THC US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS

The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), is to provide a narrative explanation of our financial statements that enables investors to better understand our business, to enhance our overall financial disclosures, to provide context to the analysis of our financial information, and to provide information about the quality of, and potential variability of, our financial condition, results of operations and cash flows. MD&A, which should be read in conjunction with the accompanying Consolidated Financial Statements, includes the following sections:

•Management Overview

•Sources of Revenue for Our Hospital Operations Segment

•Results of Operations

•Liquidity and Capital Resources

•Recently Issued Accounting Standards

•Critical Accounting Estimates

Our business consists of our Hospital Operations and other (“Hospital Operations”) segment, our Ambulatory Care segment and our Conifer segment. Our Hospital Operations segment is comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro‐hospitals and physician practices. At December 31, 2022, our subsidiaries operated 61 hospitals serving primarily urban and suburban communities in nine states, including Piedmont Medical Center Fort Mill (“PMC Fort Mill”), the new acute care hospital we opened in South Carolina in September 2022. Our Hospital Operations segment also included 109 outpatient centers at December 31, 2022, the majority of which are provider‐based and freestanding imaging centers, off‐campus hospital emergency departments and micro-hospitals, and provider‐based ambulatory surgery centers (each, an “ASC”).

Our Ambulatory Care segment, through our USPI Holding Company, Inc. subsidiary (“USPI”), held ownership interests in 442 ASCs (300 consolidated) and 24 surgical hospitals (eight consolidated) in 35 states at December 31, 2022. 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. At the beginning of 2022, we owned approximately 95% of USPI, and Baylor University Medical Center (“Baylor”) owned approximately 5%. Effective June 30, 2022, we purchased all of the shares in USPI that Baylor held on that date for $406 million, which increased our ownership interest in USPI’s voting shares from 95% to 100%. See Note 18 to the accompanying Consolidated Financial Statements and the Liquidity and Capital Resources section of MD&A for additional information about this transaction.

Our Conifer segment provides revenue cycle management and value‐based care services to hospitals, health systems, physician practices, employers and other clients through our Conifer Holdings, Inc. subsidiary (“Conifer”). At December 31, 2022, Conifer provided services to approximately 660 Tenet and non‐Tenet hospitals and other clients nationwide. Almost all of the services comprising the operations of our Conifer segment are provided by Conifer Health Solutions, LLC, in which we own an interest of approximately 76%, or by one of its direct or indirect wholly owned subsidiaries.

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, with respect to our Hospital Operations segment, the results of our same 60 hospitals operated throughout the years ended December 31, 2022 and 2021, as well as the results of (1) PMC Fort Mill, which we opened in September 2022, (2) the five Miami-area hospitals and certain related operations (the “Miami Hospitals”) we sold in August 2021, (3) nearly 50 urgent care centers held in our Hospital Operations segment until their sale in April 2021 and (4) 24 imaging centers following their transfer from our Ambulatory Care segment to our Hospital Operations segment in April 2021. Continuing operations information for our Ambulatory Care segment includes the results of 40 urgent care centers held in this segment until their sale and the results of 24 imaging centers until their transfer to our Hospital Operations segment, both of which occurred in April 2021. Continuing operations information excludes the results of our hospitals and other businesses classified as discontinued operations for accounting purposes. We believe this information 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. We present certain metrics as a percentage of

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net operating revenues because a significant portion of our operating expenses are variable. In addition, we present certain metrics on a per‐adjusted‐admission and per‐adjusted‐patient‐day basis to show trends other than volume.

In certain cases, information presented in MD&A for our Hospital Operations segment is described as presented on a same‐hospital basis, which includes the results of our same 60 hospitals operated throughout the years ended December 31, 2022 and 2021, and excludes the results of PMC Fort Mill, the Miami Hospitals, all of the urgent care centers we sold in April 2021, the 24 imaging centers transferred from our Ambulatory Care segment to our Hospital Operations segment in April 2021, and 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.

MANAGEMENT OVERVIEW

RECENT DEVELOPMENTS

Agreement to Divest San Ramon Regional Medical Center—In January 2023, we entered into a definitive agreement to sell our 51% ownership interest in San Ramon Regional Medical Center and related operations to John Muir Health. We expect the transaction to be completed in 2023, subject to regulatory approvals and customary closing conditions.

OPERATING ENVIRONMENT AND TRENDS

Ongoing Impact of the COVID-19 Pandemic—In 2022, the COVID‐19 pandemic continued to adversely impact our operations, as well as our patients, communities and employees, to varying degrees. As described in greater detail throughout MD&A, ongoing waves of COVID‐19 infections, changes in COVID‐related patient acuity and broad economic factors resulting from the pandemic affected our patient volumes, service mix, revenue mix, operating expenses and net operating revenues.

Various federal legislative actions, including additional funding for the Public Health and Social Services Emergency Fund (“PRF”), mitigated some of the adverse financial impacts of the COVID‐19 pandemic on our business. In the years ended December 31, 2022 and 2021, we received cash payments from the PRF and state and local grant programs totaling $196 million and $215 million, respectively, including $37 million received during 2021 by our unconsolidated affiliates for whom we provide cash management services. We recognized $194 million and $191 million from these funds as grant income during the years ended December 31, 2022 and 2021, respectively. In addition, we recognized $14 million in equity in earnings of unconsolidated affiliates in the accompanying Consolidated Statement of Operations during the year ended December 31, 2021 from grant funds.

Furthermore, throughout the pandemic, we have taken, and we continue to take, various actions to increase our liquidity and mitigate the impact of reductions in our patient volumes and changes in our service mix and revenue mix. As described in further detail in the Liquidity and Capital Resources section of MD&A, we issued new senior unsecured notes and senior secured first lien notes, redeemed existing senior unsecured notes and senior secured first lien notes, including those with the highest interest rate of all of our long‐term debt, and amended our senior secured revolving credit facility (as amended to date, the “Credit Agreement”). We also decreased our employee headcount throughout the organization at the outset of the COVID‐19 pandemic, and we deferred certain operating expenses that were not expected to impact our response to the pandemic. In addition, we reduced certain variable costs across the enterprise. Together with government relief packages, we believe these actions supported our ability to provide essential patient services during the initial uncertainty caused by the COVID‐19 pandemic and continue to do so.

The ultimate extent and scope of the pandemic and its future impact on our business remain unknown. For information about risks and uncertainties related to COVID‐19 that could affect our results of operations, financial condition and cash flows, see the Risk Factors section in Part I of this report.

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 a 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 a shortage of advanced practice providers and critical‐care nurses in certain disciplines and geographic areas. The COVID‐19 pandemic exacerbated this shortage as more employees chose to retire early, leave the workforce or take travel assignments. In addition, the Centers for Disease Control and Prevention has released data indicating that the 2022‐23 influenza season has thus far been more acute than in prior years compounded by concurrent

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COVID‐19 surges and increases in other respiratory viral infections. In some areas, the increased demand for care of patients with COVID‐19, influenza and other respiratory viruses in our hospitals, as well as the direct impact of these illnesses on physicians, employees and their families, have put a strain on our resources and staff. Over the past several years, we have had to rely on higher-cost temporary and contract labor, which we compete with other healthcare providers to secure, and pay premiums above standard compensation for essential workers. In general, compensation rates typically rise when overall case rates and hospitalizations increase, whether due to COVID, flu or other illnesses.

We also depend on the available labor pool of semi‐skilled and unskilled workers in each of the areas where we operate. In some of our communities, employers across various industries have increased their minimum wage, which has created more competition and, in some cases, higher labor costs for this sector of employees.

Supply-Chain Disruptions—Throughout the pandemic, we have experienced significant price increases in medical supplies, particularly for personal protective equipment (“PPE”), and we have encountered supply-chain disruptions, including shortages and delays. In addition, our Ambulatory Care segment has been 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.

Inflation and Other General Economic Conditions—Our business has been impacted by the rise in inflation and its effects on elective procedures, wages and costs. Other economic factors, including unemployment rates and consumer spending, affect our service mix, revenue mix and patient volumes. Business closings and layoffs in the areas we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients to pay for services. Any increase in the amount of or deterioration in the collectability of patient accounts receivable could adversely affect our cash flows and results of operations.

Cybersecurity Incident—In April 2022, we experienced a cybersecurity incident that temporarily disrupted a subset of our acute care operations and involved the exfiltration of certain confidential company and patient information (the “Cybersecurity Incident”). During this time, our hospitals remained operational and continued to deliver patient care safely and effectively, utilizing well‐established back‐up processes. We immediately suspended user access to impacted information technology applications, executed extensive cybersecurity protection protocols, and took steps to restrict further unauthorized activity. Following the restoration of impacted information technology operations, we took additional measures to protect patient, employee and other data, as appropriate, in response to the Cybersecurity Incident.

Disruption from the Cybersecurity Incident placed pressure on our Hospital Operations segment’s volumes and earnings, particularly in April and May 2022. We estimate that the Cybersecurity Incident had an adverse pre‐tax impact of approximately $100 million. This estimate includes the costs to remediate the issues, lost revenues from the associated business interruption and other related expenses. We have insurance coverage and have filed a claim within our policy limits for these losses. We are unable to predict or control the timing or amount of insurance recoveries.

Industry Trends—We believe that several key trends are continuing to shape the demand for healthcare services: (1) consumers, employers and insurers are actively seeking lower‐cost solutions and better value as they focus more on healthcare spending; (2) patient volumes are shifting from inpatient to outpatient settings due to technological advancements and demand for care that is more convenient, affordable and accessible; (3) the growing aging population requires greater chronic disease management and higher‐acuity treatment; and (4) consolidation continues across the entire healthcare sector. Furthermore, the healthcare industry, in general, and the acute care hospital business, in particular, continue to be subject to significant regulatory uncertainty. Changes in federal or state healthcare laws, regulations, funding policies or reimbursement practices, especially those involving reductions to government payment rates, could have a significant impact on our future revenues and operations.

STRATEGIES

Expanding Our Ambulatory Care Segment—We continue to focus on opportunities to expand our Ambulatory Care segment through acquisitions, organic growth, construction of new outpatient centers and strategic partnerships. We believe USPI’s ASCs and surgical hospitals offer many advantages to patients and physicians, including greater affordability, predictability, flexibility and convenience. Moreover, due in part to advancements in surgical techniques, medical technology and anesthesia, as well as the lower cost structure and greater efficiencies that are attainable at a specialized outpatient site, we believe the volume and complexity of surgical cases performed in an outpatient setting will continue to increase over time. Historically, our outpatient services have generated significantly higher margins for us than inpatient services.

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During the years ended December 31, 2022 and 2021, we invested $264 million and $1.315 billion, respectively, to acquire ownership interests in new ASCs, increase our ownership interests in existing facilities and invest in de novo facilities. In December 2021, USPI entered into a joint venture and development agreement with SurgCenter Development (“SCD”) under which USPI has the exclusive option to partner with affiliates of SCD on the future development of a minimum target of 50 de novo ASCs through December 2026. In July 2022, USPI formed a joint venture with United Urology Group (“UUG”) and acquired ownership interests in 22 ASCs (three of which were then in development). Including these UUG facilities, during the year ended December 31, 2022, we added 37 fully operational ASCs to our portfolio through acquisitions of majority and minority ownership interests and opened 15 de novo facilities, including two ASCs acquired from UUG while in the development stage. Also during 2022, we increased our ownership interests in 23 ASCs, which allowed us to consolidate their financial results.

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 year ended December 31, 2022, and we could incur additional restructuring charges in the future.

We regularly review the marginal costs of providing certain services, and we use analytics to manage our operations and make staffing decisions. We also exit service lines, businesses and markets that we believe are no longer a core part of our long‐term growth and synergy strategies. In April 2021, we divested the majority of our urgent care centers operated under the MedPost and CareSpot brands by our Hospital Operations and Ambulatory Care segments. In addition, we completed the sale of the Miami Hospitals in August 2021. We intend to further 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, reduce our debt and lower our ratio of debt‐to‐Adjusted EBITDA.

We also seek advantageous opportunities to grow our portfolio of hospitals and other healthcare facilities. In September 2022, we opened PMC Fort Mill, a new acute care hospital located in South Carolina. This 100‐bed facility includes an emergency department, multi‐specialty operating rooms, an intensive care unit, and labor and delivery rooms.

Improving the Customer Care Experience—As consumers continue to become more engaged in managing their health, we recognize that understanding what matters most to them and earning their loyalty is imperative to our success. As such, we have enhanced our focus on treating our patients as traditional customers by: (1) establishing networks of physicians and facilities that provide convenient access to services across the care continuum; (2) expanding service lines aligned with growing community demand, including a focus on aging and chronic disease patients; (3) offering greater affordability and predictability, including simplified registration and discharge procedures, particularly in our outpatient centers; (4) improving our culture of service; and (5) creating health and benefit programs, patient education and health literacy materials that are customized to the needs of the communities we serve. Through these efforts, we intend to improve the customer care experience in every part of our operations.

Driving Conifer’s Growth—Conifer serves approximately 660 Tenet and non‐Tenet hospitals and other clients nationwide. In addition to providing revenue cycle management services to health systems and physicians, Conifer provides support to both providers and self‐insured employers seeking assistance with clinical integration, financial risk management and population health management. We believe that our success in growing Conifer and increasing its profitability depends in part on our success in executing the following strategies: (1) attracting hospitals and other healthcare providers that currently handle their revenue cycle management processes internally as new clients; (2) generating new client relationships through opportunities from USPI and Tenet’s acute care hospital acquisition and divestiture activities; (3) expanding revenue cycle management and value‐based care service offerings through organic development and small acquisitions; (4) leveraging data from tens of millions of patient interactions for continued enhancement of the value‐based care environment to drive competitive differentiation; and (5) maximizing opportunities through automation and offshoring to improve the effectiveness and efficiency of Conifer’s services.

Improving Profitability—We continue to focus on growing patient volumes and effective cost management as a means to improve profitability. Our inpatient admissions have been constrained in recent years by the pandemic, increased competition, utilization pressure by managed care organizations, new delivery models that are designed to lower the utilization of acute care hospital services, the effects of higher patient co‐pays, co‐insurance amounts and deductibles, changing consumer

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behavior, and adverse economic conditions and demographic trends in certain areas where we operate. Our business has also been impacted by the rise in inflation and its effects on elective procedures, wages and costs. However, we also believe that emphasis on higher‐demand clinical service lines (including outpatient services), focus on expanding our ambulatory care business, cultivation of our culture of service, participation in Medicare Advantage health plans that have been experiencing higher growth rates than traditional Medicare, and 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 and vendor contract variation.

Reducing Our Leverage Over Time—All of our long‐term debt has a fixed rate of interest, except for outstanding borrowings, if any, under our Credit Agreement, and the maturity dates of our notes are staggered from 2024 through 2031. We believe that our capital structure helps to minimize the near‐term impact of increased interest rates, and the staggered maturities of our debt allow us to retire or refinance our debt over time. It remains our long‐term objective to reduce our debt and lower our ratio of debt‐to‐Adjusted EBITDA, primarily through more efficient capital allocation and Adjusted EBITDA growth, which should lower our refinancing risk.

During the year ended December 31, 2022, we redeemed or repurchased $2.597 billion aggregate principal amount of our senior secured first lien and senior unsecured notes in advance of their maturity dates. We financed these transactions using a substantial portion of the proceeds from our issuance of $2.000 billion aggregate principal amount of 6.125% senior secured first lien notes due 2030 (the “2030 Senior Secured First Lien Notes”) and cash on hand.

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. Repurchases will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in open-market or privately negotiated transactions, subject to market conditions and other factors. The 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 before its scheduled expiration date of December 31, 2024. We paid approximately $250 million to repurchase a total of 5,888,841 shares during the period from the commencement of the program through December 31, 2022, or an average of $42.45 per share.

Our ability to execute on our strategies and respond to the aforementioned trends in the current operating environment is subject to numerous risks and uncertainties, all of which may cause actual results to be materially different from expectations. For information about risks and uncertainties that could affect our results of operations, see the Forward‐Looking Statements and Risk Factors sections in Part I of this report.

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RECENT RESULTS OF OPERATIONS

The following table presents selected operating statistics for our Hospital Operations and Ambulatory Care segments on a continuing operations basis:

Three Months Ended December 31, Increase(Decrease)

Hospital Operations – hospitals and related outpatient facilities:

Number of hospitals (at end of period) 61 60 1 (1)

Paying admissions (excludes charity and uninsured) 128,505 127,092 1.1 %

Charity and uninsured admissions 6,646 6,717 (1.1) %

Average length of stay (days) 5.21 5.34 (2.4) %

Utilization of licensed beds(3) 49.5 % 50.5 % (1.0) % (1)

Ambulatory Care:

Total consolidated facilities (at end of period) 308 257 51 (1)

(1) The change is the difference between the 2022 and 2021 amounts shown.

Total admissions increased by 1,342, or 1.0% in the three months ended December 31, 2022 compared to the three months ended December 31, 2021, primarily due to elevated volumes of influenza cases and the opening of our new PMC Fort Mill hospital in September 2022. Also during the 2022 period, total emergency department visits increased by 8.6%, due in part to the same factors. Total surgeries decreased by 1,891, or 2.1%, during the three‐month period in 2022 compared to the same period in 2021. The increase in our Ambulatory Care segment’s total consolidated cases of 17.9% in the three months ended December 31, 2022, as compared to the same period in 2021, is primarily attributable to incremental case volume from our recently acquired ASCs.

The following table presents net operating revenues by segment on a continuing operations basis:

Three Months Ended December 31, Increase(Decrease)

Net operating revenues:

Hospital Operations prior to inter-segment eliminations $ 3,840 $ 3,910 (1.8) %

Inter-segment eliminations (109) (120) (9.2) %

Consolidated net operating revenues increased by $134 million, or 2.8%, in the three months ended December 31, 2022 compared to the same period in 2021. Our Hospital Operations segment’s net operating revenues prior to inter‐segment eliminations for the three‐month period in 2022 decreased $70 million, or 1.8%, compared to the same period in 2021. This decrease was primarily due to lower COVID-related patient volumes and acuity, lower surgical volumes and a shorter average length of patient stay, partially offset by higher adjusted admissions and improved pricing yield. Net operating

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revenues in our Ambulatory Care segment increased $191 million, or 25.7%, in the three months ended December 31, 2022 compared to the three months ended December 31, 2021. This increase was mainly driven by our recently acquired ASCs, improved case volumes, incremental revenue from new service lines and negotiated commercial rate increases. Conifer’s revenues, net of inter‐segment eliminations, increased $13 million, or 6.4%, during the three months ended December 31, 2022 compared to the same period in 2021, primarily due to contractual rate increases and new business expansion. During the three months ended December 31, 2022 and 2021, we recognized grant income of $40 million and $138 million, respectively, which amounts are not included in net operating revenues.

Our accounts receivable days outstanding (“AR Days”) from continuing operations were 58.3 days and 57.0 days at December 31, 2022 and 2021, 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 from continuing operations 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. The AR Days calculation excludes (1) urgent care centers operated under the MedPost and CareSpot brands, which we divested in April 2021, (2) the Miami Hospitals, which we sold in August 2021, and (3) our California provider fee revenues.

The following table provides information about selected operating expenses by segment on a continuing operations basis:

Three Months Ended December 31, Increase(Decrease)

Hospital Operations:

Ambulatory Care:

Salaries, wages and benefits $ 219 $ 178 23.0 %

Conifer:

Salaries, wages and benefits $ 173 $ 169 2.4 %

Supplies 1 1 — %

Other operating expenses 62 60 3.3 %

Total:

Rent/lease expense(1):

Hospital Operations $ 69 $ 71 (2.8) %

Conifer 2 2 — %

(1) Included in other operating expenses.

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The following table provides information about our Hospital Operations segment’s selected operating expenses per adjusted admission on a continuing operations basis:

Three Months Ended December 31, Increase(Decrease)

Hospital Operations:

Salaries, wages and benefits per adjusted admission(1) $ 7,670 $ 7,634 0.5 %

Other operating expenses per adjusted admission(1) 3,407 3,632 (6.2) %

Salaries, wages and benefits expense for our Hospital Operations segment increased $73 million, or 4.0%, in the three months ended December 31, 2022 compared to the same period in 2021. This increase was primarily attributable to higher contract labor and premium pay costs due to the pandemic, and annual merit increases for certain of our employees. These factors were partially offset by lower employee benefit costs and our continued focus on cost‐efficiency measures. On a per‐adjusted‐admission basis, Hospital Operations salaries, wages and benefits expense increased 0.5% in the three months ended December 31, 2022 compared to the three months ended December 31, 2021.

Supplies expense for our Hospital Operations segment decreased $37 million, or 5.7%, during the three months ended December 31, 2022 compared to the three months ended December 31, 2021. This decrease was primarily attributable to lower COVID-related patient volumes and acuity, decreased surgical volumes and our cost‐efficiency measures. These factors were partially offset by increased costs for certain supplies due to the COVID-19 pandemic, the impact of general market conditions and inflation. On a per‐adjusted‐admission basis, supplies expense decreased 9.1% in the three months ended December 31, 2022 compared to the three months ended December 31, 2021 due to the aforementioned factors.

Other operating expenses for our Hospital Operations segment decreased $28 million, or 3.2%, in the three months ended December 31, 2022 compared to the same period in 2021. This decrease was primarily due to decreased costs associated with funding indigent care services by certain of our hospitals (which costs were substantially offset by reduced net patient revenues) and lower malpractice expense. On a per‐adjusted‐admission basis, other operating expenses in the three months ended December 31, 2022 decreased 6.2% compared to the three months ended December 31, 2021, primarily due to the factors described above, as well as increased adjusted admissions that reduce this cost metric due to various fixed costs in other operating expenses.

LIQUIDITY AND CAPITAL RESOURCES OVERVIEW

Cash and cash equivalents were $858 million at December 31, 2022 compared to $1.208 billion at September 30, 2022.

Significant cash flow items in the three months ended December 31, 2022 included:

•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 $738 million, including $41 million received from federal and state grants, and a $128 million payment of payroll taxes deferred during 2020;

•Capital expenditures of $290 million;

•Interest payments of $247 million;

•$128 million of distributions paid to noncontrolling interests;

•Payments totaling $57 million for restructuring charges, acquisition‐related costs, and litigation costs and settlements;

•Purchases of noncontrolling interests of $39 million;

•Purchases of marketable securities and equity investments of $24 million;

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•Debt payments of $65 million, including an aggregate total of $24 million cash to retire portions of our 4.625% senior secured first lien notes due in July 2024 (our “July 2024 Senior Secured First Lien Notes”) and September 2024 (our “September 2024 Senior Secured First Lien Notes”); and

•$250 million of payments to purchase nearly six million shares of our common stock under the share repurchase program.

Net cash provided by operating activities was $1.083 billion in the year ended December 31, 2022 compared to $1.568 billion in the year ended December 31, 2021. Key factors contributing to the change between 2022 and 2021 include the following:

•$880 million of Medicare advances recouped or repaid in the year ended December 31, 2022 compared to $512 million during 2021;

•$196 million of cash received from pandemic-related grant programs in 2022 compared to $178 million received in 2021;

•Lower interest payments of $89 million in 2022;

•Higher income tax payments of $69 million in 2022;

•An increase of $61 million in payments for restructuring charges, acquisition‐related costs, and litigation costs and settlements in 2022; and

•The timing of other working capital items.

SOURCES OF REVENUE FOR OUR HOSPITAL OPERATIONS SEGMENT

We earn revenues for patient services from a variety of sources, primarily managed care payers and the federal Medicare program, as well as state Medicaid programs, indemnity‐based health insurance companies and uninsured patients.

The following table presents the sources of net patient service revenues for our hospitals and related outpatient facilities, expressed as percentages of net patient service revenues from all sources:

Years Ended December 31,

Indemnity and other 4.8 % 4.8 % 4.8 %

(1) Includes Medicare and Medicaid managed care programs.

Our payer mix on an admissions basis for our hospitals, expressed as a percentage of total admissions from all sources, is presented below:

Years Ended December 31,

Charity and uninsured 4.9 % 5.8 % 6.3 %

Indemnity and other 3.2 % 3.2 % 2.9 %

(1) Includes Medicare and Medicaid managed care programs.

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 healthcare regulations; the business environment, economic conditions (including inflationary pressures) and demographics of local communities in which we operate; the number of uninsured and underinsured individuals in local communities treated at our hospitals; seasonal cycles of illness; climate and weather conditions; physician recruitment, satisfaction, retention and attrition; advances in technology and treatments that reduce length of stay; local healthcare

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competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; hospital performance data on quality measures and patient satisfaction, as well as standard charges for services; any unfavorable publicity about us, or our joint venture partners, that impacts our relationships with physicians and patients; and changing consumer behavior, including with respect to the timing of elective procedures.

GOVERNMENT PROGRAMS

The Centers for Medicare & Medicaid Services (“CMS”) is an agency of the U.S. Department of Health and Human Services (“HHS”) that administers a number of government programs authorized by federal law; it is the single largest payer of healthcare services in the United States. Medicare is a federally funded health insurance program primarily for individuals 65 years of age and older, as well as some younger people with certain disabilities and conditions, and is provided without regard to income or assets. Medicaid is co‐administered by the states and is jointly funded by the federal government and state governments. Medicaid is the nation’s main public health insurance program for people with low incomes and is the largest source of health coverage in the United States. The Children’s Health Insurance Program (“CHIP”), which is also co‐administered by the states and jointly funded, provides health coverage to children in families with incomes too high to qualify for Medicaid, but too low to afford private coverage. Unlike Medicaid, the CHIP is limited in duration and requires the enactment of reauthorizing legislation. Funding for the CHIP has been reauthorized through federal fiscal year (“FFY”) 2029.

Healthcare Reform

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), extended health coverage to millions of uninsured legal U.S. residents through a combination of private sector health insurance reforms and public program expansion. The expansion of Medicaid in 39 states (including four of the nine states in which we operate acute care hospitals) and the District of Columbia is currently financed through:

•negative “productivity adjustments” to the annual market basket updates, which began in 2011 and do not expire under current law; and

•reductions to Medicare and Medicaid disproportionate share hospital (“DSH”) payments, which began for Medicare payments in FFY 2014 and, under current law, are scheduled to commence for Medicaid payments in FFY 2024.

The Affordable Care Act also includes measures designed to promote quality and cost efficiency in healthcare delivery and provisions intended to strengthen fraud and abuse enforcement.

The initial expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities with either private or public program coverage and a decrease in uninsured and charity care admissions. Although a substantial portion of our patient volumes and, as a result, our revenues has historically been derived from government healthcare programs, reductions to our reimbursement under the Medicare and Medicaid programs as a result of the Affordable Care Act have been partially offset by increased revenues from providing care to previously uninsured individuals.

There is ongoing uncertainty with respect to the ultimate net effect of the Affordable Care Act due to the potential for continued changes in the law’s implementation and how government agencies and courts interpret it. Moreover, we cannot predict what future action, if any, Congress might take to amend the Affordable Care Act. If future modifications or interpretations result in significantly fewer individuals having private or public health coverage, we likely will experience decreased patient volumes, reduced revenues and an increase in uncompensated care, which would adversely affect our results of operations and cash flows. There is also uncertainty regarding the potential impact of other healthcare-related reform efforts at the federal and state levels. Some reforms may have a positive effect on our business, while others may increase our operating costs, adversely affect the reimbursement we receive or require us to modify certain aspects of our operations. Legislative and executive branch efforts related to healthcare reform could result in increased prices for consumers purchasing health insurance coverage, impact our competitive position, and affect our relationships with insurers and patients.

Medicare

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

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Operations segment for services provided to patients enrolled in the Original Medicare Plan were $2.369 billion, $2.615 billion and $2.695 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided below. 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.

Acute Care Hospital Inpatient Prospective Payment System

Medicare Severity-Adjusted Diagnosis-Related Group Payments—Sections 1886(d) and 1886(g) of the Social Security Act set forth a system of payments for the operating and capital costs of inpatient acute care hospital admissions based on a prospective payment system (“PPS”). Under the inpatient prospective payment systems (“IPPS”), Medicare payments for hospital inpatient operating services are made at predetermined rates for each hospital discharge. Discharges are classified according to a system of Medicare severity‐adjusted diagnosis‐related groups (“MS‐DRGs”), which categorize patients with similar clinical characteristics that are expected to require similar amounts of hospital resources. CMS assigns to each MS‐DRG a relative weight that represents the average resources required to treat cases in that particular MS‐DRG, relative to the average resources used to treat cases in all MS‐DRGs.

The base payment amount for the operating component of the MS‐DRG payment is comprised of an average standardized amount that is divided into a labor‐related share and a nonlabor-related share. Both the labor‐related share of operating base payments and the base payment amount for capital costs are adjusted for geographic variations in labor and capital costs, respectively. Using diagnosis and procedure information submitted by the hospital, CMS assigns to each discharge an MS‐DRG, and the base payments are multiplied by the relative weight of the MS‐DRG assigned. The MS‐DRG operating and capital base rates, relative weights and geographic adjustment factors are updated annually, with consideration given to: the increased cost of goods and services purchased by hospitals; the relative costs associated with each MS‐DRG; changes in labor data by geographic area; and other policies. Although these payments are adjusted for area labor and capital cost differentials, the adjustments do not take into consideration an individual hospital’s operating and capital costs.

Outlier Payments—Outlier payments are additional payments made to hospitals on individual claims for treating Medicare patients whose medical conditions are more costly to treat than those of the average patient in the same MS‐DRG. To qualify for a cost outlier payment, a hospital’s billed charges, adjusted to cost, must exceed the payment rate for the MS‐DRG by a fixed threshold updated annually by CMS. A Medicare Administrative Contractor (“MAC”) calculates the cost of a claim by multiplying the billed charges by an average cost‐to‐charge ratio that is typically based on the hospital’s most recently filed cost report. Generally, if the computed cost exceeds the sum of the MS‐DRG payment plus the fixed threshold, the hospital receives 80% of the difference as an outlier payment.

Under the Social Security Act, CMS must project aggregate annual outlier payments to all PPS hospitals to be not less than 5% or more than 6% of total MS‐DRG payments (“Outlier Percentage”). The Outlier Percentage is determined by dividing total outlier payments by the sum of MS‐DRG and outlier payments. CMS annually adjusts the fixed threshold to bring projected outlier payments within the mandated limit. A change to the fixed threshold affects total outlier payments by changing: (1) the number of cases that qualify for outlier payments; and (2) the dollar amount hospitals receive for those cases that qualify for outlier payments. Under certain conditions, outlier payments are subject to reconciliation based on more recent data.

Disproportionate Share Hospital Payments—In addition to making payments for services provided directly to beneficiaries, Medicare makes additional payments to hospitals that treat a disproportionately high share of low‐income patients. Prior to October 1, 2013, DSH payments were based on each hospital’s low income utilization for each payment year (the “Pre‐ACA DSH Formula”). The Affordable Care Act revised the Medicare DSH adjustment effective for discharges occurring on or after October 1, 2013. Under the revised methodology, hospitals receive 25% of the amount they previously would have received under the Pre‐ACA DSH Formula. This amount is referred to as the “Empirically Justified Amount.”

Hospitals qualifying for the Empirically Justified Amount of DSH payments are also eligible to receive an additional payment for uncompensated care (the “UC‐DSH Amount”). The UC‐DSH Amount is a hospital’s share of a pool of funds that the CMS Office of the Actuary estimates would equal 75% of Medicare DSH that otherwise would have been paid under the Pre‐ACA DSH Formula, adjusted for changes in the percentage of individuals that are uninsured. Generally, the factors used to calculate and distribute UC‐DSH Amounts are set forth in the Affordable Care Act and are not subject to administrative or judicial review. The statute requires that each hospital’s cost of uncompensated care (i.e., charity and bad debt) as a percentage of the total uncompensated care cost of all DSH hospitals be used to allocate the pool. As of December 31, 2022, 51 of our acute care hospitals qualified for Medicare DSH payments.

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The statutes and regulations that govern Medicare DSH payments have been the subject of various administrative appeals and lawsuits, and our hospitals have been participating in such appeals, including challenges to the inclusion of the Medicare Advantage days used in the DSH calculation as set forth in the Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005 Rates. We are unable to predict what action the Secretary of HHS might take with respect to the DSH calculation for prior periods in this regard or the outcome of the litigation; however, a favorable outcome of our DSH appeals could have a material impact on our future revenues and cash flows.

Direct Graduate and Indirect Medical Education Payments—The Medicare program provides additional reimbursement to approved teaching hospitals for the increased expenses incurred by such institutions. This additional reimbursement, which is subject to certain limits, including intern and resident full-time equivalent (“FTE”) limits, is made in the form of Direct Graduate Medical Education (“DGME”) and Indirect Medical Education (“IME”) payments. As of December 31, 2022, 30 of our hospitals were affiliated with academic institutions and were eligible to receive such payments.

IPPS Quality Adjustments—The Affordable Care Act also authorizes quality adjustments to Medicare IPPS payments under the following programs:

•Value‐Based Purchasing (“VBP”) Program – Under the VBP program, IPPS operating payments to hospitals are reduced by 2% to fund value‐based incentive payments to eligible hospitals based on their overall performance on a set of quality measures;

•Hospital Readmission Reduction Program – Under this program, IPPS operating payments to hospitals with excess readmissions are reduced up to a maximum of 3% of base MS‐DRG payments; and

•Hospital‐Acquired Conditions (“HAC”) Reduction Program – Under this program, overall inpatient payments are reduced by 1% for hospitals in the worst performing quartile of risk‐adjusted quality measures for reasonable preventable hospital‐acquired conditions.

These adjustments, which CMS updates annually, are generally based on a hospital’s performance from prior periods.

Hospital Outpatient Prospective Payment System

Under the outpatient prospective payment system (“OPPS”), hospital outpatient services, except for certain services that are reimbursed on a separate fee schedule, are classified into groups called ambulatory payment classifications (“APCs”). Services in each APC are similar clinically and in terms of the resources they require, and a payment rate is established for each APC. Depending on the services provided, hospitals may be paid for more than one APC for an encounter. CMS annually updates the APCs and the rates paid for each APC.

Inpatient Psychiatric Facility Prospective Payment System

The inpatient psychiatric facility (“IPF”) prospective payment system (“IPF-PPS”) applies to psychiatric hospitals and psychiatric units located within acute care hospitals that have been designated as exempt from the hospital inpatient prospective payment system. The IPF-PPS is based on prospectively determined per‐diem rates and includes an outlier policy that authorizes additional payments for extraordinarily costly cases. As of December 31, 2022, 19 of our general hospitals operated IPF units.

Inpatient Rehabilitation Prospective Payment System

Rehabilitation hospitals and rehabilitation units in acute care hospitals meeting certain criteria established by CMS are eligible to be paid as an inpatient rehabilitation facility (“IRF”) under the IRF prospective payment system (“IRF‐PPS”). Payments under the IRF‐PPS are made on a per-discharge basis. The IRF‐PPS uses federal prospective payment rates across distinct case‐mix groups established by a patient classification system. As of December 31, 2022, we operated one freestanding IRF, and 15 of our general hospitals operated IRF units.

Physician and Other Health Professional Services Payment System

Medicare uses a fee schedule to pay for physician and other health professional services based on a list of services and their payment rates referred to as the Medicare Physician Fee Schedule (“MPFS”). In determining payment rates for each service, CMS considers the amount of clinician work required to provide a service, expenses related to maintaining a practice and professional liability insurance costs. These three factors are adjusted for variation in the input prices in different markets, and the sum is multiplied by the fee schedule’s conversion factor (average payment amount) to produce a total payment amount.

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Cost Reports

The final determination of certain Medicare payments to our hospitals, such as DSH, DGME, IME and bad debt expense, are retrospectively determined based on our hospitals’ cost reports. The final determination of these payments often takes many years to resolve because of audits by the program representatives, providers’ rights of appeal, and the application of numerous technical reimbursement provisions.

For filed cost reports, we adjust the accrual for estimated cost report settlements based on those cost reports and subsequent activity, and we record a valuation allowance against those cost reports based on historical settlement trends. The accrual for estimated cost report settlements for periods for which a cost report is yet to be filed is recorded based on estimates of what we expect to report on the filed cost reports and a corresponding valuation allowance is recorded as previously described. Cost reports must generally be filed within five months after the end of the annual cost report reporting period. After the cost report is filed, the accrual and corresponding valuation allowance may need to be adjusted.

Medicare Claims Reviews

HHS estimates that the overall 2022 Medicare FFS improper payment rate for the program is approximately 7.46%. The 2022 error rate for Hospital IPPS payments is approximately 3%. CMS has identified the FFS program as a program at risk for significant erroneous payments, and one of the agency’s stated key goals is to pay claims properly the first time. This means paying the right amount, to legitimate providers, for covered, reasonable and necessary services provided to eligible beneficiaries. According to CMS, paying correctly the first time saves resources required to recover improper payments and ensures the proper expenditure of Medicare Trust Fund dollars. CMS has established several initiatives to prevent or identify improper payments before a claim is paid, and to identify and recover improper payments after paying a claim. The overall goal is to reduce improper payments by identifying and addressing coverage and coding billing errors for all provider types. Under the authority of the Social Security Act, CMS employs a variety of contractors (e.g., MACs, Recovery Audit Contractors and Unified Program Integrity Contractors) to process and review claims according to Medicare rules and regulations.

Claims selected for prepayment review are not subject to the normal Medicare FFS payment timeframe. Furthermore, prepayment and post‐payment claims denials are subject to administrative and judicial review, and we pursue the reversal of adverse determinations where appropriate. We have established robust protocols to respond to claims reviews and payment denials. In addition to overpayments that are not reversed on appeal, we incur additional costs to respond to requests for records and pursue the reversal of payment denials. The degree to which our Medicare FFS claims are subjected to prepayment reviews, the extent to which payments are denied, and our success in overturning denials could have an adverse effect on our cash flows and results of operations.

Meaningful Use of Health Information Technology

The Health Information Technology for Economic and Clinical Health (“HITECH”) Act, which is part of the American Recovery and Reinvestment Act of 2009, promotes the use of healthcare information technology by, among other things, providing financial incentives to hospitals and physicians to become “meaningful users” of electronic health record (“EHR”) systems and imposing penalties on those who do not. Under the HITECH Act and other laws and regulations, eligible hospitals that fail to demonstrate and maintain meaningful use of certified EHR technology and/or submit quality data every year (and have not applied and qualified for a hardship exception) are subject to a reduction of the Medicare market basket update. Eligible healthcare professionals are also subject to positive or negative payment adjustments based, in part, on their use of EHR technology. We continue to invest in the maintenance and utilization of certified EHR systems for our hospitals and employed physicians. Failure to do so could subject us to penalties that may have an adverse effect on our net revenues and results of operations.

Medicaid

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 19.4%, 18.7% and 17.8% of the total net patient service revenues of our acute care hospitals and related outpatient facilities for the years ended December 31, 2022, 2021 and 2020, respectively. We also receive DSH and other supplemental revenues under various state Medicaid programs. For the years ended December 31, 2022, 2021 and 2020, our total Medicaid revenues attributable to DSH and other supplemental revenues were approximately $644 million, $915 million and $754 million, respectively. The decrease between 2022 and 2021 was primarily attributable to changes in Medicaid program payments in California, Florida, Michigan and Texas. For Texas, we recognized $123 million of assessments to support the Texas Comprehensive Hospital Increase Reimbursement Program (“CHIRP”) following its approval in 2022. During the year ended December 31, 2022, we also recognized $245 million of revenue related to CHIRP that is included in

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Managed Medicaid revenue rather than the DSH and other supplemental revenues classification due to the structure of the program.

Even prior to the COVID-19 pandemic, several states in which we operate faced budgetary challenges that resulted in reduced Medicaid funding levels to hospitals and other providers. 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 adopt or consider adopting future legislation designed to reduce or not increase their Medicaid expenditures. In addition, some states delay issuing Medicaid payments to providers to manage state expenditures. As an alternative means of funding provider payments, many of the states in which we operate have adopted supplemental payment programs authorized under the Social Security Act.

Continuing pressure on state budgets and other factors, including legislative and regulatory changes, could result in future reductions to Medicaid payments, payment delays or changes to Medicaid supplemental payment programs. Federal government denials or delayed approvals of waiver applications or extension requests by the states in which we operate could materially impact our Medicaid funding levels.

Total Medicaid and Managed Medicaid net patient service revenues from continuing operations recognized by the hospitals and related outpatient facilities in our Hospital Operations segment for the years ended December 31, 2022, 2021 and 2020 were $2.692 billion, $2.760 billion and $2.427 billion, respectively. During the year ended December 31, 2022, Medicaid and Managed Medicaid revenues comprised 35% and 65%, respectively, 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 Managed Medicaid patient service revenues are presented net of provider taxes or assessments paid by our hospitals, which are reported as an offset reduction to FFS Medicaid revenue.

Because we cannot predict what actions the federal government or the states may take under existing or future legislation and/or regulatory changes to address budget gaps, deficits, Medicaid expansion, provider fee programs or Medicaid Section 1115 waivers, we are unable to assess the effect that any such legislation or regulatory action might have on our business; however, the impact on our future financial position, results of operations or cash flows could be material.

Regulatory and Legislative Changes

The Medicare and Medicaid programs are subject to: statutory and regulatory changes, administrative and judicial rulings, interpretations and determinations concerning patient eligibility requirements, funding levels and the method of calculating reimbursements, among other things; requirements for utilization review; and federal and state funding restrictions. Any of these factors could materially increase or decrease payments from these government programs in the future, as well as affect the cost of providing services to our patients and the timing of payments to our facilities. We are unable to predict the effect of future government healthcare funding policy changes on our operations. If the rates paid by governmental payers are reduced, if the scope of services covered by governmental payers is limited, or if we or one or more of our hospitals are excluded from participation in the Medicare or Medicaid program or any other government healthcare program, there could be a material adverse effect on our business, financial condition, results of operations or cash flows. Recent regulatory and legislative updates to the Medicare and Medicaid payment systems, as well as other government programs impacting our business, are provided below.

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 IPPS annually. The updates generally become effective October 1, the beginning of the FFY. In August 2022, CMS issued final changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2023 Rates (“Final IPPS Rule”). The Final IPPS Rule includes the following payment and policy changes, among others:

•A market basket increase of 4.1% for MS‐DRG operating payments for hospitals reporting specified quality measure data and that are meaningful users of EHR technology; CMS also finalized a 0.3% multifactor productivity reduction required by the Affordable Care Act and a 0.5% increase required by the Medicare Access and CHIP Reauthorization Act of 2015 that together result in a net operating payment update of 4.3% before budget neutrality adjustments;

•Updates to the hospital VBP and HAC programs for FFY 2023 due to the impact of the COVID-19 public health emergency, including: the implementation of a special scoring methodology for the VBP program that results in each hospital receiving a value‐based incentive payment amount equal to the 2% reduction to its operating standardized amount; and suppression of all measures in the HAC reduction program resulting in no hospitals being penalized for FFY 2023;

•An increase in the cost outlier threshold from $30,988 to $38,859;

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•A 2.37% net increase in the capital federal MS‐DRG rate; and

•Updates to the three factors used to determine the amount and distribution of Medicare UC‐DSH Amounts.

According to CMS, the combined impact of the payment and policy changes in the Final IPPS Rule for operating costs will yield an average 2.6% 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 2023. We estimate that all of the final payment and policy changes affecting operating MS‐DRG and UC‐DSH Amounts should result in a 3.7% increase in our annual Medicare FFS IPPS payments, which yields an estimated increase of approximately $55 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.

Payment and Policy Changes to the Medicare Outpatient Prospective Payment and Ambulatory Surgery Center Payment Systems—In November 2022, CMS released the final policy changes and payment rates for the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System for calendar year (“CY”) 2023 (“Final OPPS/ASC Rule”). The Final OPPS/ASC Rule includes the following payment and policy changes, among others:

•An estimated net increase of 3.8% for the OPPS rates based on a market basket increase of 4.1%, reduced by a multifactor productivity adjustment required by the Affordable Care Act of 0.3%;

•Removal of 11 services from the Inpatient Only List (which is the list of procedures that must be performed on an inpatient basis) after determining such services meet established criteria for removal;

•Establishment of an exemption for rural Sole Community Hospitals from the site-neutral Medicare reduced payment rate for clinic visits furnished in exempt off-campus, provider-based departments and payment for such visits at the full OPPS rate; and

•A 3.8% increase to the Ambulatory Surgical Center payment rates.

In addition, the Final OPPS/ASC Rule made certain changes to CMS’ 340B program, which allows certain hospitals (i.e., only nonprofit organizations with specific federal designations and/or funding) (“340B Hospitals”) to purchase drugs at discounted rates from drug manufacturers (“340B Drugs”). In the CY 2018 final rule regarding OPPS payment and policy changes, CMS reduced the payment for 340B Drugs from the average sales price (“ASP”) plus 6% to the ASP minus 22.5% and made a corresponding budget‐neutral increase to payments to all hospitals for other drugs and services reimbursed under the OPPS (the “340B Payment Adjustment”). CMS retained the same 340B Payment Adjustment in the final rules regarding OPPS payment and policy changes for CYs 2019 through 2022. Certain hospital associations and hospitals commenced litigation challenging CMS’ authority to impose the 340B Payment Adjustment for CYs 2018, 2019 and 2020. Following the initial court decisions and a series of appeals, the U.S. Supreme Court (the “Supreme Court”) unanimously ruled in June 2022 that the decision to impose the 340B Payment Adjustment in CYs 2018 and 2019 was unlawful, and the case was remanded to the lower courts to determine the appropriate remedy. In response to the Supreme Court’s decision, the 2023 Final OPPS/ASC Rule affirms that CMS is now applying the default rate, generally ASP plus 6%, to 340B Drugs and biologicals, and it has removed the 340B Payment Adjustment made in 2018. In January 2023, the U.S. District Court for the District of Columbia issued an opinion remanding the case to HHS to determine the remediation for the prior years’ underpayments. Before the issuance of this opinion, CMS had indicated that it is still evaluating how to apply the Supreme Court ruling to the cost years 2018 through 2022, and it expects to address the remedy for those cost years in a separate rulemaking that will be published prior to the CY 2024 proposed rule regarding OPPS payment and policy changes.

CMS projects that the combined impact of the payment and policy changes in the Final OPPS/ASC Rule will yield an average 4.9% increase in Medicare FFS OPPS payments for hospitals in urban areas and an average 1.3% increase in Medicare FFS OPPS payments for proprietary hospitals. The projected annual impact of the payment and policy changes in the Final OPPS/ASC Rule on our hospitals is an increase to Medicare FFS hospital outpatient revenues of approximately $9 million, which represents an increase of approximately 1.5%.

Because of the uncertainty associated with various factors that may influence our future OPPS payments, including legislative or legal actions, volumes and case mix, we cannot provide any assurances regarding our estimate of the impact of the final payment and policy changes. In addition, it remains unclear at this time how CMS will finance any retroactive payments for 340B payments that were previously withheld given that the original policy was budget‐neutral and HHS already redistributed the savings. We cannot predict the remedy that will be imposed, the timing thereof, or what further actions CMS or Congress might take with respect to the 340B program; however, it is possible that reversal of the 340B Payment Adjustment could have an adverse effect on our future net operating revenues and cash flows.

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Payment and Policy Changes to the Medicare Physician Fee Schedule—In November 2022, CMS released the CY 2023 Medicare Physician Fee Schedule (“MPFS”) Final Rule (“MPFS Final Rule”). The MPFS Final Rule includes updates to payment policies, payment rates and other provisions for services reimbursed under the MPFS from January 1 through December 31, 2023. Under the MPFS Final Rule, the CY 2023 conversion factor, which is the base rate that is used to convert relative units into payment rates, was reduced from $34.61 to $33.06, due in part to the expiration of the one-time 3% payment increase provided for in CY 2022 by the Protecting Medicare and American Farmers from Sequester Cuts Act (the “Sequester Cuts Act”), which was signed into law in December 2021, as well as budget neutrality rules. However, the December 2022 enactment of the Consolidated Appropriations Act, 2023 (“CAA, 2023”) provided a 2.5% positive adjustment to the MPFS CY 2023 conversion factor, resulting in a CY 2023 conversion factor of $33.89. We estimate the impact of the MPFS Final Rule in conjunction with the positive adjustment from the CAA, 2023 should result in a reduction of approximately $4 million to our FFS MPFS revenues. Because of the uncertainty associated with various factors that may influence our future MPFS payments, including legislative, regulatory or legal actions, volumes and case mix, we cannot provide any assurances regarding our estimate of the impact of the final payment and policy changes.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 and Related Legislation

Several pieces of legislation (the “COVID Acts”) that include funding and other provisions to mitigate the economic effects of the COVID‐19 pandemic have been signed into law since March 2020. Provided below is a brief overview of certain provisions of the COVID Acts that have impacted our business and that may continue to impact our business to varying degrees in 2023. With the recent announcement that the public health emergency will end on May 11, 2023, and the subsequent unwinding of federal flexibilities and funding, there is no assurance or expectation that we will continue to receive or remain eligible for significant funding or assistance under the COVID Acts or similar measures in the future.

Funding for the Public Health and Social Services Emergency Fund—The COVID Acts authorized $178 billion in payments to be distributed to providers through the PRF. To receive distributions, providers are required to agree to certain terms and conditions, including, among other things, that the funds are being used for lost revenues and unreimbursed COVID‐related costs as defined by HHS, and that the providers will not seek collection of out‐of‐pocket payments from a COVID‐19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network provider. All recipients of PRF payments are required to comply with the reporting requirements described in the terms and conditions and as determined by HHS. In January 2021, HHS released updated reporting requirements that include lost revenues, expenses attributable to COVID-19 and non-financial information. The updated reporting requirements reflect certain provisions of the Consolidated Appropriations Act, 2021 and Other Extensions Act (“Consolidated Appropriations Act”) affecting the calculation of lost revenues, as well as the distribution of PRF funds among subsidiaries in a hospital system. Furthermore, HHS has indicated that it will be closely monitoring and, along with the U.S. Office of Inspector General, auditing providers to ensure that recipients comply with the terms and conditions of relief programs and to prevent fraud and abuse. All providers will be subject to civil and criminal penalties for any deliberate omissions, misrepresentations or falsifications of any information given to HHS. PRF funds not utilized by the established deadlines, generally 12 to 18 months after receipt of the grant funds, will be recouped by HHS. Except for certain immaterial PRF payments we returned to HHS, we have formally accepted PRF payments issued to our providers and the terms and conditions associated with those payments, and we have complied with the reporting requirements.

During the years ended December 31, 2022, 2021 and 2020, our Hospital Operations and Ambulatory Care segments combined recognized approximately $138 million, $176 million and $868 million, respectively, of PRF grant income associated with lost revenues and COVID‐related costs. We recognized an additional $14 million and $17 million of PRF grant income from our unconsolidated affiliates during 2021 and 2020, respectively. Our Hospital Operations and Ambulatory Care segments combined also recognized $56 million, $15 million and $14 million of grant income from state and local grant programs during the years ended December 31, 2022, 2021 and 2020, respectively. Grant income recognized by our Hospital Operations and Ambulatory Care segments is presented in grant income, and grant income recognized through our unconsolidated affiliates is presented in equity in earnings of unconsolidated affiliates, in each case in the accompanying Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020. At December 31, 2022 and 2021, we had remaining deferred grant payment balances of $7 million and $5 million, respectively, which amounts were recorded in other current liabilities in the accompanying Consolidated Balance Sheets for those periods. We cannot predict whether additional distributions of grant funds will be authorized, and we cannot provide any assurances regarding the amount of grant income, if any, to be recognized in the future.

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Medicare and Medicaid Payment Policy Changes—The COVID Acts have also alleviated some of the financial strain on hospitals, physicians, other healthcare providers and states through a series of Medicare and Medicaid payment policy changes, as described below:

•The CMS 2% sequestration reduction on Medicare FFS and Medicare Advantage payments to hospitals, physicians and other providers was suspended effective May 1, 2020 through December 31, 2021. The Sequester Cuts Act extended the 2% Medicare sequestration moratorium through March 31, 2022 and adjusted the sequestration to 1% for the period April 1, 2022 through June 30, 2022. Because further legislation was not passed, the full 2% reduction was restored effective July 1, 2022. The impact of the Sequester Cuts Act on our operations was an increase of approximately $39 million of revenues in the six months ended June 30, 2022, after which the sequestration was fully reinstated.

•The COVID Acts instituted a 20% increase in the Medicare MS‐DRG payment for COVID-19 hospital admissions for the duration of the public health emergency.

•The COVID Acts initially eliminated the scheduled nationwide reduction of $4 billion in federal Medicaid DSH allotments in FFY 2020 mandated by the Affordable Care Act and decreased the FFY 2021 DSH reduction from $8 billion to $4 billion effective December 1, 2020. Subsequently, the FFY 2021 DSH reduction was eliminated entirely and the remaining $8 billion of DSH reductions were delayed until FFY 2024.

•The COVID Acts expanded the Medicare accelerated payment program, which provides prepayment of claims to providers in certain circumstances, such as national emergencies or natural disasters. Under the Consolidated Appropriations Act, providers could retain the accelerated payments for one year from the date of receipt before CMS commenced recoupment. During the year ended December 31, 2020, our hospitals and other providers applied for and received approximately $1.5 billion of accelerated payments. No additional accelerated payment funds were applied for or received in the years ended December 31, 2022 and 2021. All advances received by our hospitals and other providers were either repaid or recouped during the years ended December 31, 2022 and 2021.

•A 6.2% increase in the Federal Medical Assistance Percentage (“FMAP”) matching funds was instituted to help states respond to the COVID‐19 pandemic. The additional funds became available to states effective January 1, 2020, and they were expected to remain available through the quarter in which the public health emergency period ends, provided that states met certain conditions. In addition, the COVID Acts established an incentive for states that had not already done so to expand Medicaid by temporarily increasing each such respective state’s FMAP for their base program by five percentage points for two years.

The COVID Acts included a requirement that state Medicaid programs keep people continuously enrolled through the end of the month in which the COVID‐19 public health emergency ends in exchange for the temporary increase to the FMAP. Under the CAA, 2023, the Medicaid continuous enrollment condition and the receipt of the temporary FMAP increase will no longer be tied to the continuation of the public health emergency. Effective March 31, 2023, the continuous enrollment condition will end and, on April 1, 2023, states can begin eligibility redeterminations on their Medicaid populations and the disenrollment of individuals no longer eligible. In addition, the CAA, 2023 provides for the phase-down of the 6.2% enhanced FMAP as follows: 6.2% through the first quarter of 2023; 5.0% through the second quarter of 2023; 2.5% through the third quarter of 2023; and 1.5% through the last quarter of 2023. The increased support will end entirely as of January 1, 2024.

Because of the uncertainty associated with various factors that may influence our future Medicare and Medicaid payments, including future legislative, legal or regulatory actions, or changes in volumes and case mix, there is a risk that actual payments received under, or the ultimate impact of, these programs will differ materially from our expectations.

Funding for Uninsured Individuals—The COVID Acts provided claims reimbursement to healthcare providers generally at Medicare rates for testing uninsured individuals for COVID‐19 and treating uninsured individuals with a COVID‐19 diagnosis. A portion of the funding could also be used to reimburse providers for COVID‐19 vaccine administration to uninsured individuals. We recognized net operating revenues totaling $20 million, $91 million and $40 million related to this program in the accompanying Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020, respectively. This program stopped accepting reimbursement claims for the testing and treatment of uninsured individuals on March 22, 2022, and stopped accepting claims for vaccine administration to uninsured individuals on April 5, 2022.

Tax Changes—Beginning March 27, 2020, all employers were able to elect to defer payment of the 6.2% employer Social Security tax through December 31, 2020. Deferred tax amounts were required to be paid in equal amounts over two years, with payments due in December 2021 and December 2022. During the year ended December 31, 2020, we deferred Social Security tax payments totaling $275 million pursuant to this COVID Acts provision. In December 2021, we repaid half of the outstanding deferred Social Security tax payments, and the remainder was repaid in December 2022.

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CMS Innovation Models

The CMS Innovation Center develops and tests innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid or CHIP expenditures while preserving or enhancing the quality of care for beneficiaries. Congress has defined – both through the Affordable Care Act and previous legislation – a number of specific demonstrations for CMS to conduct, including bundled payment models. Generally, the bundled payment models hold hospitals financially accountable for the quality and costs for an entire episode of care for a specific diagnosis or procedure from the date of the hospital admission or inpatient procedure through 90 days post‐discharge, including services not provided by the hospital, such as physician, inpatient rehabilitation, skilled nursing and home health care. Provider participation in some of these models is voluntary; for example, 19 hospitals in our Hospital Operations segment and three surgical hospitals in our Ambulatory Care segment participate in the CMS Bundled Payments for Care Improvement Advanced (“BPCIA”) program that became effective October 1, 2018, and USPI also holds the CMS contract for one physician group practice participating in the BPCIA program. Participation in certain other bundled payment arrangements is mandatory for providers located in randomly selected geographic locations. Under the mandatory models, hospitals are eligible to receive incentive payments or will be subject to payment reductions within certain corridors based on their performance against quality and spending criteria. In 2015, CMS finalized a five‐year bundled payment model (that was subsequently extended for an additional three years), called the Comprehensive Care for Joint Replacement (“CJR”) model, which includes hip and knee replacements, as well as other major leg procedures. Eleven hospitals in our Hospital Operations segment and four surgical hospitals in our Ambulatory Care segment currently participate in the CJR model.

PRIVATE INSURANCE

Managed Care

We currently have thousands of managed care contracts with various HMOs and PPOs. HMOs generally maintain a full‐service healthcare delivery network comprised of physician, hospital, pharmacy and ancillary service providers that HMO members must access through an assigned “primary care” physician. The member’s care is then managed by his or her primary care physician and other network providers in accordance with the HMO’s quality assurance and utilization review guidelines so that appropriate healthcare can be efficiently delivered in the most cost‐effective manner. HMOs typically provide reduced benefits or reimbursement (or none at all) to their members who use non‐contracted healthcare providers for non‐emergency care.

PPOs generally offer limited benefits to members who use non‐contracted healthcare providers. PPO members who use contracted healthcare providers receive a preferred benefit, typically in the form of lower co‐pays, co‐insurance or deductibles. As employers and employees have demanded more choice, managed care plans have developed hybrid products that combine elements of both HMO and PPO plans, including high‐deductible healthcare plans that may have limited benefits, but cost the employee less in premiums.

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 years ended December 31, 2022, 2021 and 2020 was $9.730 billion, $9.985 billion and $9.022 billion, respectively. Our top 10 managed care payers generated 62% of our managed care net patient service revenues for the year ended December 31, 2022. In 2022, national payers generated 44% of our managed care net patient service revenues; the remainder came from regional or local payers. At December 31, 2022 and 2021, 66% and 67%, respectively, of our net accounts receivable for our Hospital Operations segment were due from managed care payers.

Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per‐diem rates, discounted FFS rates and/or other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers, which can take several years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient‐by‐patient basis in the ordinary course of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likely for there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed care plans. Based on reserves at December 31, 2022, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves by approximately $18 million. Some of the factors that can contribute to changes in the contractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs when threshold levels are triggered; (2) changes in reimbursement levels when stop‐loss or outlier limits are reached; (3) changes in the admission status of a patient due to physician orders subsequent to initial diagnosis or testing; (4) final coding of in‐house and discharged‐not‐final‐billed

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patients that change reimbursement levels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coverage and payment levels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history. We believe our estimation and review process enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments to estimates of patient bills that were material to our revenues during the years ended December 31, 2022, 2021 or 2020. In addition, on a corporate‐wide basis, we do not record any general provision for adjustments to estimated contractual allowances for managed care plans. Managed care accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for these payers and other factors that affect the estimation process.

We expect managed care governmental admissions to continue to increase as a percentage of total managed care admissions over the near term. However, the managed Medicare and Medicaid insurance plans typically generate lower yields than commercial managed care plans, which have been experiencing an improved pricing trend. Although we have benefited from solid year‐over‐year aggregate managed care pricing improvements for some time, we have seen these improvements moderate in recent years, and we believe this moderation could continue into the future, subject to incremental pricing improvements to address inflationary pressures. In the year ended December 31, 2022, our commercial managed care net inpatient revenue per admission from the hospitals in our Hospital Operations segment was approximately 81% higher than our aggregate yield on a per-admission basis from government payers, including managed Medicare and Medicaid insurance plans.

Indemnity

At both December 31, 2022 and 2021, 4.8% of our net patient service revenues for our hospitals and related outpatient facilities were derived from indemnity‐based health plans. An indemnity‐based agreement generally requires the insurer to reimburse an insured patient for healthcare expenses after those expenses have been incurred by the patient, subject to policy conditions and exclusions. Unlike an HMO member, a patient with indemnity insurance is free to control his or her utilization of healthcare and selection of healthcare providers.

Legislative Changes

The No Surprises Act (“NSA”) established federal protections, which became effective on January 1, 2022, against balance billing for patients who obtain medical services from physicians and other providers not chosen by the patient and outside of the patient’s health insurance network. Providers that violate these surprise billing prohibitions may be subject to state enforcement action or federal civil monetary penalties. Among other things, the NSA limits the amount an insured patient will pay for (1) out-of-network emergency care (provided in hospital emergency departments and freestanding emergency facilities), and (2) scheduled out-of-network services (such as radiology, pathology and anesthesiology) at an in-network facility when the patient hasn’t been notified or provided consent. The NSA also prohibits insurers from assigning higher deductibles (and other cost-sharing charges) to patients for out-of-network care than they do for in-network care without patient notification and consent.

Under the NSA, insurers and providers are given the opportunity to resolve disputed out‐of‐network reimbursement through negotiation and an independent dispute resolution (“IDR”) process, unless state law specifies a different approach. The IDR process has been utilized far more than anticipated, and there is currently a backlog of claims pending determination. Moreover, provider groups have been successful in challenging certain IDR-related provisions of the regulations promulgated under the NSA, claiming the regulations unfairly favor insurers in the determination of appropriate reimbursement amounts. We cannot predict the ultimate impact of this or any future litigation nor can we predict any future regulatory changes. In addition, we are unable to fully assess the ultimate impact of the NSA on our business at this time; however, based on our experience to this point, we believe that compliance with the provisions of the NSA will not have a material adverse effect on our financial condition, results of operations or cash flows.

UNINSURED PATIENTS

Uninsured patients are patients who do not qualify for government programs payments, such as Medicare and Medicaid, do not have some form of private insurance and, therefore, are responsible for their own medical bills. A significant number of our uninsured patients are admitted through our hospitals’ emergency departments and often require high‐acuity treatment that is more costly to provide and, therefore, results in higher billings, which are the least collectible of all accounts.

Self‐pay accounts receivable, which include amounts due from uninsured patients, as well as co‐pays, co‐insurance amounts and deductibles owed to us by patients with insurance, pose significant collectability problems. At December 31, 2022 and 2021, 5% and 4%, respectively, of our net accounts receivable for our Hospital Operations segment was self‐pay. Further, a significant portion of our implicit price concessions relates to self‐pay amounts.

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We provide revenue cycle management services through Conifer, which is subject to various statutes and regulations regarding consumer protection in areas including finance, debt collection and credit reporting activities. For additional information, see Item 1, Business — Regulations Affecting Conifer’s Operations, of Part I of this report. Conifer has performed systematic analyses to focus our attention on the drivers of bad debt expense for each hospital. While emergency department use is the primary contributor to our implicit price concessions in the aggregate, this is not the case at all hospitals. As a result, we have increased our focus on targeted initiatives that concentrate on non‐emergency department patients as well. These initiatives are intended to promote process efficiencies in collecting self‐pay accounts, as well as co‐pay, co‐insurance and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We leverage a statistical‐based collections model that aligns our operational capacity to maximize our collections performance. We are dedicated to modifying and refining our processes as needed, enhancing our technology and improving staff training throughout the revenue cycle process in an effort to increase collections and reduce accounts receivable.

Over the longer term, several other initiatives we have previously announced should also help address the challenges associated with serving uninsured patients. For example, our Compact with Uninsured Patients (“Compact”) is designed to offer managed care‐style discounts to certain uninsured patients, which enables us to offer lower rates to those patients who historically had been charged standard gross charges. Under the Compact, the discount offered to uninsured patients is recognized as a contractual allowance, which reduces net operating revenues at the time the self‐pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for self‐pay accounts and other factors that affect the estimation process. We also provide financial assistance through our charity and uninsured discount programs to uninsured patients who are unable to pay for the healthcare services they receive. Our policy is not to pursue collection of amounts determined to qualify for financial assistance; therefore, we do not report these amounts in net operating revenues. Most states include an estimate of the cost of charity care in the determination of a hospital’s eligibility for Medicaid DSH payments. These payments are intended to mitigate our cost of uncompensated care. Some states have also developed provider fee or other supplemental payment programs to mitigate the shortfall of Medicaid reimbursement compared to the cost of caring for Medicaid patients.

The initial expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities with either private or public program coverage and a decrease in uninsured and charity care admissions, along with reductions in Medicare and Medicaid reimbursement to healthcare providers, including us. However, we continue to have to provide uninsured discounts and charity care due to the failure of certain states to expand Medicaid coverage and for persons living in the country who are not permitted to enroll in a health insurance exchange or government healthcare insurance program.

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:

Years Ended December 31,

Estimated costs for:

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RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022 COMPARED TO THE YEAR ENDED DECEMBER 31, 2021

The following tables present our consolidated net operating revenues, operating expenses and operating income, both in dollar amounts and as percentages of net operating revenues, on a continuing operations basis:

Years Ended December 31, Increase(Decrease)

Net operating revenues:

Inter-segment eliminations (451) (482) 31

Equity in earnings of unconsolidated affiliates 216 218 (2)

Operating expenses:

Depreciation and amortization 841 855 (14)

Impairment and restructuring charges, and acquisition-related costs 226 85 141

Litigation and investigation costs 70 116 (46)

Years Ended December 31, Increase(Decrease)

Net operating revenues 100.0 % 100.0 % — %

Grant income 1.0 % 1.0 % — %

Equity in earnings of unconsolidated affiliates 1.1 % 1.1 % — %

Operating expenses:

Salaries, wages and benefits 46.1 % 45.6 % 0.5 %

Other operating expenses, net 20.8 % 21.6 % (0.8) %

Depreciation and amortization 4.4 % 4.4 % — %

Litigation and investigation costs 0.4 % 0.6 % (0.2) %

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The following tables present our net operating revenues, operating expenses and operating income, both in dollar amounts and as percentages of net operating revenues, by operating segment on a continuing operations basis:

Equity in earnings of unconsolidated affiliates 10 206 — 25 193 —

Operating expenses:

Grant income 1.3 % 0.1 % — % 0.9 % 1.8 % — %

Equity in earnings of unconsolidated affiliates 0.1 % 6.3 % — % 0.2 % 7.1 % — %

Operating expenses:

Depreciation and amortization 4.7 % 3.4 % 2.8 % 4.7 % 3.5 % 3.0 %

Litigation and investigation costs 0.4 % 0.1 % 1.1 % 0.6 % 0.5 % 0.2 %

Consolidated net operating revenues decreased by $311 million, or 1.6%, for the year ended December 31, 2022 compared to the year ended December 31, 2021. Hospital Operations net operating revenues, net of inter‐segment eliminations, decreased by $890 million, or 5.7%, for the year ended December 31, 2022 compared to 2021, primarily due to the loss of revenues from the Miami Hospitals we sold in August 2021, lower overall patient volumes, and decreased COVID-related volumes and acuity during 2022, partially offset by negotiated commercial rate increases. Our Hospital Operations segment also recognized grant income from federal, state and local grants totaling $190 million and $142 million during the years ended December 31, 2022 and 2021, respectively, which is not included in net operating revenues.

Ambulatory Care net operating revenues increased by $530 million, or 19.5%, for the year ended December 31, 2022 compared to 2021. The change was primarily due to an increase from acquisitions of $453 million and same-facility growth of $146 million, which was attributable to the impact of higher patient volumes, incremental revenue from new service lines and negotiated commercial rate increases. These impacts were partially offset by $69 million of lower revenues compared to the prior‐year period due to the sale of the Ambulatory Care segment’s urgent care centers and the transfer of its imaging centers to the Hospital Operations segment in April 2021. Our Ambulatory Care segment also recognized grant income from federal grants totaling $4 million and $49 million during the years ended December 31, 2022 and 2021, respectively, which is not included in net operating revenues.

Conifer net operating revenues increased by $49 million, or 3.9%, for the year ended December 31, 2022 compared to 2021. Conifer revenues from third‐party clients, which revenues are not eliminated in consolidation, increased $80 million, or 10.2%, for the year ended December 31, 2022 compared to 2021. These increases were primarily due to contractual rate increases and new business expansion.

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RESULTS OF OPERATIONS BY SEGMENT

Our operations are reported in three segments:

•Hospital Operations, which is comprised of acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro‐hospitals and physician practices;

•Ambulatory Care, which is comprised of USPI’s ASCs and surgical hospitals; and

•Conifer, which provides revenue cycle management and value‐based care services to hospitals, health systems, physician practices, employers and other clients.

Hospital Operations Segment

The following tables present operating statistics, revenues and expenses of our hospitals and related outpatient facilities on a same‐hospital basis, unless otherwise indicated:

Same-Hospital Years Ended December 31, Increase(Decrease)

Admissions, Patient Days and Surgeries 2022 2021

Number of hospitals (at end of period) 60 60 — (1)

Paying admissions (excludes charity and uninsured) 497,990 518,515 (4.0) %

Paying admissions as a percentage of total admissions 95.2 % 94.7 % 0.5 % (1)

Average length of stay (days) 5.25 5.27 (0.4) %

Utilization of licensed beds(3) 48.9 % 51.4 % (2.5) % (1)

(1) The change is the difference between 2022 and 2021 amounts shown.

Same-Hospital Years Ended December 31, Increase(Decrease)

Paying visits as a percentage of total visits 93.8 % 93.3 % 0.5 % (1)

(1) The change is the difference between 2022 and 2021 amounts shown.

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Same-Hospital Years Ended December 31, Increase(Decrease)

Total segment net operating revenues $ 14,464 $ 14,768 (2.1) %

Selected revenue data – hospitals and related outpatient facilities:

Net patient service revenue per adjusted admission(1) $ 14,244 $ 14,424 (1.2) %

Net patient service revenue per adjusted patient day(1) $ 2,806 $ 2,800 0.2 %

Same-Hospital Years Ended December 31, Increase(Decrease)

Same-Hospital Years Ended December 31, Increase(Decrease)

Selected Operating Expenses as a Percentage of Net Operating Revenues 2022 2021

Salaries, wages and benefits 50.3 % 48.9 % 1.4 % (1)

Other operating expenses 22.4 % 22.9 % (0.5) % (1)

(1) The change is the difference between 2022 and 2021 amounts shown.

Revenues

Same‐hospital net operating revenues decreased $304 million, or 2.1%, during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease was due in part to lower overall patient volumes, decreased COVID‐related volumes and acuity, and the adverse impact of the Cybersecurity Incident on patient volumes, partially offset by negotiated commercial rate increases. Our Hospital Operations segment also recognized grant income from federal, state and local grants totaling $190 million and $142 million in the years ended December 31, 2022 and 2021, respectively, which is not included in net operating revenues. Same‐hospital admissions and outpatient visits decreased by 4.5% and 4.8%, respectively, in the year ended December 31, 2022 compared to 2021, primarily due to the factors described above.

The following table presents our consolidated net accounts receivable by payer:

December 31,

Net cost report settlements receivable and valuation allowances 48 33

Self-pay uninsured 35 21

Self-pay balance after insurance 92 70

Estimated future recoveries 149 137

The collection of accounts receivable is a key area of focus for our business. At December 31, 2022, our Hospital Operations segment collection rate on self‐pay accounts was approximately 29.5%. Our self‐pay collection rate includes payments made by patients, including co‐pays, co‐insurance amounts and deductibles paid by patients with insurance. Based on our accounts receivable from uninsured patients and co‐pays, co‐insurance amounts and deductibles owed to us by patients with insurance at December 31, 2022, a 10% decrease or increase in our self‐pay collection rate, or approximately 3.0%, which we

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believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to patient accounts receivable of approximately $11 million. There are various factors that can impact collection trends, such as changes in the economy and inflation, which in turn have an impact on unemployment rates and the number of uninsured and underinsured patients, the volume of patients through our emergency departments, the increased burden of co‐pays and deductibles to be made by patients with insurance, and business practices related to collection efforts. These factors, many of which have been affected by the pandemic, continuously change and can have an impact on collection trends and our estimation process.

We also typically experience ongoing managed care payment delays and disputes; however, we continue to work with these payers to obtain adequate and timely reimbursement for our services. Our estimated Hospital Operations segment collection rate from managed care payers was approximately 95.7% at December 31, 2022.

We manage our implicit price concessions using hospital‐specific goals and benchmarks such as (1) total cash collections, (2) point‐of‐service cash collections, (3) AR Days and (4) accounts receivable by aging category. The following tables present the approximate aging by payer of our net accounts receivable from the continuing operations of our Hospital Operations segment of $2.462 billion and $2.363 billion at December 31, 2022 and 2021, respectively, excluding cost report settlements receivable and valuation allowances of $48 million and $33 million, respectively, at December 31, 2022 and 2021:

Medicare Medicaid ManagedCare Indemnity,Self-Payand Other Total

Conifer continues to implement revenue cycle initiatives intended to improve our cash flow. These initiatives are focused on standardizing and improving patient access processes, including pre‐registration, registration, verification of eligibility and benefits, liability identification and collections at point‐of‐service, and financial counseling. These initiatives are intended to reduce denials, improve service levels to patients and increase the quality of accounts that end up in accounts receivable. Although we continue to focus on improving our methodology for evaluating the collectability of our accounts receivable, we may incur future charges if there are unfavorable changes in the trends affecting the net realizable value of our accounts receivable.

Patient advocates from Conifer’s Eligibility and Enrollment Services program (“EES”) screen patients in the hospital to determine whether those patients meet eligibility requirements for financial assistance programs. They also expedite the process of applying for these government programs. Receivables from patients who are potentially eligible for Medicaid are classified as Medicaid pending, under the EES, net of appropriate implicit price concessions. Based on recent trends, approximately 97% of all accounts in the EES are ultimately approved for benefits under a government program, such as Medicaid.

The following table presents the approximate amount of accounts receivable in the EES still awaiting determination of eligibility under a government program at December 31, 2022 and 2021 by aging category:

December 31,

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Salaries, Wages and Benefits

Same‐hospital salaries, wages and benefits expense increased $55 million, or 0.8%, in the year ended December 31, 2022 compared to 2021. This increase was primarily attributable to higher contract labor and premium pay costs due to the pandemic, and annual merit increases for certain of our employees, all of which were partially offset by lower incentive compensation and employee benefit costs, as well as our continued focus on cost‐efficiency measures. Same‐hospital salaries, wages and benefits expense as a percentage of net operating revenues increased by 140 basis points to 50.3% in the year ended December 31, 2022 compared to the year ended December 31, 2021. This increase was primarily due to the impact of higher contract labor and premium pay costs, decreased patient volumes, and the Cybersecurity Incident on our patient revenues during the 2022 period. Salaries, wages and benefits expense for the years ended December 31, 2022 and 2021 included stock‐based compensation expense of $43 million and $41 million, respectively.

Supplies

Same‐hospital supplies expense decreased $147 million, or 5.8%, in the year ended December 31, 2022 compared to 2021. The decrease was primarily attributable to lower overall patient volumes, reduced COVID‐related volumes and acuity, and our cost‐efficiency measures, partially offset by the increased cost of certain supplies as a result of the COVID‐19 pandemic, the impact of general market conditions and inflation. Same‐hospital supplies expense as a percentage of net operating revenues decreased by 60 basis points to 16.5% in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the factors described above.

The pandemic created supply‐chain disruptions, including shortages and delays, as well as significant price increases in medical supplies. During the year ended December 31, 2022, general market conditions and inflation also increased the cost of medical supplies. We strive to control supplies expense through product standardization, consistent contract terms and end‐to‐end contract management, improved utilization, bulk purchases, focused spending with a smaller number of vendors and operational improvements. The items of current cost‐reduction focus include cardiac stents and pacemakers, orthopedics, implants and high‐cost pharmaceuticals.

Other Operating Expenses, Net

Same‐hospital other operating expenses decreased by $136 million, or 4.0%, in the year ended December 31, 2022 compared to 2021. Same‐hospital other operating expenses as a percentage of net operating revenues decreased by 50 basis points to 22.4% in the year ended December 31, 2022 compared to 22.9% in the year ended December 31, 2021, primarily due to the net gains from the sale of assets noted below. The changes in other operating expenses included:

•an increase in gains from the sale of assets of $102 million, which were classified as a reduction of other operating expenses, net; and

•decreased malpractice expense of $51 million.

For the years ended December 31, 2022 and 2021, other operating expenses for our Hospital Operations segment included $273 million and $280 million, respectively, of rent expense.

AmbulatoryCareSegment

Our Ambulatory Care segment is comprised of USPI’s ASCs and surgical hospitals. USPI operates its surgical facilities in partnership with local physicians and, in many of these facilities, a health system partner. We hold an ownership interest in each facility, with each being operated through a separate legal entity in most cases. USPI operates facilities on a day‐to‐day basis through management services contracts. Our sources of earnings from each facility consist of:

•management and administrative services revenues from the facilities USPI operates through management services contracts, computed as a percentage of each facility’s net revenues; and

•our share of each facility’s net income (loss), which is computed by multiplying the facility’s net income (loss) times the percentage of each facility’s equity interests owned by USPI.

Our role as an owner and day‐to‐day manager provides us with significant influence over the operations of each facility. For many of the facilities our Ambulatory Care segment holds an ownership interest in (158 of 466 facilities at December 31, 2022), this influence does not represent control of the facility, so we account for our investment in the facility under the equity method for an unconsolidated affiliate. USPI controls 308of the facilities our Ambulatory Care segment operates, and we account for these investments as consolidated subsidiaries. Our net earnings from a facility are the same under either method, but the classification of those earnings differs. For consolidated subsidiaries, our financial statements reflect

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100% of the revenues and expenses of the subsidiaries, after the elimination of intercompany amounts. The net profit attributable to owners other than USPI is classified within net income available (loss attributable) to noncontrolling interests.

For unconsolidated affiliates, our statements of operations reflect our earnings in two line items:

•equity in earnings of unconsolidated affiliates—our share of the net income (loss) of each facility, which is based on the facility’s net income (loss) and the percentage of the facility’s outstanding equity interests owned by USPI; and

•management and administrative services revenues, which is included in our net operating revenues—income we earn in exchange for managing the day‐to‐day operations of each facility, usually quantified as a percentage of each facility’s net revenues.

Our Ambulatory Care segment operating income is driven by the performance of all facilities USPI operates and by USPI’s ownership interests in those facilities, but our individual revenue and expense line items contain only consolidated businesses, which represent 66% of those facilities. This translates to trends in consolidated operating income that often do not correspond with changes in consolidated revenues and expenses, which is why we disclose certain statistical and financial data on a pro forma systemwide basis that includes both consolidated and unconsolidated (equity method) facilities.

Our unconsolidated facilities received cash payments from the PRF during 2021, and we recognized grant income of $14 million from these funds; this income is included in equity in earnings of unconsolidated affiliates in the accompanying Consolidated Statement of Operations for the year ended December 31, 2021. No additional grant income was recognized from our unconsolidated facilities during the year ended December 31, 2022.

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

The following table presents selected revenue and expense information for our Ambulatory Care segment:

Years Ended December 31, Increase(Decrease)

Equity in earnings of unconsolidated affiliates $ 206 $ 193 6.7 %

Salaries, wages and benefits $ 822 $ 690 19.1 %

Other operating expenses, net $ 438 $ 389 12.6 %

Revenues

Our Ambulatory Care net operating revenues increased by $530 million, or 19.5%, during the year ended December 31, 2022 compared to 2021. The change was driven by an increase from acquisitions of $453 million, as well as an increase in same‐facility net operating revenues of $146 million, which was attributable to the impact of improved case volumes, incremental revenue from new service lines and negotiated commercial rate increases. These impacts were partially offset by lower revenues of $69 million due primarily to the sale of USPI’s urgent care centers and the transfer of imaging centers to the Hospital Operations segment, both in April 2021. Our Ambulatory Care segment also recognized grant income from federal grants totaling $4 million and $49 million during the years ended December 31, 2022 and 2021, respectively, which is not included in net operating revenues.

Salaries, Wages and Benefits

Salaries, wages and benefits expense increased by $132 million, or 19.1%, during the year ended December 31, 2022 compared to 2021. Salaries, wages and benefits expense was impacted by an increase from acquisitions of $121 million and an increase in same‐facility salaries, wages and benefits expense of $41 million due primarily to higher surgical case volumes. These increases were partially offset by a decrease of $30 million due primarily to the sale of USPI’s urgent care centers and the transfer of imaging centers to the Hospital Operations segment. Salaries, wages and benefits expense as a percentage of net operating revenues decreased 10 basis points during the year ended December 31, 2022 compared to 2021 and included stock‐based compensation expense of $11 million and $13 million, respectively.

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Supplies

Supplies expense increased by $187 million, or 27.3%, during the year ended December 31, 2022 compared to 2021. The change was driven by an increase from acquisitions of $161 million, as well as an increase in same‐facility supplies expense of $32 million due primarily to an increase in surgical cases at our consolidated centers and higher pricing of certain supplies as a result of the pandemic, the impact of general market conditions and inflation. Supplies expense as a percentage of net operating revenues increased 160 basis points from 25.2% in the year ended December 31, 2021 to 26.8% in the year ended December 31, 2022. This change was driven by an increase in higher‐acuity, supply‐intensive surgeries and higher pricing of certain supplies.

Other Operating Expenses, Net

Other operating expenses increased by $49 million, or 12.6%, during the year ended December 31, 2022 compared to 2021. The change was primarily driven by an increase from acquisitions of $61 million, partially offset by a decrease of $18 million due primarily to the sale of USPI’s urgent care centers and the transfer of imaging centers to the Hospital Operations segment. Other operating expenses, net as a percentage of net operating revenues decreased from 14.3% during the year ended December 31, 2021 to 13.5% for 2022. Other operating expenses for our Ambulatory Care segment included $115 million and $100 million of rent expense for the years ended December 31, 2022 and 2021, respectively.

Facility Growth

The following table summarizes the year-over-year changes in our same‐facility revenue and cases on a pro forma systemwide basis, which includes both consolidated and unconsolidated (equity method) facilities. While we do not record the revenues of unconsolidated facilities, we believe this information is important in understanding the financial performance of our Ambulatory Care segment because these revenues are the basis for calculating our management services revenues and, together with the expenses of our unconsolidated facilities, are the basis for our equity in earnings of unconsolidated affiliates.

Net revenues 4.6%

Net revenue per case 2.5%

Joint Ventures with Health System Partners

USPI’s business model is to jointly own its facilities with local physicians and, in many of these facilities, a health system partner. Accordingly, as of December 31, 2022, the majority of facilities in our Ambulatory Care segment were operated in this model.

The table below summarizes the amounts we paid to acquire various ownership interests in ambulatory care facilities:

Years Ended December 31, Increase(Decrease)

Noncontrolling interests 9 79 (70)

The table below provides information about the ownership structure of the facilities operated by our Ambulatory Care segment:

With a health system partner 208

Without a health system partner 258

Total facilities operated 466

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The table below reflects the change in the number of facilities operated by our Ambulatory Care segment since December 31, 2021:

Acquisitions 37

Dispositions/Mergers (9)

Total increase in number of facilities operated 43

During the year ended December 31, 2022, we acquired controlling interests in 30 fully operational ASCs, 16 of which are located in Maryland, four in Florida, two in each of Arizona, Colorado and Tennessee, and four located in other states. All of these facilities are jointly owned with physicians, except one that is jointly owned with a health system partner and physicians. During 2022, we also acquired noncontrolling interests in seven ASCs, three of which are located in Texas, two in Washington and one in each of California and New Jersey. In total, we paid $178 million to acquire controlling and noncontrolling interests in these facilities.

In addition, during the year ended December 31, 2022, we paid an aggregate of $65 million to acquire controlling ownership interests in 23 previously unconsolidated ASCs located in 11 geographically diverse states. Following our acquisition of a controlling interest in one of these ASCs, we contributed our ownership interest in it to a joint venture in which we have a noncontrolling ownership interest.

We also regularly engage in the purchase of equity interests with respect to our investments in unconsolidated affiliates and consolidated facilities that do not result in a change in control. These transactions are primarily the acquisitions of equity interests in ASCs and the investment of additional cash in facilities that need capital for new acquisitions, new construction or other business growth opportunities. During the year ended December 31, 2022, we invested approximately $21 million in such transactions.

ConiferSegment

The following table presents selected revenue and expense information for our Conifer segment:

Years Ended December 31, Increase(Decrease)

Revenue cycle and other services – Tenet $ 451 $ 482 (6.4) %

Revenue cycle and other services – other customers $ 865 $ 785 10.2 %

Salaries, wages and benefits $ 689 $ 677 1.8 %

Supplies $ 4 $ 4 — %

Revenues

Our Conifer segment’s operating revenues from third-party clients, which revenues are not eliminated in consolidation, increased $80 million, or 10.2%, for the year ended December 31, 2022 compared to 2021. This increase was primarily attributable to contractual rate increases and new business expansion.

Salaries, Wages and Benefits

Salaries, wages and benefits expense for Conifer increased $12 million, or 1.8%, in the year ended December 31, 2022 compared to 2021. Salaries, wages and benefits expense included stock‐based compensation expense of $2 million in both 2022 and 2021.

Other Operating Expenses, Net

Other operating expenses for Conifer increased $27 million, or 11.7%, in the year ended December 31, 2022 compared to 2021. This increase was primarily due to new business expansion, higher vendor utilization and increased recruiting expenses in 2022. For both of the years ended December 31, 2022 and 2021, other operating expenses for our Conifer segment included $10 million of rent expense.

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Consolidated

Impairment and Restructuring Charges, and Acquisition-Related Costs

The following table presents information about our impairment and restructuring charges, and acquisition‐related costs:

Years Ended December 31,

Consolidated:

Impairment charges $ 94 $ 8

Restructuring charges 118 57

Acquisition-related costs 14 20

By segment:

Hospital Operations $ 180 $ 39

Ambulatory Care 21 27

Impairment charges during the year ended December 31, 2022 included $82 million for the write‐down of certain buildings and medical equipment located in one of our markets to their estimated fair values. Material adverse trends in our estimates of future undiscounted cash flows of the hospitals indicated the aggregate carrying value of the hospitals’ long‐lived assets was not recoverable from their estimated future cash flows. We believe the most significant factors contributing to the adverse financial trends included decreased revenues and lower patient volumes due to the pandemic and competition, as well as higher labor costs as a result of the pandemic. As a result, we updated the estimate of the fair value of the hospitals’ long‐lived assets and compared it to the aggregate carrying value of those assets. Because the fair value estimates were lower than the aggregate carrying value of the long‐lived assets, an impairment charge was recorded for the difference in the amounts. We also recorded $12 million of other impairment charges. For additional discussion, see Note6to the accompanying Consolidated Financial Statements. Impairment charges for the year ended December 31, 2022 were comprised of $86 million from our Hospital Operations segment, $6 million from our Ambulatory Care segment and $2 million from our Conifer segment.

Restructuring charges for the year ended December 31, 2022 consisted of $27 million of employee severance costs, $16 million related to the transition of various administrative functions to our GBC, $32 million related to contract and lease termination fees, and $43 million of other restructuring costs. Acquisition‐related costs during 2022 consisted entirely of transaction costs.

Impairment charges for the year ended December 31, 2021 were comprised of $5 million from our Ambulatory Care segment, primarily related to the impairment of certain management contract intangible assets, and $3 million from our Conifer segment. Restructuring charges during the year ended December 31, 2021 consisted of $14 million of employee severance costs, $19 million related to the transition of various administrative functions to our GBC and $24 million of other restructuring costs. Acquisition‐related costs during 2021 consisted entirely of transaction 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.

Litigation and Investigation Costs

Litigation and investigation costs for the years ended December 31, 2022 and 2021 were $70 million and $116 million, respectively. The decrease of $46 million, or 39.7%, in 2022 as compared to 2021 was primarily due to higher costs associated with legal proceedings and governmental investigations during 2021. See Note 17 to the accompanying Consolidated Financial Statements for additional information.

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Net Gains on Sales, Consolidation and Deconsolidation of Facilities

During the year ended December 31, 2021, we recorded net gains on sales, consolidation and deconsolidation of facilities of $445 million, primarily comprised of a gain of $406 million related to the sale of the Miami Hospitals in August 2021, a gain of $14 million related to the sale of the majority of our urgent care centers in April 2021, net gains of $22 million related to consolidation changes of certain USPI businesses due to ownership changes and net gains of $3 million related to other activity.

Interest Expense

Interest expense for the year ended December 31, 2022 was $890 million compared to $923 million for the year ended December 31, 2021.

Loss from Early Extinguishment of Debt

During the year ended December 31, 2022, we incurred aggregate losses from the early extinguishment of debt of $109 million. These losses primarily related to the redemption in full of our 7.500% senior secured first lien notes due 2025 (“2025 Senior Secured First Lien Notes”) in February 2022 and open market purchases and the subsequent redemption in full of our 6.750% senior unsecured notes due 2023 (the “2023 Senior Unsecured Notes”) during the six months ended June 30, 2022.

During the year ended December 31, 2021, we incurred aggregate losses from the early extinguishment of debt of $74 million. These losses related to the partial redemption of our July 2024 Senior Secured First Lien Notes in September 2021, the redemption in full of our 5.125% senior secured second lien notes due 2025 (the “2025 Senior Secured Second Lien Notes”) in June 2021 and the retirement in full of our 7.000% senior unsecured notes due 2025 (“2025 Senior Unsecured Notes”) in March 2021.

In both 2022 and 2021, the net losses from early extinguishment of debt primarily related to the difference between the purchase prices and the par values of the notes, as well as the write‐off of associated unamortized issuance costs.

Income Tax Expense

During the year ended December 31, 2022, we recorded income tax expense of $344 million in continuing operations on pre‐tax income of $1.344 billion compared to income tax expense of $411 million in continuing operations on pre‐tax income of $1.888 billion during the year ended December 31, 2021.

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

Years Ended December 31,

Tax expense at statutory federal rate of 21% $ 282 $ 396

State income taxes, net of federal income tax benefit 64 77

Tax benefit attributable to noncontrolling interests (122) (114)

Nondeductible goodwill 1 35

Nondeductible executive compensation 10 8

Nondeductible litigation costs — 1

Stock-based compensation tax benefit (6) (5)

Changes in valuation allowance 120 2

Other items 7 3

A change in the business interest expense disallowance rules took effect in 2022, resulting in a larger amount of interest disallowance compared to prior years. During the year ended December 31, 2022, the valuation allowance increased by $120 million, including an increase of $123 million due to limitations on the tax deductibility of interest expense, a decrease of $1 million due to the expiration or worthlessness of unutilized net operating loss carryovers, and a decrease of $2 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2022 was $177 million. During the year ended December 31, 2021, the valuation allowance increased by $2 million, including an increase of $2 million due to limitations on the tax deductibility of interest expense, a decrease of $2 million due to the expiration or worthlessness of unutilized state net operating loss carryovers, and an increase of $2 million due to changes in the

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expected realizability of deferred tax assets. The remaining balance in the valuation allowance at December 31, 2021 was $57 million.

Net Income Available to Noncontrolling Interests

Net income available to noncontrolling interests was $590 million for the year ended December 31, 2022 compared to $562 million for the year ended December 31, 2021. Net income available to noncontrolling interests in 2022 was comprised of $469 million related to our Ambulatory Care segment, $77 million related to our Conifer segment and $44 million related to our Hospital Operations segment. Of the portion related to our Ambulatory Care segment, $9 million related to the minority interest Baylor held in USPI until June 30, 2022.

ADDITIONAL SUPPLEMENTAL NON-GAAP DISCLOSURES

The financial information provided throughout this report, including our Consolidated Financial Statements and the notes thereto, has been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, we use certain non‐GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on our financial statements, some of which are recurring or involve cash payments. We use this information in our analysis of the performance of our business, excluding items we do not consider relevant to the performance of our continuing operations. In addition, we use these measures to define certain performance targets under our compensation programs.

“Adjusted EBITDA” is a non‐GAAP measure we define as net income available (loss attributable) to Tenet Healthcare Corporation common shareholders before (1) the cumulative effect of changes in accounting principle, (2) net loss attributable (income available) to noncontrolling interests, (3) income (loss) from discontinued operations, net of tax, (4) income tax benefit (expense), (5) gain (loss) from early extinguishment of debt, (6) other non‐operating income (expense), net, (7) interest expense, (8) litigation and investigation (costs) benefit, net of insurance recoveries, (9) net gains (losses) on sales, consolidation and deconsolidation of facilities, (10) impairment and restructuring charges and acquisition‐related costs, (11) depreciation and amortization, and (12) income (loss) from divested and closed businesses (i.e., health plan businesses). Litigation and investigation costs do not include ordinary course of business malpractice and other litigation and related expense.

We believe the foregoing non‐GAAP measure is useful to investors and analysts because it presents additional information about our financial performance. Investors, analysts, company management and our board of directors utilize this non‐GAAP measure, in addition to GAAP measures, to track our financial and operating performance and compare that performance to peer companies, which utilize similar non‐GAAP measures in their presentations. The human resources committee of our board of directors also uses certain non‐GAAP measures to evaluate management’s performance for the purpose of determining incentive compensation. We believe that Adjusted EBITDA is a useful measure, in part, because certain investors and analysts use both historical and projected Adjusted EBITDA, in addition to GAAP and other non‐GAAP measures, as factors in determining the estimated fair value of shares of our common stock. Company management also regularly reviews the Adjusted EBITDA performance for each operating segment. We do not use Adjusted EBITDA to measure liquidity, but instead to measure operating performance. The non‐GAAP Adjusted EBITDA measure we utilize may not be comparable to similarly titled measures reported by other companies. Because this measure excludes many items that are included in our financial statements, it does not provide a complete measure of our operating performance. Accordingly, investors are encouraged to use GAAP measures when evaluating our financial performance.

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The following table presents the reconciliation of Adjusted EBITDA to net income available to Tenet Healthcare Corporation common shareholders (the most comparable GAAP term):

Years Ended December 31,

Less: Net income available to noncontrolling interests (590) (562)

Income (loss) from discontinued operations, net of tax 1 (1)

Income from continuing operations 1,000 1,477

Loss from early extinguishment of debt (109) (74)

Other non-operating income, net 10 14

Litigation and investigation costs (70) (116)

Net gains on sales, consolidation and deconsolidation of facilities 1 445

Impairment and restructuring charges, and acquisition-related costs (226) (85)

Depreciation and amortization (841) (855)

Loss from divested and closed businesses — (1)

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE YEAR ENDED DECEMBER 31, 2020

A discussion of the results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found in our Annual Report on Form 10‐K for the year ended December 31, 2021.

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LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS

Scheduled Contractual Obligations

Our obligations to make future cash payments under contracts are summarized in the table below, all as of December 31, 2022. Other than the repayment of long-term debt, we expect to use net cash generated from operating activities, cash on hand or borrowings under our Credit Agreement to satisfy the below obligations. Long‐term debt maturities may be refinanced or repaid using net cash generated from operating activities or from the proceeds from sales of facilities.

Total Years Ended December 31, Later Years

(In Millions)

Purchase orders 369 369 — — — — —

(1) Amounts include both principal and interest.

Long-term Debt—Our Credit Agreement provides for revolving loans in an aggregate principal amount of up to $1.500 billion, subject to borrowing availability, with a $200 million subfacility for standby letters of credit. In March 2022, we amended our Credit Agreement to, among other things, (1) decrease the aggregate revolving credit commitments from the previous maximum of $1.900 billion to $1.500 billion, (2) extend the Credit Agreement’s maturity date to March 2027 and (3) replace the London Interbank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“SOFR”) and Daily Simple SOFR (each, as defined in the Credit Agreement) as the reference interest rate. At December 31, 2022, we had no cash borrowings outstanding under the Credit Agreement and less than $1 million of standby letters of credit outstanding.

At December 31, 2022, we had outstanding senior unsecured and senior secured notes (“Senior Notes”) with an aggregate principal balance of $14.757 billion. The Senior Notes generally require semi‐annual interest payments and have maturity dates ranging from 2024 through 2031. Any outstanding principal and accrued but unpaid interest is due upon maturity.

We consummated the following transactions affecting our Senior Notes in the year ended December 31, 2022:

•During the three months ended December 31, 2022, we paid $13 million from cash on hand to repurchase $14 million of the aggregate principal amount then outstanding of our July 2024 Senior Secured First Lien Notes in advance of their maturity date through multiple open‐market transactions.

•Also during the three months ended December 31, 2022, we paid $11 million from cash on hand to repurchase $11 million of the aggregate principal amount then outstanding of our September 2024 Senior Secured First Lien Notes in advance of their maturity date through multiple open‐market transactions.

•In June 2022, we issued $2.000 billion aggregate principal amount of our 2030 Senior Secured First Lien Notes. We pay interest on these notes semi‐annually in arrears on June 15 and December 15 of each year, which payments commended on December 15, 2022. As further discussed below, we used a substantial portion of the issuance proceeds from the 2030 Senior Secured First Lien Notes, after payment of fees and expenses, to finance the redemption of our 2023 Senior Unsecured Notes.

•Through a series of open‐market transactions during the six months ended June 30, 2022, we repurchased $124 million aggregate principal amount outstanding of our 2023 Senior Unsecured Notes using cash on hand. Following the issuance of our 2030 Senior Secured First Lien Notes in June 2022, we used a substantial portion of the proceeds to redeem the then‐remaining $1.748 billion aggregate principal outstanding of the 2023 Senior Unsecured Notes in advance of their maturity date. In total, we paid $1.933 billion during the six months ended June 30, 2022 to retire our 2023 Senior Unsecured Notes in full and recorded aggregate losses from early extinguishment of debt of $71 million.

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•In February 2022, we paid $730 million from cash on hand to redeem all $700 million aggregate principal amount outstanding of our 2025 Senior Secured First Lien Notes in advance of their maturity date. In connection with the redemption, we recorded a loss from early extinguishment of debt of $38 million in the three months ended March 31, 2022.

At December 31, 2022, using the last 12 months of Adjusted EBITDA, our ratio of total long‐term debt, net of cash and cash equivalent balances, to Adjusted EBITDA was 4.1x. We anticipate this ratio will fluctuate from quarter to quarter based on earnings performance and other factors, including the use of our Credit Agreement as a source of liquidity and acquisitions that involve the assumption of long‐term debt. We seek to manage this ratio and increase the efficiency of our balance sheet by following our business plan and managing our cost structure, including through possible asset divestitures, and through other changes in our capital structure. As part of our long‐term objective to manage our capital structure, we continue to evaluate opportunities to retire, purchase, redeem and refinance outstanding debt subject to prevailing market conditions, our liquidity requirements, operating results, contractual restrictions and other factors. Our ability to achieve our leverage and capital structure objectives is subject to numerous risks and uncertainties, many of which are described in the Forward‐Looking Statements and Risk Factors sections in Part I of this report.

Interest payments, net of capitalized interest, were $848 million, $937 million and $962 million in the years ended December 31, 2022, 2021 and 2020, respectively. For the year ending December 31, 2023, we expect annual interest payments to be approximately $835 million to $845 million.

Future maturities of our long-term debt obligations are summarized in the table above. See Note 8 to the accompanying Consolidated Financial Statements for additional information about our long‐term debt obligations.

Lease Obligations—We have operating lease agreements primarily for real estate, including off‐campus outpatient facilities, medical office buildings, and corporate and other administrative offices, as well as for medical office equipment. Our finance leases are primarily for medical equipment and information technology and telecommunications assets. As of December 31, 2022, we had fixed payment obligations of $1.517 billion under non‐cancellable lease agreements. Future payments due in connection with our operating and finance leases, including imputed interest, are summarized in the table above. Additional information about our lease commitments is provided in Note 7 to the accompanying Consolidated Financial Statements.

Academic Teaching Services—We enter into contracts for academic teaching services with university and physician groups to support graduate medical education. These agreements contain various rights and termination provisions.

Defined Benefit Plan Obligations—We maintain three frozen, non‐qualified defined benefit plans that provide supplemental retirement benefits to certain of our current and former executives. These plans are unfunded, and plan obligations are paid from our working capital. We also maintain a frozen, qualified defined benefit plan that benefits certain of our current and former employees in Detroit. See Note 10 to the accompanying Consolidated Financial Statements for additional information about our defined benefit plans.

Information Technology Contracts—We enter into various non‐cancellable contracts for information technology services and licenses as a normal part of our business. These contracts generally relate to information technology infrastructure support and services, software licenses for certain operational and administrative systems, and cybersecurity‐related software and services.

Purchase Orders—We had outstanding short‐term purchase commitments of $369 million at December 31, 2022, which we expect to pay within 12 months.

Other Contractual Obligations

Asset Retirement Obligations—Asset retirement obligations represent the estimated costs to perform environmental remediation work, which we are legally obligated to complete, at certain of our facilities upon their retirement. This work could include asbestos abatement, the removal of underground storage tanks and other similar activities. At December 31, 2022, the undiscounted aggregate future estimated payments related to these obligations was $184 million. We are unable to predict the timing of these payments due to the uncertainty and long timeframes inherent in these obligations.

Standby Letters of Credit—Standby letters of credit are required principally by our insurers and various states to collateralize our workers’ compensation programs pursuant to statutory requirements and as security to collateralize the deductible and self‐insured retentions under certain of our professional and general liability insurance programs. The amount of

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collateral required is primarily dependent upon the level of claims activity and our creditworthiness. The insurers require the collateral in case we are unable to meet our obligations to claimants within the deductible or self‐insured retention layers.

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. Drawings under any letter of credit issued under the LC Facility accrue interest if not reimbursed within three business days. At December 31, 2022, we had $116 million of standby letters of credit outstanding under the LC Facility. The timing of reimbursement payments is uncertain, as we cannot foresee when, or if, a standby letter of credit will be drawn upon.

Guarantees—Our guarantees include minimum revenue guarantees, primarily related to physicians under relocation agreements and physician groups that provide services at our hospitals, as well as operating lease guarantees. At December 31, 2022, the maximum potential amount of future payments under these guarantees was $266 million, of which $168 million were recorded in the accompanying Consolidated Balance Sheet at December 31, 2022. The timing and amount of future payments under these guarantees is uncertain.

Professional and General Liability Obligations—At December 31, 2022, the current and long‐term professional and general liability reserves included in our Consolidated Balance Sheet were $255 million and $790 million, respectively, and the current and long‐term workers’ compensation reserves included in our Consolidated Balance Sheet were $45 million and $93 million, respectively. The timing of professional and general liability payments is uncertain as such payments depend on several factors, including the nature of claims and when they are received.

Baylor Put/Call Agreement—As further discussed in Note 18 to the accompanying Consolidated Financial Statements, we had a put/call agreement (the “Baylor Put/Call Agreement”) with respect to the 5% ownership interest Baylor held in USPI until June 30, 2022. The Baylor Put/Call Agreement gave Baylor the option to annually put up to one-third of its total shares in USPI (the “Baylor Shares”) over a period of three years beginning in 2021. We had the right to call the difference between the number of shares Baylor put each year and the maximum number of shares it could have put.

In each of 2021 and 2022, we notified Baylor of our intention to exercise our call option to purchase 33.3% of the Baylor Shares for that year (66.6% in total). In June 2022, we entered into an agreement with Baylor (the “Share Purchase Agreement”) to complete the purchase of the Baylor Shares we called in 2021 and 2022 and to accelerate the acquisition of the remaining Baylor Shares eligible to be put/called in 2023. Under the terms of the Share Purchase Agreement, we agreed to pay Baylor $406 million to buy its entire 5% voting interest in USPI. We paid $11 million upon execution of the Share Purchase Agreement and are obligated to make additional non-interest bearing monthly payments of approximately $11 million, which payments commenced in August 2022. At December 31, 2022, we had liabilities of $135 million recorded in other current liabilities and $190 million in other long-term liabilities in the accompanying Consolidated Balance Sheet for the purchase of these shares.

Investment in the SCD Centers—USPI continues to make offers in an ongoing process to acquire a portion of the equity interests in certain of the ASCs acquired from SCD in December 2021 from the physician owners for consideration of up to approximately $250 million. During the year ended December 31, 2022, we made aggregate payments of $58 million to acquire controlling interests in 18 of these ASCs. We cannot reasonably predict how many additional physician owners will accept our offers to acquire a portion of their equity, nor the timing or amount of any remaining payments.

SCD Development Agreement—In December 2021, USPI and SCD’s principals entered into a joint venture and development agreement under which USPI has the exclusive option to partner with affiliates of SCD on the future development of a minimum target of 50 de novo ASCs through December 2026. The timing and amount of payments related to the development of these facilities is currently unknown.

Other than the obligations described above, we had no off‐balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources at December 31, 2022.

Other Cash Requirements

Capital Expenditures—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. We continue to implement our portfolio diversification strategy into ambulatory surgery and have a baseline intention to invest $250 million annually in

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ambulatory business acquisitions and de novo facilities. Capital expenditures were $762 million, $658 million and $540 million in the years ended December 31, 2022, 2021 and 2020, respectively. We anticipate that our capital expenditures for continuing operations for the year ending December 31, 2023 will total approximately $625 million to $675 million, including $196 million that was accrued as a liability at December 31, 2022.

We completed the construction of and opened PMC Fort Mill to patients during the year ended December 31, 2022. This 100‐bed facility includes an emergency department, multi‐specialty operating rooms, an intensive care unit, and labor and delivery rooms. In addition, we broke ground in 2022 on a new healthcare campus in the Westover Hills area of San Antonio, Texas, which campus will include a hospital, ASC and medical office space. We expect construction of the Westover Hills facilities will cost approximately $230 million over the construction period.

By the beginning of 2030, all hospitals in California providing acute care services must meet standards that are intended to ensure that they remain intact and capable of continued operation following an earthquake. During 2022, we began planning for the nonstructural performance category (“NPC”) seismic requirements for our hospitals in California, which we expect to complete by the end of 2023 for review by the State. This analysis will clarify the NPC work required to be completed in future years to bring our hospitals in compliance with the building requirements by the 2030 deadline, and the results of the NPC planning will inform more detailed design and cost estimates after we receive State feedback. We will also determine any additional structural category performance (“SCP”) work, with required design and construction work in both categories coordinated. At this time, we are unable to reasonably estimate the amount of NPC and SCP work our hospitals will require or the potential cost to retrofit them. The additional NPC work required will not change the timing or general nature of our ongoing or currently planned NPC or SCP work on our buildings.