Tenet Reports EPS from Operations of $0.40; Net Operating Revenues Grew 5.8 Percent, Driven by...

Business Editors

SANTA BARBARA, Calif.--(BUSINESS WIRE)--April 10, 2003

Tenet Healthcare Corporation (NYSE:THC) today reported results for its quarter ended Feb. 28, 2003, and provided preliminary guidance for calendar fiscal 2003 that incorporates the impact of previously announced

During the quarter, net income from operations was $190 million, or $0.40 per diluted share, compared with $310 million, or $0.62, in the prior-year quarter, after reflecting Statement of Financial Accounting Standards (SFAS) No. 142 on accounting for goodwill as if it had been in effect in both periods and after adjusting the prior- year period to reflect the company's June 2002 3-for-2 stock split. A reconciliation of net income from operations to net income as determined in accordance with generally accepted accounting principles is offered in Note 9 of the Financial Update below.

The company offered preliminary guidance for earnings from operations for its new calendar fiscal 2003, expected to be between $1.34 per share and $1.65 per share. This range incorporates a proposed rule change regarding Medicare outlier payments and the $0.39 to $0.43 cumulative net reduction from numerous previously announced actions the company has taken in recent months. These actions include the decision to expense stock options, reclassification of earnings from pending asset sales, the company's recent $1 billion financing and announced cost reductions. These adjustments are purely arithmetic and do not reflect any changes in the underlying operating assumptions. As such, this guidance is preliminary, pending completion of the company's operating budget process currently underway. As previously announced, Tenet is moving to a calendar fiscal year to help investors more easily make financial comparisons with other publicly traded hospital companies, and better align its financial reporting with the company's new outlier policy that became effective Jan. 1, 2003.

"We are clearly in a transitional period and we continue to address aggressively the challenges facing the company through cost reductions, non-core asset sales, revised pricing policies, enhanced corporate governance, and a sharp focus on quality patient care," said Jeffrey C. Barbakow, Tenet chairman and chief executive officer. "Some of these actions will impact our near-term performance but are necessary as we work to reposition the company and build a strong foundation for the future. The fact that admissions to our hospitals continue to grow at a solid rate is an encouraging demonstration of the underlying strength in our core business."

Results of Fiscal Third-Quarter Ended Feb. 28, 2003

For the third quarter under the company's former May 31 fiscal year, admissions to Tenet hospitals rose 2.5 percent on a same- facility basis and 1.9 percent overall. Outpatient visits rose 1.9 percent and net outpatient revenue per visit rose 10.0 percent, both on a same-facility basis.

Net operating revenues grew 5.8 percent to $3.69 billion, compared with $3.48 billion in the prior-year quarter.

Reflecting the company's voluntary adoption on Jan. 1, 2003, of new policies regarding Medicare outlier payments, such payments to Tenet hospitals dropped to $40 million in the quarter, compared with $191 million in the prior-year period. Reflecting this decline, and offset by increases in other payor categories, overall unit revenue (measured by same-facility net patient revenue per admission) rose 0.3 percent, compared with the prior-year quarter. Excluding all outlier payments, unit revenue rose 7.3 percent.

The reduction in Medicare outlier revenue also caused a shift in the company's payor mix, with Medicare now representing 28 percent of net patient revenues and managed care accounting for 49 percent, compared with 32 percent and 44 percent, respectively, in the prior- year quarter.

Reflecting the reduction of outlier payments and a significant increase in medical malpractice insurance reserves, EBITDA (earnings before interest, taxes, depreciation and amortization, impairment and restructuring charges, and loss from early extinguishment of debt) declined 29.1 percent in the quarter to $511 million, versus $721 million in the prior-year quarter.

EBITDA margins dropped to 13.9 percent, versus 20.7 percent in the year-ago quarter. During the quarter, the company increased its medical malpractice insurance reserves, resulting in total malpractice expense for the quarter of $189 million, compared with $50 million in the prior-year quarter. A reconciliation of EBITDA to operating income as determined in accordance with generally accepted accounting principles is offered in Note 10 of the Financial Update below.

The company also recorded non-cash impairment charges of $383 million relating to the write-down of long-lived assets to their estimated fair values at ten general hospitals and four other properties. The write-downs were necessitated by various expected changes in the business at these facilities, including the effect of projected reductions in Medicare outlier payments. The company also recorded restructuring charges of $15 million during the quarter related primarily to severance and relocation costs in connection with management changes. In the prior-year quarter, the company recorded a charge of $12 million related to the early retirement of debt. Including the effect of these charges, the company posted a net loss in the quarter of $55 million, or $0.12 per share, compared with net income of $280 million, or $0.56 per share, in the prior-year quarter.

Cash flow from operations was $327 million in the quarter, compared with $475 million in the prior-year quarter. Free cash flow, defined as cash flow from operations less capital expenditures, was $98 million, compared with $307 million. On a rolling 12-month basis, cash flow from operations was $2.09 billion and free cash flow was $1.14 billion, compared with $2.37 billion and $1.59 billion, respectively, in the prior-year 12-month period.

Accounts receivable days outstanding were 65 days in the quarter, up from 64 days in the year-ago quarter and 62 days in the preceding quarter. Approximately one-half of the growth over the preceding quarter derives from the arithmetic impact of the shift in payor mix. Given the reduction in Medicare outlier payments, proportionately more of the company's revenue comes from managed care payors, which tend to pay bills much more slowly than Medicare.

During the quarter, the company repurchased 6 million shares of its common stock for a total cost of approximately $110 million, at an average cost of $18.28 per share. Under its current authorization, the company may repurchase up to 24 million additional shares using free cash flow. Because the company will be reporting results for the new calendar fiscal quarter ending March 31, 2003, next month and otherwise would be restricted under its internal policies from purchasing shares, it has put in place a 10b-5(1) plan to enable it to continue to use its free cash flow to repurchase shares between April 14 and the time that it reports its March quarter results.

Key financial ratios remain strong. The company's coverage ratio, or EBITDA-to-net-interest-expense rose to 10.72, up from 7.35 times a year ago. The company's debt-to-EBITDA ratio dropped to 1.44 times, down from 1.63 times a year ago. Its debt-to-equity ratio dropped to 0.71 times, down from 0.79 times a year ago.

Nine Months

In reporting nine-month results, the company stressed that due to the change in Medicare outlier payments the nine-month results are not representative of expected full-year results, and pointed out that full-year results for a May 31 year-end would not be reported given the change in fiscal year to a calendar year.

In the first nine months of fiscal 2003, admissions to Tenet hospitals rose 2.9 percent on a same-facility basis and 3.5 percent overall compared with the prior-year period.

Net operating revenues rose 9.7 percent to $11.17 billion, versus $10.18 billion in the prior-year period. Medicare outlier payments totaled $513 million in the current nine-month period, compared with $543 million in the prior-year period.

Unit revenues, measured by same-facility net patient revenue per admission, rose 5.7 percent. Excluding outlier payments, unit revenues grew 6.9 percent.

EBITDA totaled $2.04 billion, versus $2.03 billion in the prior-year period. EBITDA margins were 18.3 percent, compared with 19.9 percent in the prior-year period. A reconciliation of EBITDA to operating income as determined in accordance with generally accepted accounting principles is offered in Note 10 of the Financial Update below.

Net income from operations rose to $886 million, or $1.80 per share, compared with $835 million, or $1.66 per share, in the year-ago period. A reconciliation of net income from operations to net income as determined in accordance with generally accepted accounting principles is offered in Note 9 of the Financial Update below.

Net income from operations in both the current and the year-ago nine-month periods excludes the impact of impairment, restructuring and other unusual charges, as well as charges for the early retirement of debt. Reflecting these charges, the company recorded net income of $598 million, or $1.22 per share, in the current nine-month period, compared with $524 million, or $1.04 per share, in the prior-year nine months.

Outlook

On December 3, 2002, the company said that it expected earnings per share from operations for the twelve months ended May 2004 to range between $1.80 and $2.20 per share, depending upon changes to the Medicare outlier rule and commercial pricing assumptions. The company's preliminary guidance for its new calendar fiscal 2003 was derived from this prior assumption, updated for the impact of numerous subsequent developments.

Since the December guidance, the company adopted in January a voluntary policy regarding Medicare outlier payments that it said would reduce its outlier payments to approximately $8 million per month or $96 million per year. Last month, the Centers for Medicare and Medicaid Services (CMS) proposed its expected change to the outlier rules. Based upon the proposed rule, the company expects outlier payments to its hospitals to be approximately $6 million per month or $72 million per year. This compares to the $100 million to $200 million assumed in the December guidance. This change alone brings the range to $1.77 to $2.04 per share. Additionally, the company has taken numerous actions which would further impact those assumptions as follows:

    --  Revising the December guidance to the new calendar fiscal year
        ending Dec. 2003 results in a $0.10 per share reduction.
    --  Expensing stock options reduces another $0.18 per share, as
        previously announced.
    --  The previously announced $1 billion financing completed in
        January reduces earnings by another $0.06 per share due to
        increased interest expense.
    --  The previously announced pending asset sale, although
        ultimately accretive once proceeds are used for share
        repurchase, will be dilutive during the interim period while
        the assets are held as discontinued, reducing fiscal calendar
        2003 performance by $0.09 to $0.12 per share, depending upon
        the timing of the sales.
    --  The expected cost reductions of $100 million would add $0.12
        per share once fully implemented. Given the expected timing of
        these cuts, the company expects to realize approximately $0.03
        to $0.04 per share in fiscal calendar 2003.

Of these adjustments, the $0.27 to $0.30 of reductions related to expensing stock options and discontinued operations are non-cash accounting changes. All of the actions, in aggregate, reduce the previous guidance range to $1.34 to $1.65 earnings per share from operations, before any charges.

Additional Information

According to its new calendar fiscal year, the company will report results of its March quarter in May.

In the March quarter, the company expects to record additional impairment and restructuring charges, including impairment charges of approximately $62 million related to its announced asset sales. The company also expects to record goodwill impairment charges in the period of approximately $175 million to $200 million related to SFAS No. 142 goodwill impairments resulting from its change in reporting units from the divisional level to the company's five new operating regions. The company noted that it anticipates recording additional restructuring and other charges throughout this transitional year as it continues its restructuring efforts.

The assets identified for sale will be accounted for as discontinued operations beginning with the March quarter, in accordance with SFAS No. 144. This will require reporting these assets' operating results in current and prior periods as discontinued operations in our statements of operations.

Also in the March period, the company will begin expensing stock options and the employee stock purchase plan discounts granted to employees in accordance with SFAS No. 123 and SFAS No. 148. This will increase salaries and benefits costs reported in the company's statements of operations by approximately $36 million per quarter. The company will use the retroactive restatement method to transition to the fair value method of accounting for stock-based employee compensation, resulting in expensing the fair value of options which will cause the company to restate prior periods.

As it transitions to the new calendar schedule, the company will provide unaudited prior-year calendar-quarter results for comparison purposes.

Also next month, the company will file an annual report on Form 10-K for the 7-month period between the end of its previous fiscal year, ended May 2002, and its new calendar fiscal year-end, ended December 2002, pursuant to the transition rules involving a change in fiscal year.

Since December, the company has, among other things, (1) announced a series of corporate governance enhancements, including the expected appointment of four new independent directors and a non-executive chairman; (2) decided to sell non-core assets and accelerate share repurchases; (3) taken action to reduce operating expenses going forward by at least $100 million annually; (4) announced its intention to begin expensing on its income statement the cost of stock options granted to employees; (5) changed to a calendar year for financial reporting to enhance comparability with other hospital companies; (6) adopted a new policy on Medicare outlier payments; (7) restructured its operating divisions and regions; (8) promoted its top hospital executives to the senior executive management team; (9) placed a seasoned hospital executive who is also a physician in charge of its large California market; and (10) established a groundbreaking new policy for uninsured patients that includes an offer, subject to government approval, of managed care-style pricing.

Tenet executives will discuss the company's performance in greater detail on a live audio webcast later this morning. All interested investors are invited to access the webcast live at 11:00 a.m. (EDT), or on a replay basis for the next 30 days, through the company's website, www.tenethealth.com, or through www.companyboardroom.com.

Tenet Healthcare Corporation, through its subsidiaries, owns and operates 114 acute care hospitals with 27,882 beds and numerous related health care services. Tenet and its subsidiaries employ approximately 116,500 people serving communities in 16 states. Tenet's name reflects its core business philosophy: the importance of shared values among partners -- including employees, physicians, insurers, and communities -- in providing a full spectrum of health care. Tenet can be found on the World Wide Web at www.tenethealth.com.

Certain statements in this release may constitute forward-looking statements. They are based on management's current expectations and could be affected by numerous factors and are subject to various risks and uncertainties. Certain of those risks and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K and quarterly reports on Form 10-Q. Do not rely on any forward-looking statement, as we cannot predict or control many of the factors that ultimately may affect our ability to achieve the results estimated. We make no promise to update any forward-looking statement, whether as a result of changes in underlying factors, new information, future events, or otherwise.

                     TENET HEALTHCARE CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)

 (Dollars in millions            Three Months Ended February 28,
  except per share amounts)
                               2003       %    2002       %  Growth
                            ---------------------------------------
Net operating revenues        3,686  100.0%   3,484  100.0%    5.8%
Operating expenses:
     Salaries and benefits   (1,451)  39.4%  (1,351)  38.8%    7.4%
     Supplies                  (558)  15.1%    (496)  14.2%   12.5%
     Provision for doubtful
      accounts                 (304)   8.2%    (236)   6.8%   28.8%
     Other operating
      expenses (7)             (862)  23.4%    (680)  19.5%   26.8%

Earnings before interest,
 taxes, depreciation,
 amortization, impairment
 and restructuring charges
 and loss from early
 extinguishment of debt         511             721         (29.1%)
          EBITDA margin               13.9%           20.7%  (6.8%)(a)

Depreciation                   (125)           (121)
Amortization (2)                 (7)            (33)
Impairment and
 restructuring charges
 (3, 4)                        (398)            ---
Loss from early
 extinguishment of debt (5)     ---             (12)

Operating income (loss)         (19)            555

Interest expense                (67)            (75)
Investment earnings               5               7
Minority interests in income
 of consolidated
 subsidiaries                    (5)             (9)
Impairment of investment
 securities (5)                 ---             ---

Income (loss) before income
 taxes                          (86)            478
Income taxes                     31            (198)
Net income (loss)               (55)            280

Diluted earnings (loss) per
 share:
  Operations:
      Before goodwill
       amortization            0.40            0.62         (35.5%)
      Goodwill amortization
       (2)                      ---           (0.04)
                               0.40            0.58
  Impairment and
   restructuring charges
   (3, 4)                     (0.52)            ---
  Loss from early
   extinguishment of debt
   (5)                          ---           (0.02)
  Impairment of investment
   securities (5)               ---             ---
  Total                       (0.12)           0.56

Diluted weighted average
 shares outstanding (000s)  472,289         502,682

Shares outstanding at end
 of period (000s)           468,554         489,760

(a) This change is the difference between the 2003 and 2002
    percentages shown.


                     TENET HEALTHCARE CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)

 (Dollars in millions             Nine Months Ended February 28,
  except per share amounts)
                               2003       %    2002       %  Growth
                            ---------------------------------------
Net operating revenues       11,167  100.0%  10,175  100.0%    9.7%
Operating expenses:
     Salaries and benefits   (4,321)  38.7%  (3,921)  38.5%   10.2%
     Supplies                (1,623)  14.5%  (1,435)  14.1%   13.1%
     Provision for doubtful
      accounts                 (872)   7.8%    (740)   7.3%   17.8%
     Other operating
      expenses (7)           (2,309)  20.7%  (2,054)  20.2%   12.4%

Earnings before interest,
 taxes, depreciation,
 amortization, impairment,
 restructuring, other
 unusual charges and loss
 from early extinguishment
 of debt                      2,042           2,025            0.8%
          EBITDA margin               18.3%           19.9%  (1.6%)(a)

Depreciation                   (367)           (354)
Amortization (2)                (23)           (100)
Impairment, restructuring
 and other unusual charges
 (3, 4)                        (398)            (99)
Loss from early
 extinguishment of debt (5)      (4)           (287)

Operating income              1,250           1,185

Interest expense               (193)           (258)
                               (129)           (129)        (31.4%)
                                  4               4         (20.0%)

Investment earnings              18              26
Minority interests in income
 of consolidated
 subsidiaries                   (25)            (28)
Impairment of investment
 securities (6)                 (64)            ---

Income before income taxes      986             925
Income taxes                   (388)           (401)
Net income                      598             524

Diluted earnings (loss) per
 share:
  Operations:
      Before goodwill
       amortization            1.80            1.66            8.4%
      Goodwill amortization
       (2)                      ---           (0.13)
                               1.80            1.53
  Impairment, restructuring
   and other unusual charges
   (3, 4)                     (0.50)          (0.13)
  Loss from early
   extinguishment of debt
   (5)                          ---           (0.36)
  Impairment of investment
   securities (6)             (0.08)            ---
  Total                        1.22            1.04

Diluted weighted average
 shares outstanding (000s)  489,111         502,959

Shares outstanding at end
 of period (000s)           468,554         489,760

(a) This change is the difference between the 2003 and 2002
    percentages shown.


                     TENET HEALTHCARE CORPORATION
        FINANCIAL DATA EXCLUDING MEDICARE OUTLIER PAYMENTS (11)
                              (Unaudited)

 (Dollars in millions)            Three Months Ended February 28,

                                2003       %   2002       %  Growth
                              -------------------------------------
Net operating revenues as
 reported                      3,686  100.0%  3,484  100.0%    5.8%
  Less: Medicare outlier
   payments                      (40)          (191)
Adjusted net operating
 revenues                      3,646          3,293           10.7%
Operating expenses:
     Salaries and benefits    (1,451)  39.8% (1,351)  41.0%    7.4%
     Supplies                   (558)  15.3%   (496)  15.1%   12.5%
     Provision for doubtful
      accounts                  (304)   8.3%   (236)   7.2%   28.8%
     Other operating expenses
      (7)                       (862)  23.6%   (680)  20.6%   26.8%

Adjusted earnings before
 interest, taxes,
 depreciation, amortization,
 impairment, restructuring,
 other unusual charges and
 loss from early
 extinguishment of debt          471            530         (11.1%)
          EBITDA margin                12.9%          16.1%  (3.2%)(a)

Depreciation                    (125)          (121)
Amortization (2)                  (7)           (33)
Impairment, restructuring and
 other unusual charges (3, 4)   (398)           ---
Loss from early
 extinguishment of debt (5)      ---            (12)

Adjusted operating income
 (loss)                          (59)           364

Total-facility net inpatient
 revenues (in millions)       $2,350         $2,144            9.6%
Total-facility net inpatient
 revenue per patient day      $1,692         $1,558            8.6%
Total-facility net inpatient
 revenue per admission        $8,983         $8,348            7.6%

Same-facility net inpatient
 revenues (in millions)       $2,315         $2,104           10.0%
Same-facility net inpatient
 revenue per patient day      $1,701         $1,577            7.9%
Same-facility net inpatient
 revenue per admission        $9,012         $8,396            7.3%


                                   Nine Months Ended February 28,

                                2003       %   2002       %  Growth
                              -------------------------------------
Net operating revenues as
 reported                     11,167  100.0% 10,175  100.0%    9.7%
  Less: Medicare outlier
   payments                     (513)          (543)
Adjusted net operating
 revenues                     10,654          9,632           10.6%
Operating expenses:
     Salaries and benefits    (4,321)  40.6% (3,921)  40.7%   10.2%
     Supplies                 (1,623)  15.2% (1,435)  14.9%   13.1%
     Provision for doubtful
      accounts                  (872)   8.2%   (740)   7.7%   17.8%
     Other operating expenses
      (7)                     (2,309)  21.7% (2,054)  21.3%   12.4%

Adjusted earnings before
 interest, taxes,
 depreciation, amortization,
 impairment, restructuring,
 other unusual charges and
 loss from early
 extinguishment of debt        1,529          1,482            3.2%
          EBITDA margin                14.4%          15.4%  (1.0%)(a)

Depreciation                    (367)          (354)
Amortization (2)                 (23)          (100)
Impairment, restructuring and
 other unusual charges (3, 4)   (398)           (99)
Loss from early
 extinguishment of debt (5)       (4)          (287)

Adjusted operating income        737            642

Total-facility net inpatient
 revenues (in millions)       $6,771         $6,123           10.6%
Total-facility net inpatient
 revenue per patient day      $1,659         $1,557            6.6%
Total-facility net inpatient
 revenue per admission        $8,817         $8,253            6.8%

Same-facility net inpatient
 revenues (in millions)       $6,619         $6,019           10.0%
Same-facility net inpatient
 revenue per patient day      $1,673         $1,574            6.3%
Same-facility net inpatient
 revenue per admission        $8,881         $8,307            6.9%

(a) This change is the difference between the 2003 and 2002
    percentages shown.


                     TENET HEALTHCARE CORPORATION
                   SELECTED QUARTERLY FINANCIAL DATA
                              (Unaudited)
            (Dollars in millions except per share amounts)

                                               Diluted
                                               Earnings
                                            Per Share From
                                              Operations
                                               (Before
                                               Goodwill,
                                             Amortization,
                                               Loss From
                                                 Early
                                            Extinguishment
                   Net            Net           of Debt
                   Operating      Income      And Unusual
                   Revenues       (Loss)        Charges)
Fiscal Year 2003

1st Qtr            $3,703          $338          $0.68
2nd Qtr             3,778           315           0.72
3rd Qtr             3,686           (55)          0.40

Fiscal Year 2002

1st Qtr            $3,297          $155          $0.49
2nd Qtr             3,394            89           0.56
3rd Qtr             3,484           280           0.62
4th Qtr             3,738           261           0.68


                        SELECTED BALANCE SHEET DATA
                            Dollars in millions
                                (Unaudited)

                                  February 28,         November 30,
                                     2003                 2002

Cash and cash equivalents             $118                  $40
Net  accounts receivable             2,662                2,584
Other current assets                   926                  970

Current assets                       3,706                3,594
Current liabilities                 (2,300)              (2,316)

Net working capital                  1,406                1,278
Investments and other assets           292                  193
Net property and equipment           6,412                6,679
Net intangible assets                3,445                3,458
Long-term debt, excluding current
 portion                            (4,024)              (3,888)
Other long-term liabilities         (1,769)              (1,827)
Shareholders' equity                (5,762)              (5,893)


                          SELECTED CASH FLOW DATA
                            Dollars in millions
                                (Unaudited)

                              Three Months Ended     Nine Months Ended
                              February 28, 2003      February 28, 2003

Net cash provided by operating
 activities                          $327                 $1,269
Cash flow from investing
 activities:
  Purchases of property and
   equipment                         (229)                  (642)
  Purchases of businesses, net of
   cash acquired                      (27)                   (27)
  Other items                         (24)                    11
Cash flows from financing
 activities:
  Proceeds from
   borrowings                       1,002                  2,706
  Payment of borrowings              (860)                (2,388)
  Repurchases of debt                 ---                   (282)
  Purchases of treasury stock        (110)                  (610)
  Proceeds from stock option
    exercises                           1                     42
  Other items                          (2)                     1

Net increase in cash and cash
 equivalents                           78                     80

Supplemental disclosures:
Interest paid                          75                    194
Income taxes paid, net of refunds
 received                             215                    521


                     TENET HEALTHCARE CORPORATION
                      DOMESTIC GENERAL HOSPITALS
                         SELECTED STATISTICS
            Three and Nine Months Ended February 28, 2003
                             (Unaudited)

(Dollar amounts in millions except for net inpatient revenue per
 patient day and per admission)

                                               Three Months
                                            2003       2002     Change
                                       -------------------------------
Net inpatient revenues                    $2,390     $2,335    2.4%
Net outpatient revenues                   $1,103       $982   12.3%

Facilities owned or operated                 114        116     (2)(a)
Quarter-end licensed beds                 27,882     28,677  (2.8%)
Average licensed beds                     27,852     28,630  (2.7%)
Utilization of licensed beds                55.4%      53.4%   2.0%(a)
Patient days                           1,388,530  1,375,943    0.9%
Net inpatient revenue per patient day     $1,721     $1,697    1.4%
Admissions                               261,601    256,840    1.9%
Net inpatient revenue per admission       $9,136     $9,091    0.5%
Average length of stay (days)                5.3        5.4   (0.1)(a)
Outpatient visits                      2,275,989  2,261,010    0.7%
Sources of net patient revenue
     Medicare                               28.1%      32.0%
     Medicaid                                9.0%       8.7%
     Managed Care                           48.6%      44.2%
     Indemnity and other                    14.3%      15.1%

Same facilities
  Average licensed beds                   27,227     27,020    0.8%
  Patient days                         1,360,758  1,333,985    2.0%
  Net inpatient revenue per patient
   day                                    $1,730     $1,717    0.8%
  Admissions                             256,831    250,537    2.5%
  Net inpatient revenue per admission     $9,166     $9,140    0.3%
  Outpatient visits                    2,249,289  2,206,727    1.9%
  Average length of stay (days)              5.3        5.3    --- (a)

(a) This change is the difference between the 2003 and 2002 amounts
    shown.


                                               Nine Months
                                            2003       2002    Change
                                       -------------------------------
Net inpatient revenues                    $7,284     $6,666    9.3%
Net outpatient revenues                   $3,363     $2,993   12.4%

Facilities owned or operated                 114        116     (2)(a)
Quarter-end licensed beds                 27,882     28,677  (2.8%)
Average licensed beds                     28,016     28,211  (0.7%)
Utilization of licensed beds                53.4%      51.1%   2.3%(a)
Patient days                           4,081,253  3,932,966    3.8%
Net inpatient revenue per patient day     $1,785     $1,695    5.3%
Admissions                               767,947    741,873    3.5%
Net inpatient revenue per admission       $9,485     $8,985    5.6%
Average length of stay (days)                5.3        5.3    --- (a)
Outpatient visits                      6,949,186  6,849,259    1.5%
Sources of net patient revenue
     Medicare                               30.1%      31.3%
     Medicaid                                8.3%       8.3%
     Managed Care                           46.7%      43.9%
     Indemnity and other                    14.9%      16.5%

Same facilities
  Average licensed beds                   26,994     26,834    0.6%
  Patient days                         3,956,567  3,823,874    3.5%
  Net inpatient revenue per patient
   day                                    $1,800     $1,714    5.0%
  Admissions                             745,375    724,634    2.9%
  Net inpatient revenue per admission     $9,554     $9,043    5.7%
  Outpatient visits                    6,763,212  6,689,782    1.1%
  Average length of stay (days)              5.3        5.3    --- (a)

(a) This change is the difference between the 2003 and 2002 amounts
    shown.


                     Tenet Healthcare Corporation
                         Footnote Explanations

1. Quarterly operating results are not necessarily indicative of the
   results that may be expected for a full fiscal year.  Reasons for
   this include changes in Medicare regulations, our recently
   announced voluntary change in the method of calculating our
   Medicare outlier payments, interest rates, acquisitions and
   disposals of facilities and other assets, impairment and
   restructuring charges, unusual and non-recurring items,
   fluctuations in revenue allowances, revenue discounts and quarterly
   tax rates, the timing of price changes, and changes in occupancy
   levels and patient volumes.

   On January 6, 2003, the Company announced that it had volunteered
   to the Centers for Medicare and Medicaid Services ("CMS") to adopt
   a new method of calculating Medicare outlier payments,
   retroactively to January 1, 2003.  With this new method, instead of
   using recently settled cost reports for our outlier calculations,
   we're using current year cost-to-charge ratios, we've eliminated
   the use of statewide average, and we continue to use the current
   threshold amounts.  Such payments were $40 million in the three
   months ended February 28, 2003, versus $191 million for the prior-
   year quarter.

2. The Company adopted Statement of Financial Accounting Standards No.
   142 as of June 1, 2002.  The new accounting standard, among other
   things, eliminates the amortization of goodwill and other
   intangible assets with indefinite useful lives for periods
   subsequent to the date of adoption.  In accordance with the
   standard, we completed our initial transitional impairment
   evaluation in the quarter ended November 30, 2002, and we did not
   need to record a goodwill impairment charge.  As a result of recent
   events and circumstances, we performed an additional evaluation of
   goodwill in the quarter ended February 28, 2003, and did not need
   to record any goodwill impairment at that time.

3. During the quarter ended February 28, 2003, the Company recorded
   impairment charges of $383 million relating to the write-down of
   long-lived assets to their estimated fair values at ten general
   hospitals and four other properties.  The Company recognized the
   impairment of these long-lived assets because events or changes in
   circumstances indicated that the carrying amount of the assets or
   related group of assets might not be fully recoverable from the
   assets' estimated future cash flows.  These circumstances include:
   1) our plan to dispose of 14 general hospitals that do not fit our
   core operating strategy; 2) our analyses of expected changes in
   growth rates for revenues and expenses, changes in payor mix, and
   changes in certain managed-care contract terms; and 3) the effect
   of projected reductions in Medicare outlier payments on net
   operating revenues and operating cash flows.

   During the nine months ended February 28, 2002, the Company
   recorded an impairment and other unusual charges of $99 million
   relating to the planned closure of two general hospitals and the
   sale of certain other health care businesses.  The total charge
   consisted of $76 million in impairment write-downs of property,
   equipment, and other assets to estimated fair values and $23
   million for expected cash disbursements related to lease
   cancellation, severance, and other exit costs.

4. During the quarter ended February 28, 2003, the Company recorded
   restructuring charges of $15 million related to the recently
   announced initiatives to sharpen our strategic focus.  The charges
   consist primarily of severance and employee relocation costs
   incurred in connection with management changes.

5. During the quarter ended August 31, 2002, the Company repurchased,
   at par, the remaining $282 million balance of its 6% Exchangeable
   Notes due 2005.  In connection with the repurchase of this debt,
   the Company recorded a loss from early extinguishment of debt in
   the amount of $4 million.  In accordance with Statement of
   Financial Accounting Standards No. 145 (SFAS 145), issued by the
   Financial Accounting Standards Board in April 2002 and adopted by
   the Company as of June 1, 2002, such loss has been reported herein
   as part of operating income (loss).  Prior to the adoption of this
   standard, the loss would have been reported as an extraordinary
   item, net of tax benefits, in the Company's consolidated statement
   of operations.

   During the quarter ended February 28, 2002, the Company recorded an
   extraordinary charge from the early extinguishment of debt in the
   amount of $8 million.  This item has been reclassified in the
   current quarter's income statement presentation in accordance with
   SFAS 145 by reducing previously reported operating income and
   income taxes for the quarter ended February 28, 2002, by $12
   million and $4 million, respectively.

   On a year-to-date basis, the extraordinary charge from early
   extinguishment of debt was $180 million.  The reclassification on a
   year-to-date basis was a reduction of previously reported operating
   income and income taxes by $287 million and $107 million,
   respectively.

6. In November, the Company decided to sell its shares in Ventas, Inc.
   ("Ventas") and Ventas agreed to file a shelf registration statement
   with the Securities and Exchange Commission relating to the sale.
   Because of the Company's decision to sell its Ventas shares and
   because we did not expect the fair value of the shares to recover
   prior to the expected time of sale, the Company recorded a $64
   million impairment charge ($40 million, net of taxes) in November
   2002.  On December 20, 2002, the Company sold all 8,301,067 shares
   of Ventas stock for $86 million.

7. Other operating expenses include malpractice insurance expense of
   $50 million for the quarter ended February 28, 2002, and $189
   million for the current quarter and $4 million in the current
   quarter for costs associated with our significant legal proceedings
   and investigations.  The Company continues to experience
   unfavorable trends in professional and general liability risks, as
   well as increases in the size of claim settlements and awards in
   this area.  The current quarter expense includes special charges of
   $40 million as a result of lowering the discount rate used from
   7.5% to 4.61% at December 31, 2002, and 4.44% at February 28, 2003,
   $29 million due to increases in its reserves resulting from
   increases in the average cost of claims being paid by our majority-
   owned insurance subsidiary, and $57 million due to increases in our
   self-insurance reserves in excess of those planned for the quarter.

8. On March 12, 2003, the board of directors approved a change in the
   accounting for stock options granted to employees and directors
   from the intrinsic-value method to the fair-value method, as
   recommended by SFAS No. 123, effective for the new calendar year
   ending December 31, 2003.  Based on options granted through
   February 28, 2003, we estimate that this change will increase
   salaries and benefits expense by approximately $36 million each
   quarter throughout the calendar year ending December 31, 2003.  We
   will also restate the results of operations for prior periods.  For
   example, for the four quarters prior to the beginning of the new
   calendar year, we will report additional salaries and benefits
   expense ranging between $32 million and $35 million per quarter.

9. The following is a reconciliation of net income (loss) as
   determined in accordance with Generally Accepted Accounting
   Principles to income (loss) from operations as used herein, in
   millions:

                                     Three Months Ended
                           February 28, 2003      February 28, 2002

                                 Income                 Income
                         Pre-tax  Taxes    Net  Pre-tax  Taxes    Net

Income from operations:
 Before goodwill
  amortization             312    (122)    190    515    (205)    310
 Goodwill amortization     ---     ---     ---    (25)      3     (22)
                           312    (122)    190    490    (202)    288

Impairment of long-lived
 assets and restructuring
 charges                  (398)    153    (245)   ---     ---     ---
Loss from early
 extinguishment of debt    ---     ---     ---    (12)      4      (8)

Net income (loss)          ---     ---     (55)   ---     ---     280


                                      Nine Months Ended
                           February 28, 2003      February 28, 2002

                                 Income                 Income
                         Pre-tax  Taxes    Net  Pre-tax  Taxes    Net

Income from operations:
 Before goodwill
  amortization            1,452   (566)    886   1,387   (552)    835
 Goodwill amortization      ---    ---     ---     (76)    11     (65)
                          1,452   (566)    886   1,311   (541)    770

Impairment of long-lived assets,
 restructuring, and other
 unusual charges           (398)   153    (245)    (99)    33     (66)
Loss from early
 extinguishment of debt      (4)     1      (3)   (287)   107    (180)
Impairment of investment
 securities                 (64)    24     (40)    ---    ---     ---
Net income                                 598                    524


10. The following is a reconciliation of EBITDA and EBITDA margins
    (the ratio of earnings before interest, taxes, depreciation and
    amortization, impairment and restructuring charges, and loss from
    early extinguishment of debt to net operating revenues) to
    operating income and operating margins (the ratio of operating
    income to net operating revenues).  Operating income and net
    operating revenues are considered performance measures under
    Generally Accepted Accounting Principles, whereas EBITDA is not.
    We refer to EBITDA and EBITDA margins because this measure is
    widely used in our industry.

                        Three Months Ended      Nine Months Ended
                            February 28,           February 28,
                          2003       2002        2003        2002

Net operating revenues   3,686      3,484      11,167      10,175

Operating income (loss)    (19)       555       1,250       1,185
 Operating margin              -0.5%     15.9%       11.2%       11.6%
 Add back to operating
   income:
  Depreciation             125        121         367         354
  Amortization               7         33          23         100
  Impairment, restructuring,
   and other
   unusual items           398        ---         398          99
  Loss from early
   extinguishment of debt  ---         12           4         287

    EBITDA                 511        721       2,042       2,025
    EBITDA margin             13.9%      20.7%       18.3%       19.9%


11. In light of recent events and our voluntary adoption of a new
    method of calculating Medicare outlier payments, we are
    supplementing certain of the historical information with
    information presented on an adjusted basis (as if we had received
    no Medicare outlier payments during the periods indicated).  We do
    so to show the effect that Medicare outlier payments have had on
    our historical results of operations, without estimating or
    suggesting their effect on future results of operations.