues in the three months ended June 30, 2026 was generally consistent with the same period in 2025 at 22.8%.

Previous wording

Our Ambulatory Care segment’s net operating revenues increased by $126 million, or 10.6%, during the three months ended March 31, 2026 compared to the same period in 2025. The change was driven by (1) a $77 million increase from 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) a $49 million increase in same‑facility net operating revenues, which was primarily attributable to incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines.

Current wording

Our Ambulatory Care segment’s net operating revenues increased by $118 million, or 9.3%, during the three months ended June 30, 2026 compared to the same period in 2025. The change was driven by (1) a $71 million increase from our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) a $47 million increase in same‑facility net operating revenues, which was primarily attributable to incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines.

Previous wording

Salaries, wages and benefits expense increased by $35 million, or 11.9%, during the three months ended March 31, 2026 compared to the same period in 2025. This change was driven by (1) an $18 million increase from our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) an increase of $17 million in same‑facility salaries, wages and benefits expense. As a percentage of net operating revenues, salaries, wages and benefits expense increased to 25.0% for the three months ended March 31, 2026 from 24.7% for the same period in 2025.

Current wording

Salaries, wages and benefits expense increased by $24 million, or 7.6%, during the three months ended June 30, 2026 compared to the same period in 2025. This change was driven by (1) a $11 million increase from our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) a $13 million increase in same‑facility salaries, wages and benefits expense. As a percentage of net operating revenues, salaries, wages and benefits expense decreased to 24.4% for the three months ended June 30, 2026 from 24.7% for the same period in 2025.

Previous wording

Supplies expense increased by $39 million, or 12.3%, during the three months ended March 31, 2026 compared to the same period in 2025. The change was driven by (1) a $27 million increase related to our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) a $12 million increase in same‑facility supplies expense, due primarily to higher patient acuity and the addition of new service lines. Supplies expense as a percentage of net operating revenues increased to 27.1% for the three months ended March 31, 2026 from 26.6% for the same period in 2025.

Current wording

Supplies expense increased by $37 million, or 11.1%, during the three months ended June 30, 2026 compared to the same period in 2025. The change was driven by (1) an $15 million increase related to our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) a $22 million increase in same‑facility supplies expense, due primarily to higher patient acuity and the addition of new service lines. Supplies expense as a percentage of net operating revenues increased to 26.6% for the three months ended June 30, 2026 from 26.1% for the same period in 2025.

Previous wording

Other operating expenses increased by $21 million, or 11.7%, during the three months ended March 31, 2026 compared to the same period in 2025. The change was driven by (1) a $15 million increase from our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) a $6 million increase in same‑facility other operating expenses. Other operating expenses as a percentage of net operating revenues increased to 15.2% for the three months ended March 31, 2026 from 15.0% for the same period in 2025.

Current wording

Other operating expenses increased by $18 million, or 9.7%, during the three months ended June 30, 2026 compared to the same period in 2025. The change was driven by (1) a $10 million increase from our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities, and (2) an $8 million increase in same‑facility other operating expenses. Other operating expenses as a percentage of net operating revenues in the three months ended June 30, 2026 was generally consistent with the same period in 2025 at 14.6%.

Previous wording

The table below presents the aggregate cash activity related to our acquisition of various ownership interests in ambulatory care facilities:

Current wording

The table below presents the aggregate cash investments and related cash adjustments associated with our acquisition of, and investment in, ownership interests in ambulatory care facilities:

Previous wording

During the three months ended March 31, 2026, our Ambulatory Care segment paid an aggregate of $120 million to acquire controlling ownership interests in seven ASCs. In the same period, this segment also commenced operations at three de novo ASCs and ceased operations at two ASCs.

Current wording

During the six months ended June 30, 2026, our Ambulatory Care segment paid an aggregate of $128 million to acquire controlling ownership interests in eight ASCs and a noncontrolling ownership interest in an additional ASC. In the same period, this segment also commenced operations at four de novo ASCs and ceased operations at eight ASCs.

Previous wording

We recorded net gains from the sale, consolidation and deconsolidation of facilities totaling $1 million during the three months ended March 31, 2026. We recorded gains from the sale, consolidation and deconsolidation of facilities totaling $22 million during the three months ended March 31, 2025, primarily comprised of gains related to post-closing adjustments from the 2024 divestiture of five hospitals and certain related operations located in Alabama and the consolidation of certain Ambulatory Care segment facilities.

Current wording

We recorded net losses from the sale, consolidation and deconsolidation of facilities totaling $16 million during the six months ended June 30, 2025. The activity during this period primarily included net losses of $33 million related to the consolidation of certain facilities by our Ambulatory Care segment, partially offset by a gain of $10 million related to post‑closing adjustments from our Hospital Operations segment’s 2024 divestiture of five hospitals and certain related operations located in Alabama, net gains of $4 million from the sale of facilities by our Ambulatory Care segment and a gain of $3 million related to other activity.

Previous wording

Income before income taxes for the three months ended March 31, 2026 and 2025 was $1.132 billion and $765 million, respectively. The change in our valuation allowance during the three months ended March 31, 2026 was related to state interest expense limitations and changes in the realizability of deferred tax assets. The decrease in our valuation allowance during the three months ended March 31, 2025 was related to interest expense limitations and changes in the realizability of deferred tax assets.

Current wording

Income before income taxes for the six months ended June 30, 2026 and 2025 was $2.472 billion and $1.407 billion, respectively. The change in our valuation allowance during each of the six-month periods in 2026 and 2025 was attributable to a decrease related to changes in the realizability of deferred tax assets, partially offset by an increase related to interest expense carryforwards.

Previous wording

Interest payments, net of capitalized interest, were $24 million and $99 million in the three months ended March 31, 2026 and 2025, respectively.

Current wording

Interest payments, net of capitalized interest, were $365 million and $399 million in the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amounts to comply with applicable laws and regulations); surgical hospital expansion focused on higher‑acuity services; equipment and information systems additions and replacements; introduction of new medical technologies (including robotics); design and construction of new facilities; and various other capital improvements. Capital expenditures were $180 million and $173 million in the three months ended March 31, 2026 and 2025, respectively. We anticipate that our capital expenditures for the year ending December 31, 2026 will total approximately $700 million to $800 million, including $111 million that was accrued as a liability at December 31, 2025.

Current wording

Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amounts to comply with applicable laws and regulations); surgical hospital expansion focused on higher‑acuity services; equipment and information systems additions and replacements; introduction of new medical technologies (including robotics); design and construction of new facilities; and various other capital improvements. Capital expenditures were $348 million and $366 million in the six months ended June 30, 2026 and 2025, respectively. We anticipate that our capital expenditures for the year ending December 31, 2026 will total approximately $700 million to $800 million, including $111 million that was accrued as a liability at December 31, 2025.