Equity Research

Healthcare | Healthcare Delivery

November 21, 2017 Matt Larew +1 312 364 8242

Basic Report mlarew@williamblair.com

Tenet Healthcare Corporation Stock Rating: Market Perform

Initiating Coverage With a Market Perform Rating Symbol: THC (NYSE)

Price: $13.24 (52-Wk.: $12–$23)
Tenet’s Hospitals (Still Its Core Assets) Lack Superior Quality Metrics. Among the Market Value (M): $1,335
key quality and patient satisfaction metrics we analyzed, Tenet’s remaining hospitals as Dividend/Yield: None
a group score below the national average. Furthermore, in key Tenet markets (encom- Fiscal Year End: December
passing roughly 30% of Tenet facilities and 40% of beds), Tenet hospitals have higher
readmission rates and lower patient satisfaction scores than local market competitors.
Over time, we believe that clinical and operational quality should be a good indicator Estimates 2016A 2017E 2018E
for organic market share shift. From this perspective, we believe the company must EPS FY $1.04 $0.63 $1.26
work to improve the quality performance at its hospitals to sustain its market leader- EBITDA (M) $2,413 $2,390 $2,474
ship strategy and long-term organic growth opportunity. Revenue (B) $19.6 $19.0 $18.6

Case Mix Analysis Suggests That High Leverage Has Hindered Organic Investment. Valuation
In our view, one way to measure the impact of a company’s growth capital investment EV/EBITDA 7.5x 7.6x 7.4x
is to assess trending case mix index (CMI) levels over time. We ind that CMI growth
at Tenet hospitals has averaged about 1% from 2012 to 2016 versus the all-hospital
average of 1.8%, and in key local markets Tenet’s average CMI increase has been just Trading Data
0.7% versus 2.3% per year for local market competitors. Tenet’s adjusted admissions Shares Outstanding (M) 100.8
growth has lagged the peer group average over the last four quarters. Float (M) 98.4
Average Daily Volume 3,824,610
Sum-of-the-Parts Valuation of “New Tenet” Does Not Yield Meaningful Upside.
While there are a number of shifting pieces in the hospital outlook, using our 2019 Financial Data
segment EBITDA projections and Tenet’s ive-year average EV/EBITDA multiple of 7.5 Enterprise Value $18,274
times for hospital EBITDA, a 10-times multiple for ambulatory segment EBITDA, and
an 8-times multiple for Conifer segment EBITDA, along with net debt of $14.9 billion,
leads to a stock price today in the $14-$20 range.

Rating/Valuation. We are initiating coverage of Tenet Healthcare with a Market Per-

form rating. Current valuation at 7.4 times our 2018 EBITDA target is in line with the
ive-year average (range from 5.1 to 9.5 times) and a slight discount to the peer group
average of 7.5 times, which we believe is warranted given ongoing management and
operational changes.

Concerns and Risks. High leverage limits lexibility and puts pressure on cash low
generation; the revenue outlook relies on successful contracting with managed care
organizations; management and board disruption is ongoing; and Tenet relies on
federal and state government programs.

Tenet Healthcare Corporation, based in Dallas, is a diversi ied healthcare services provider that primarily
operates hospitals and integrated delivery networks in urban and suburban communities. The company
is a leading operator of ambulatory surgery centers through its USPI ownership and offers revenue cycle
management and other solutions through its Conifer Health Solutions segment.

Please refer to important disclosures on pages 24 and 25. Analyst certification is on page 24.
William Blair or an affiliate does and seeks to do business with companies covered in its research reports.
As a result, investors should be aware that the firm may have a conflict of interest that could affect the ob-
jectivity of this report. This report is not intended to provide personal investment advice. The opinions and
recommendations herein do not take into account individual client circumstances, objectives, or needs and
are not intended as recommendations of particular securities, financial instruments, or strategies to particular
clients. The recipient of this report must make its own independent decisions regarding any securities or
financial instruments mentioned herein.
 William Blair

Investment Thesis
We are initiating coverage on Tenet Healthcare with a Market Perform rating. Tenet is a diversi ied
provider of healthcare services, with one of the leading ambulatory surgery center businesses in
United Surgical Partners (USPI) and a large revenue cycle management arm in Conifer complementing
a hospital business that operates 77 acute facilities in 11 states (will be 69 once announced dives-
titures are completed). We believe Tenet’s efforts to rightsize its hospital portfolio and accelerate
its ownership of USPI are positive moves that should help the company reduce leverage over time
and improve its growth and margin pro iles, as segment-level EBITDA margins in the ambulatory
business are more than three times the hospital business.

We believe the “new Tenet” that emerges from the portfolio reshaping, corporate restructuring, and
management turnover is likely to be a more attractive asset than the bloated company that grew
out of the 2013 Vanguard acquisition. However, until there is more clarity about the company’s
long-term leadership, strategy, earnings power, and cash low generation potential, we do not
believe that shares can sustainably outperform. As we describe in more detail below, we are also
concerned that Tenet’s remaining hospitals (still its core assets) have underwhelming quality and
patient satisfaction scores.

Overall, our view is that the management turnover, portfolio reshaping, corporate restructuring,
and softer end-market environment all make it unlikely that shares will sustainably outperform
over the next 12 months. With the likelihood of a true breakup decreased following recent board
and management changes, we believe consistent execution (which will take time) rather than a
one-time event like a company sale or segment divestiture is what will be required for the stock to
start sustainably moving higher.

Stock Thoughts and Valuation Perspective

Given the company’s high level of debt and inconsistent earnings, we believe it is most appropri-
ate to value Tenet on an enterprise-value-to-EBITDA basis. Over the past ive years, forward EV/
EBITDA has ranged from 5.1 to 9.5 times, with an average of 7.4 times. The stock currently trades
at 7.4 times our 2018 EBITDA estimate, which is a slight discount to the peer group at 7.5 times.
Historically, Tenet has been a signi icant underperformer versus the market from these levels, and
we do not see the current setup as conducive to sustainable outperformance from these levels. We
rate the stock Market Perform.

A comparable company valuation table is provided in exhibit 1 (facing) and a summary inancial model
is available in exhibit 2 (page 4).

2 Matt Larew +1 312 364 8242

 William Blair

Exhibit 1
Tenet Healthcare Corporation
Valuation Summary

Enterprise EV/EBITDA Price/Earnings

Ticker Price value ($M) 2017 2018 5Y Avg 2017 2018 5Y Avg
Community Health CYH $ 4.15 $ 14,449 8.6x 8.9x 7.0x nm nm 11.8x
HCA Healthcare HCA $ 75.24 $ 61,775 7.7x 7.3x 7.4x 11.4x 10.4x 11.7x
LifePoint Health LPNT $ 43.70 $ 4,547 6.1x 5.7x 6.9x 12.3x 11.2x 15.7x
Tenet Healthcare THC $ 13.24 $ 18,274 7.6x 7.4x 7.4x 21.0x 10.5x 14.3x
Quorum Health QHC $ 4.60 $ 1,405 9.5x 8.2x 7.2x nm nm nm
Universal Health Services UHS $ 97.22 $ 13,489 8.0x 7.5x 8.4x 13.2x 12.2x 15.0x
Mean 7.9x 7.5x 7.4x 14.5x 11.1x 13.7x
Median 7.8x 7.5x 7.3x 12.7x 10.9x 14.3x
*HCA, LifePoint, and Tenet valuations are based on William Blair estimates
Sources: Company reports; FactSet; William Blair estimates

Matt Larew +1 312 364 8242 3

 William Blair

Exhibit 2
Tenet Healthcare Corporation
Financial Model Summary
($ in millions, except per-share items) 2014A 2015A 2016A 2017E 2018E 2019E 2020E
Revenue drivers:
Same-store growth:
Admissions 2.4% 1.1% -0.2% -2.2% -0.9% 0.3% 0.4%
Adjusted admissions 3.5% 2.4% 0.9% -1.3% -0.9% 0.0% 0.3%
Revenue per equivalent admission 0.8% 3.0% 3.6% 1.0% -0.8% 1.1% 1.1%
USPI case growth 7.9% 5.2% 0.0% 2.4% 2.3% 2.0%
Conifer revenue growth 29.8% 18.4% 11.2% 3.1% 2.6% 2.7% 2.4%

Income statement overview:

Revenue 16,604 18,634 19,621 19,024 18,579 19,162 19,566
Y/y % growth/(decline) 49.6% 12.2% 5.3% -3.0% -2.3% 3.1% 2.1%
Adjusted EBITDA 1,952 2,276 2,441 2,390 2,474 2,613 2,727
EBITDA margin % (-NCI) 11.4% 11.2% 10.6% 10.7% 11.4% 11.6% 11.9%
Y/y growth % 45.5% 16.6% 6.9% -3.8% 5.7% 5.6% 4.4%
Adjusted EPS $ 1.44 $ 2.05 $ 1.04 $ 0.63 $ 1.26 $ 1.84 $ 2.08
Y/y growth % -22.0% 42.0% -49.5% -39.1% 99.7% 45.9% 13.1%

Consensus estimates:
Revenue 19,034 18,625 19,292 NA
Adjusted EBITDA 2,392 2,478 2,582 NA
Adjusted EPS $ 0.68 $ 1.39 $ 1.97 NA

Balance sheet/cash flow:

Cash & equivalents 193 356 716 501 609 458 982
Total debt 11,807 14,510 15,255 14,781 14,240 13,640 13,590
Operating cash flow 687 1,026 558 1,196 1,369 1,539 1,663
CapEx (933) (842) (875) (742) (775) (850) (850)
Free cash flow (246) 184 (317) 454 594 689 813

Other:
Return on invested capital 7.1% 7.8% 8.1% 8.1% 8.8% 9.3% 9.4%
Total debt/EBITDA 6.0x 6.4x 6.2x 6.2x 5.8x 5.2x 5.0x
Sources: Company reports, FactSet, and William Blair estimates

4 Matt Larew +1 312 364 8242

 William Blair

Investment Highlights
There has been considerable attention of late on the USPI and Conifer businesses, and in our view,
given the reduced likelihood that a breakup or outright sale is set to occur in the near future, the
hospital business needs to be further scrutinized. Thus, as we detail below, the key points we con-
sider in forming our investment thesis are as follows:

• Tenet’s Hospitals (Still Its Core Assets) Do Not Have Superior Quality Scores Versus Local Market
Competition

• A Case Mix Analysis Suggests That Tenet’s Organic Investment Has Been Hindered by Its High
Leverage Levels

• Assessing the Value of “New Tenet” When the Dust Settles From Ongoing Hospital Sales and Cor-
porate Restructuring

Tenet’s Hospitals (Still Its Core Assets) Do Not Have Superior Quality Scores Versus Local
Market Competition
As we have discussed throughout our initiation on the healthcare delivery space, we view quality—in
particular, quality versus local competition—as both an important objective measure of execution
and a long-term indicator of competitive positioning. While Tenet’s USPI and Conifer businesses give
shareholders more exposure to other revenue streams than publicly traded peers, Tenet’s bread and
butter is still operating hospitals. Even after the most recent hospital sales of facilities in Chicago
and Philadelphia, we still expect the hospital segment (which includes a variety of outpatient ac-
cess points as well) to contribute roughly 80% of revenue and 60% of EBITDA in 2018. So despite
the more recent attention on management turnover and theoretical breakups of the business, we
believe it is worth assessing how Tenet’s remaining hospitals—still its core assets—stack up versus
national and local competition.

We looked at a number of different metrics to assess the quality performance of Tenet hospitals,
including key questions from the Hospital Consumer Assessment of Healthcare Providers and
Systems (HCAHPS), readmissions data, and Hospital Total Performance Scores (TPS) that drive
the Medicare Value-Based Purchasing program. This broad data set provides insight into objective
clinical performance and subjective evaluations garnered from patient surveys.

By almost every measure that we assessed, Tenet’s hospitals as a group score slightly below the
national average. For example, Tenet’s average star rating for the HCAHPS measure “Overall Hospital
Rating” is 2.76 versus the national average of 3.41, the summary star rating for Tenet hospitals aver-
ages 2.40 versus the national average of 3.27, and 84.7% of patients said they would recommend
a Tenet hospital versus the national average of 88.1%.

Matt Larew +1 312 364 8242 5

 William Blair

Exhibit 3
Tenet Healthcare Corporation
CMS HCAHPS Survey Data

Overall Hospital Rating Summary Star Rating Likelihood to

Recommend
4.00 3.50
89.0
3.50 3.00
3.00 88.0
2.50
2.50 87.0
2.00
2.00
86.0
1.50
1.50
1.00 85.0
1.00
0.50 84.0
0.50
- - 83.0
THC Average THC Average THC Average

Source: CMS CAHPS Hospital Survey

Tenet hospitals also fall short on more objective measures. Total readmission rate of 15.6% is above
the national average of 15.3% and Tenet hospitals’ average readmissions within important catego-
ries like stroke, coronary artery bypass graft (CABG) surgery, hip or knee replacement, and heart
attack all are above the national averages. And the average TPS scores (which measure patient and
caregiver experience, safety, ef iciency, and cost reduction) at Tenet’s remaining hospitals are also
below the national average by nearly 25%.

Exhibit 4
Tenet Healthcare Corporation
Hospital Readmissions Data (Lower Is Better)

Total Readmissions CABG Readmissions Stroke Readmissions

15.8 14.5 13.0
15.7 14.4 12.9
15.6 14.3 12.8
15.5 14.2 12.7
15.4 14.1 12.6
15.3 14.0 12.5
15.2 13.9 12.4
15.1 13.8 12.3
15.0 13.7 12.2
14.9 13.6 12.1
14.8 13.5 12.0
THC Average THC Average THC Average

Source: CMS

While national scores are relevant to benchmark Tenet’s operating performance, competition
between providers occurs at the local level. To gauge how Tenet compares with its local competi-
tors, we chose six of Tenet’s most important counties and compared Tenet hospitals to non-Tenet
hospitals. These counties include: Maricopa County, Arizona (which includes the Greater Phoenix
area); Bexar County, Texas (San Antonio); El Paso County, Texas (El Paso); Miami-Dade County,
Florida (the Greater Miami area); Palm Beach County, Florida (West Palm Beach, Boca Raton, and
other similar cities); and Wayne County, Michigan (the Greater Detroit area). We estimate that these
markets include roughly 30% of Tenet facilities and 40% of Tenet’s beds. And again, by almost every
measure that we assessed, Tenet’s hospitals are outperformed by their local market competition.

6 Matt Larew +1 312 364 8242

 William Blair

For example, Tenet’s average “Overall Hospital Rating” for hospitals in those key markets is 2.41
(below its broader average of 2.76) versus the competitor average in key local markets of 3.32. In
Maricopa County, Tenet hospitals average a star rating of 2.00 versus a competitive average of 3.46.
Key local market competitors score below the national average for summary star rating (2.99 versus
the national average of 3.27) and likelihood to recommend (87.9% versus the national average of
88.1%), but still above Tenet’s score in those markets of 2.02 and 83.25%, respectively.

Exhibit 5
Tenet Healthcare Corporation
Key Market CAHPS Analysis

Overall Hospital Rating Summary Star Rating Likelihood to Recommend

4.00 3.50 89.0
3.50 3.00 88.0
3.00 87.0
2.50
86.0
2.50
2.00 85.0
2.00
1.50 84.0
1.50 83.0
1.00
1.00 82.0
0.50 0.50 81.0
- - 80.0
THC - Key National THC - Key National THC - Key National
Key Market Average Key Market Average Key Market Average
Markets Average Markets Average Markets Average

Source: CMS CAHPS Hospital Survey

On more objective measures, Tenet hospitals also underperform key local market competitors. Total
readmission rate of 15.8% is above the key local market average of 15.6%, and Tenet’s key market
average readmissions within important categories like stroke, CABG surgery, and hip or knee re-
placement are all below Tenet’s broader averages and below local market competitors. And again,
Tenet’s average TPS score of hospitals in these key local markets is below its broader average (26.8
versus 27.6) and is well below the key local market average of 34.9.

Exhibit 6
Tenet Healthcare Corporation
Key Market Readmissions Analysis (Lower Is Better)

Total Readmissions CABG Readmissions Stroke Readmissions

16.0 14.5 13.0
15.9 14.4 12.9
15.8 14.3 12.8
15.7 14.2 12.7
15.6 14.1 12.6
15.5 14.0 12.5
15.4 13.9 12.4
15.3 13.8 12.3
15.2 13.7 12.2
15.1 13.6 12.1
15.0 13.5 12.0
THC - Key National THC - Key National THC - Key National
Key Market Average Key Market Average Key Market Average
Markets Average Markets Average Markets Average

Source: CMS

Matt Larew +1 312 364 8242 7

 William Blair

In our view, this set of measures provides a good gauge for overall hospital quality. While hospitals
can take a number of different steps to increase volumes (recruiting physicians, local M&A activity,
adding capacity to existing service lines, and adding new service lines), over time we believe that
clinical and operational quality should be a good indicator for organic market share shift. From this
perspective, we view Tenet as being at risk to be a market share donor in the future despite its cur-
rent standing as No. 1 or No. 2 in 18 of its 24 markets and, more broadly, we believe it is important
that management work to improve the quality performance at its hospitals to sustain con idence
in the organic growth story.

A Case Mix Analysis Suggests That Tenet’s Organic Investment Has Been Hindered by Its High
Leverage Levels
Our analysis of Tenet’s case mix progression over the last several years also suggests that the com-
pany’s high leverage levels have limited management’s ability to add high-value service lines rela-
tive to its local market competitors. As a reminder, a hospital’s case mix index (CMI) is calculated
by taking the sum of the diagnosis-related-group (DRG) weights for all Medicare discharges and
dividing by the number of Medicare discharges. In other words, CMI is a proxy for the average acu-
ity of patient cases at a hospital. The data iles that support CMS’s Inpatient Prospective Payment
System (IPPS) use discharge data from two years back, so for example the 2018 IPPS rule is based
on 2016 discharge data.

With that in mind, our assessment inds that CMI growth at Tenet hospitals has averaged about
1% from 2012 to 2016 versus the all-hospital average of 1.8%. In aggregate, CMI is up 4% at Tenet
hospitals versus 7.5% across the industry. Furthermore, in the key local markets we described
above, Tenet’s average CMI increase has been just 0.7%, while CMI at local market competitors has
increased an average of 2.3% per year, good for an aggregate increase of 9.7% versus 2.7% in local
Tenet hospitals.

Over the last several quarters, Tenet’s adjusted admissions growth has slipped along with its peers
due to the softening admissions environment. However, Tenet’s adjusted admissions growth has also
slipped compared with its peers—growing below the peer group average over the last four quarters.

The company has, of course, been using capital to inance its initial acquisition of USPI and more
recently its efforts to accelerate its USPI ownership. In addition, the company has completed a number
of large growth-enhancing capital projects in key hospital markets over the last 12 months, including:

• a new $155 million critical care tower (83 beds, four operating rooms) at DMC Children’s Hos-
pital of Detroit (opened July 2017);

• a new $80 million patient care tower (96 beds in private rooms and a cardiovascular clinic) at
Delray Medical Center (opened July 2017); and

• a new $120 million, 106-bed teaching hospital (the Hospitals of Providence Transmountain
Campus), opened in January 2017 in El Paso, Texas.

Overall, our view is that for the company to maximize the value of its hospitals (which remain
the company’s core assets), the portfolio should continue to be refocused on the company’s best-
performing hospitals. The company announced in September 2017 that eight domestic hospitals in
four markets (including the announced sales of two hospitals in Philadelphia) would be sold along
with the company’s Aspen operations in the United Kingdom. We believe this was a good start, and
hospitals that in our view could be candidates for sale (either as part of the recently announced
asset sale plan or in further divestiture activity) are listed below. We note that press reports have
suggested that the company is looking to exit the Chicago market entirely.

8 Matt Larew +1 312 364 8242

 William Blair

• West Suburban Medical Center in Oak Park, Illinois—2-star HCAHPS patient satisfaction rating
(ranks fourth worst in the company’s portfolio by raw score) and 2-star summary star rating,
16.2% readmissions versus 15.9% Cook County, Illinois, average

• Louis Weiss Memorial Hospital in Chicago, Illinois—2-star HCAHPS patient satisfaction rating
(ranks ninth worst in the company’s portfolio by raw score) and 2-star summary star rating,
16.9% readmissions versus 15.9% Cook County, Illinois, average

• Westlake Community Hospital in Melrose Park, Illinois—2-star HCAHPS patient satisfaction

rating (ranks 11th worst in the company’s portfolio by raw score) and 2-star summary star
rating, 16.5% readmissions versus 15.9% Cook County, Illinois, average

• Des Peres Hospital in St. Louis, Missouri—3-star HCAHPS patient satisfaction rating and 3-star
summary star rating, 18.4% readmissions versus 15.4% St. Louis County, Missouri average;
Tenet’s only hospital in Missouri

• Valley Baptist Medical Center–Harlingen and Valley Baptist Medical Center–Brownsville—both

have 3-star HCAHPS patient satisfaction ratings and 2-star summary star ratings, Harlingen
readmissions (14.4%) are below the local average (15.1%), while the Brownsville location is
well above at 15.8%

Assessing the Value of “New Tenet” When the Dust Settles From Ongoing Hospital Sales and
Corporate Restructuring
The asset sale plan announced in September 2017 includes eight U.S. hospitals in four markets (in-
cluding the two pending sales in Philadelphia) and the nine Aspen assets in the United Kingdom—so
17 targeted sales in total and expected proceeds of $900 million to $1 billion (including $170 million
from recently announced sales in Philadelphia). While this announcement was the most dramatic step
taken, Tenet has been undergoing a fairly dramatic transformation for the better part of two years.
Starting in November 2015, management has taken the following actions to reshape the company:

• November 2015: Sale of two facilities in North Carolina, 137-bed Central Carolina Hospital and
355-bed Frye Regional Medical Center (along with 19 physician practices), to LifePoint Health
for $1 billion.

• April 2016 (announced in December 2015): Sale of Atlanta, Georgia, hospitals to WellStar
Health System for $575 million. The transaction included Atlanta Medical Center and its South
Campus, North Fulton Hospital, Spalding Regional Hospital, Sylvan Grove Hospital, and 26
physician clinics.

• May 2017 (ϐirst quarter 2017 earnings call): Sold Managed Medicaid in Arizona and majority
of home health and hospice business.

• May 2017 (ϐirst quarter 2017 earnings call): Announced accelerated ownership plan for
USPI. The amended agreement with Welsh Carson allowed Tenet to increase its ownership to
roughly 80% in July 2017 and 95% as soon as 2019. Tenet paid Welsh Carson $711 million to
buy 23.7% of USPI (roughly 10 times 2017 EBITDA less NCI) and will pay approximately $275
million-$325 million in July 2018 (to raise its stake to 87.5%) and 2019 to inalize its purchase.

• August 2017: Closed a previously announced deal to sell Houston-area operations (over 1,000
total beds) to HCA Healthcare for $750 million. The facilities included in the sale are three acute-
care hospitals (Cypress Fairbanks Medical Center, Houston Northwest Medical Center, and Park
Plaza Hospital) and one LTACH (Plaza Specialty Hospital) along with other hospital-af iliated
entities (e.g., physician practices).

Matt Larew +1 312 364 8242 9

 William Blair

• September 2017: Agreed to sell 399-bed Hahnemann University Hospital and 189-bed St.
Christopher’s Hospital for Children in Philadelphia to Paladin Healthcare. Sale price of $170
million is for about $790 million of revenue and $15 million in loss before interest, taxes, de-
preciation, and amortization. The sale, which is expected to close in irst quarter 2018, will
generate a $200 million taxable loss, which when offset by a roughly $500 million taxable gain
from the Houston sales and expected $100 million gain from other targeted divestitures, will
leave Tenet with an NOL of $1.3 billion (down from $1.7 billion at year-end 2016).

• October 11, 2017: Agreed to sell 368-bed MacNeal Hospital and af iliated operations (includ-
ing an independent practice association of more than 1,000 physicians and an accountable care
organization) in the Chicago area to Loyola Medicine (a Trinity Health af iliate). The deal, which
is expected to close in irst quarter 2018, had an undisclosed sale price, with revenue that we
estimate (based on previous news reports) near $275 million and EBITDA near $28 million.

• October 27, 2017: Announced corporate restructuring with third quarter 2017 preview. Tenet
believes it can reduce annual operating expenses by $150 million, primarily through headcount
reductions and contract renegotiations with suppliers and vendors. Roughly 75% of the savings
are expected through a restructuring of the company’s Hospital Operations group, including the
elimination of a regional management layer and overhead and centralized support functions
(1,300 jobs in total, including contractors).

We give management credit for taking these much-needed steps toward rightsizing and believe
that with additional paring and a focus on quality improvement, an attractive portfolio of market-
share-leading hospitals and ambulatory surgery centers could emerge. To consider what the value
of this “New Tenet” portfolio could be, we walk through a bull/bear analysis on the Conifer and
ambulatory segments, using 2019 EBITDA as a basis for valuation given that 2018 will remain a
year of transition for the company.

Conifer. While we like the revenue diversity and strategic value that Conifer provides, we are con-
cerned that 40% of revenue comes from Tenet hospitals and 35% comes from hospitals under the
CHI (Catholic Health Initiatives) umbrella.

In a bull-case scenario where revenue growth from non-Tenet and non-CHI hospitals grows at a
13.5% compound annual rate through 2020 (CAGR from 2014 to 2017 of 22%) and revenue from
Tenet and CHI hospitals combines to grow in the low single digits, Conifer would grow EBITDA near
7.5% per year through 2020 with modest margin expansion—contributing about $25 million of
incremental EBITDA every year.

Even with more modest expectations in our base-case scenario of a 2.5% revenue CAGR through 2020
and a 5% EBITDA CAGR, Conifer would contribute about $15 million of EBITDA growth per year.

Our bear-case scenario includes revenue from Tenet hospitals being down slightly every year, CHI
hospitals essentially lat, and revenue from all other Conifer customers growing in the low teens.
In this scenario, which considers broad disruption in the individual market and an overall reduc-
tion in volumes that puts Conifer hospital customers under pressure, total revenue growth through
2020 would be roughly 1% with an EBITDA CAGR through 2020 of 0.5% (assuming slight EBITDA
margin degradation each year).

Ambulatory. In a bull-case scenario where case growth of 3.25% and revenue per case growth of
4.25% generates an organic revenue CAGR of 7.5%, we believe this segment could generate a 17.5%
EBITDA CAGR through 2020 with total EBITDA margin expansion of roughly 450 basis points from
2017 to 2020.

10 Matt Larew +1 312 364 8242

 William Blair

Our base case includes organic revenue growth of 5% (2.2% case growth, 2.8% revenue per case
growth) and 13% EBITDA growth, which is a slight discount to the trailing-four-quarter average of
12%. This case volume growth is in line with the 2%-3% growth that management has described
as reasonable over the next couple of years.

Lastly, our bear-case scenario includes revenue growth of 1% (minimal case growth and about 1%
growth in revenue per case) and 7% EBITDA growth, which assumes a worsening of issues in the ASC
market (dif iculty with payers, increased competition, restrictions on patient characteristics, etc.).

Importantly, Tenet’s increasing stake in USPI (see details later in report) ampli ies the growth in
EBITDA contribution as Tenet’s 80% ownership today moves up to 95% by July 2019.

Summary. While there are a number of shifting pieces in the hospital outlook, our current target
for hospital segment EBITDA in 2019 is $1.5 billion. We assign Tenet’s ive-year average EV/EBITDA
multiple of 7.5 times to hospital EBITDA, a 10-times multiple to ambulatory segment EBITDA, and
an 8-times multiple to Conifer segment EBITDA in our base-case scenario. These multiples, along
with net debt of $14.9 billion, lead to a stock price today of about $14 in our base-case scenario.
Using the same EBITDA multiples, our bull-case scenario yields a stock price of about $20, while
increasing the multiple on the Conifer business (from 9 times to 10 times) and the USPI business
(from 10 times to 11 times) yields a stock price of $28.

Overall, our view is that current valuation largely re lects the soft end-markets and portfolio turnover
associated with our base-case scenario. If new management is able to improve the performance
of the hospital portfolio and USPI growth rebounds following a tumultuous 2017 (e.g., hurricanes,
Humana out-of-network status), we believe the stock could work back into the low-$20 range. For
now, with our base-case analysis falling in line with current valuation and the likelihood of a true
break-up decreasing following recent board and management changes, we believe consistent execu-
tion (which will take time) rather than a one-time event like a company sale or segment divestiture
is what will be required for the stock to start consistently moving higher.

Concerns and Risks

High Leverage Limits Flexibility and Puts Pressure on Cash Flow Generation
Tenet has had high leverage levels since its 2013 acquisition of Vanguard, stepping up to about 6
times after the acquisition versus 3.5-4 times in the years leading up to the deal. Current leverage of
6.7 times is above the peer group average of about 5 times, and management is targeting leverage
of 5 times by the end of 2019, primarily through EBITDA growth (rather than early debt paydown).
Because the company’s internal growth strategy and acquisition activity are in part dependent on
access to capital, opportunities could be limited by the company’s ability to deleverage the balance.

Revenue Is in Part Dependent on the Company’s Ability to Successfully Contract With Managed
Care Organizations
In October 2016, Tenet lost its in-network status with Humana, which contributed to lost volume
and revenue in the irst half of 2017. For example, in second quarter 2017, out-of-network status
with Humana led to a 150-basis-point headwind on adjusted admissions and a 180-basis-point
headwind on USPI cases. Humana accounted for 2.9% of total net revenue in 2016 and the top 10
managed care payers accounted for nearly one-third of total revenue in 2016. Even if contract dis-
putes are resolved relatively quickly (Tenet was back in-network with Humana on June 1, 2017),
they can be disruptive to volumes. Failure to maintain in-network status with payers could lead to
additional disruptions.

Matt Larew +1 312 364 8242 11

 William Blair

Management, Board, and Shareholder Disruption Adds Near-Term Uncertainty and Clouds
the Long-Term Outlook
On August 31, 2017, the company announced that long-time CEO Trevor Fetter would step down
on March 15, 2018, or as soon as a successor was appointed. As part of that announcement, lead
director Ron Rittenmeyer became executive chairman and a third-party irm was hired to ind a
permanent CEO. Seven weeks later, on October 23, Mr. Fetter stepped down from his role as chief
executive of icer and resigned as a director of the company. Mr. Rittenmeyer was appointed to serve
as CEO while the permanent search was continued. On November 9, two independent directors were
named to the board, bringing the total membership to 12, including 11 independent directors and
5 new directors in the last 12 months. In our view, the signi icant and ongoing changes at the board
and senior management level (we suspect additional turnover could occur following the hiring of
a new CEO) present the opportunity for operational disruptions and raise uncertainty about what
the composition of the company will look like and whether the strategic focus of the company will
change when the dust settles.

Legislative Changes That Affect Insurance Coverage Could Affect Demand Trends and
Uncompensated Care Levels
About one-third of Tenet’s hospital admissions and about 27% of patient revenues are related to
traditional Medicare and Medicaid patients. Future changes to Medicare or Medicaid eligibility
requirements or funding could negatively affect Tenet’s hospital revenue. In addition, Tenet has
exposure to state-speci ic programs that add some risk on the timing or level of payments for ser-
vices in those states. For example, Tenet’s guidance for 2017 includes a $220 million-$230 million
payment from the state of California related to the California Provider Fee program. In 2016 this
was paid on a quarterly basis, so while the payment already has state approval and preliminary
federal approval, the size of the payment adds some risk to the 2017 outlook.

Corporate Overview
Of the hospital companies included in our healthcare delivery coverage, Tenet Healthcare Corporation
is the most diversi ied name on the list. While the Dallas-based company primarily is an operator
of integrated healthcare delivery networks in large urban and suburban markets, Tenet also has
market-leading exposure to the ambulatory segment in part through its United Surgical Partners
International (USPI) joint venture and operates a healthcare services subsidiary (Conifer) that is
branching out from its historical focus on revenue cycle management (RCM) to various other value-
based solutions. As of September 30, 2017, Tenet operates 77 acute-care hospitals, 21 short-stay
surgical hospitals, and over 460 outpatient centers in the United States and nine facilities in the
United Kingdom. Tenet is exiting its health plan business (as of September 30, 2017, the company
had sold three of its ive health plans and was winding down the remaining two). In addition, Tenet
has relationships with more than 50 leading not-for-pro it healthcare systems.

Tenet began its transformation from a regional hospital operator to a diversi ied healthcare provider
in 2008 with the launch of Conifer and investment in outpatient networks in some of its hospital
markets. On October 1, 2013, Tenet acquired publicly held Vanguard Health Systems for $4.3 bil-
lion in an all-cash transaction. The deal increased the size of the hospital portfolio by about 60%,
increased the number of outpatient facilities by 25%, and gave the company positions in Phoenix,
San Antonio, and Detroit. In total, the deal expanded the Tenet footprint from 49 hospitals and 126
outpatient centers serving 24 markets across 11 states, to 79 hospitals and 157 outpatient centers
in 30 markets across 16 states.

12 Matt Larew +1 312 364 8242

 William Blair

In March 2015, Tenet acquired 50.1% of leading ambulatory surgery center provider USPI, with
plans to advance its ownership over subsequent years (details below). At the time of acquisition,
USPI’s portfolio included 244 ambulatory surgery centers, 16 short-stay surgical hospitals, and 20
imaging centers in 29 states.

Business Overview
Tenet operates in three segments: hospital operations, ambulatory care, and Conifer. Exhibit 7 dis-
plays the historical revenue and segment-level EBITDA split between the segments.

Exhibit 7
Tenet Healthcare Corporation
Revenue and Segment-Level EBITDA History
100% 100%

90% 90%

80% 80%

70% 70%

60% 60%

50% 50%

40% 40%

30% 30%

20% 20%

10% 10%

0% 0%
2011A 2012A 2013A 2014A 2015A 2016A 2011A 2012A 2013A 2014A 2015A 2016A

Hospital Conifer USPI Hospital Conifer USPI

Source: Company reports

Hospital operations and other. The largest segment of the business, accounting for about 85%
of revenue (down from 96% in iscal 2011) and about 60% of EBITDA (down from 96% in 2011),
includes acute-care hospitals, ancillary outpatient facilities, urgent care centers, microhospitals,
and physician practices. Tenet has operated health plans in the past (six health plans with 139,000
members in 2015), but is exiting that business by the end of 2017.

As of September 30, 2017, this segment comprised 77 hospitals (including three academic medical
centers, two children’s hospitals, two specialty hospitals, and one critical access hospital), roughly
175 outpatient centers, 650 physician practices, and ancillary healthcare delivery locations. Ap-
proximately 2,000 employed physicians are among the over 130,000 total employees at Tenet.

Tenet has sole ownership (through its subsidiaries) of 60 of those hospitals, 13 are owned or leased
with a partner (a health system or physician group), and three are leased by Tenet from third par-
ties. Leases typically range 5 to 20 years. The outpatient centers include (as of December 31, 2016)
66 diagnostic imaging centers, 6 free-standing urgent care centers, 15 satellite emergency depart-
ments, and 10 provider-based ambulatory surgery centers—all run as departments of existing
Tenet hospitals. In addition (and as of December 31, 2016), Tenet operates 80 separately licensed
free-standing outpatient locations including eight diagnostic imaging centers, seven microhospitals,
four ambulatory surgery centers, and 61 urgent care centers (most are run under the MedPost brand
and managed by the USPI joint venture).

Matt Larew +1 312 364 8242 13

 William Blair

Given the recent and planned divestitures, we estimate that in 2018 roughly 22% of facilities and
beds will be located in Texas, about 18% of facilities and 15% of beds in California, and 14% of
facilities and 19% of beds in Florida. Similarly, over half of the outpatient centers are located in
California, Florida, and Texas.

Exhibit 8
Tenet Healthcare Corporation
U.S. Facility Map

13 hospitals, 13%
of beds in CA 15 hospitals, 20% 10 hospitals, 17%
of beds in TX of beds in FL
1
Includes ambulatory surgery centers, urgent care centers, diagnostic imaging centers, satellite emergency departments, and micro-hospitals
Source: Company reports; as of September 30, 2017

Ambulatory care. The ambulatory care segment, accounting for about 9% of revenue and about
29% of EBITDA, includes the operations of the USPI joint venture and the nine Aspen facilities in the
United Kingdom. As of September 30 2017, the USPI joint venture included 244 ambulatory surgery
centers, 34 urgent care centers (operated under the CareSpot brand), 22 imaging centers, and 20
short-stay surgical hospitals in 27 states. In many cases, USPI forms joint ventures with physician
groups and healthcare systems (192 facilities are jointly owned with systems). The majority of these
outpatient locations overlap with Tenet acute-care markets, as exhibit 9 indicates.

Surgical facilities in the USPI joint venture primarily are doing elective or non-emergency (rather
than emergency) cases, which in general lead to less schedule volatility and labor misallocation. The
broader trend toward minimally invasive surgery and improved anesthesia techniques has allowed
many procedures once restricted to the hospital (given the need for a longer recovery and likely
overnight stay) to move into the ASC setting. In addition, many states allow patients to stay for up
to 23 hours, which can incorporate an overnight stay.

As a result of these dynamics, along with patient preference for more consumer-friendly experi-
ences and payer preference for lower-cost delivery settings, over two-thirds of surgeries are done
in the outpatient setting.

14 Matt Larew +1 312 364 8242

 William Blair

Exhibit 9
Tenet Healthcare Corporation
USPI Facility Map

Source: Company reports

USPI joint venture details. The original deal structure left Tenet with 50.1% ownership in the UPSI
joint venture, while private equity irm Welsh, Carson, Anderson & Stowe owned approximately
47% and Baylor University Medical Center owned roughly 3% of the joint venture. In January 2017,
Baylor exercised an option to purchase an additional roughly 2% from Welsh Carson, raising its
stake to 5%. The agreement called for Tenet’s ownership to gradually increase over time through
a put/call agreement, with 12.5%-25% of the equity held in the joint venture being put to Tenet
each year starting in 2016.

In April 2016, Tenet paid about $127 million to raise its total stake of the total entity to 56.3% (the
minimum 12.5% was put to Tenet), and in January 2017 another 12.5% was put to Tenet, continu-
ing the slow and steady ownership transfer. However, on the May 2017 earnings call, the company
announced an amended agreement with Welsh Carson that will allow Tenet to increase ownership
to roughly 80% in July 2017 and 95% as soon as 2019. Tenet paid Welsh Carson $711 million to
buy 23.7% of USPI (roughly 10 times 2017 EBITDA less NCI) and will pay approximately $275 mil-
lion-$325 million in July 2018 (to raise its stake to 87.5%) and 2019 (to inalize its purchase). The
speci ic amount will be determined by USPI’s performance as the multiple will be 10 times EBITDA
less NCI in each year.

Accelerating the ownership level of USPI will allow Tenet to use NOLs to reduce USPI’s federal income
taxes, which management estimates will improve cash low by about $50 million over the next two
years and reduces the redeemable NCI on the balance sheet by roughly $700 million.

Aspen Healthcare. In the United Kingdom, Tenet operates four acute-care hospitals, one cancer center,
and four outpatient facilities through its Aspen Healthcare subsidiary. Aspen began as a two-hospital
system that USPI acquired in 2000 (with funding from Welsh Carson) and was separated from USPI
in 2012. Tenet has announced its intention to divest these assets.

Matt Larew +1 312 364 8242 15

 William Blair

ASC reimbursement dynamics. To qualify as an ASC, a facility must operate exclusively to provide
surgical services with an expected duration of less than 24 hours following admission to patients
who do not require hospitalization. There are roughly 3,500 procedures approved for payment
in an ASC, with the most common being cataract surgeries, colonoscopies, and nerve procedures.

The payment schedule for ASCs is similar to the Outpatient Prospective Payment System (OPPS) in
that both systems rely on ambulatory payment classi ications (APCs) that are used to group ser-
vices or surgical procedures based on clinical and cost similarity. All services within an APC have
the same payment rate, though there are some services (corneal tissue acquisition costs, blood and
blood products, and many drugs) that are paid for separately. Each APC has a “relative weight” that
is based on the geometric mean of the cost to provide the services included in the APC. Payment
rates are set for individual services by multiplying the relative weight of a service’s APC by a con-
version factor to convert to a dollar payment rate, which is then adjusted for local market factors
(primarily labor costs).

In October 2017, CMS published its outpatient (OPPS) and ASC proposed rule for iscal 2018, which
called for a 1.35% payment rate increase to the OPPS schedule and 1.2% for ASCs. The OPPS rate
increase comprises a 2.7% hospital market basket increase less a productivity adjustment reduc-
tion of 0.6% and a 0.75% reduction to the 2018 OPPS market basket as required by the Affordable
Care Act. For-pro it entities are expected to see an increase of 4.5%, as CMS offset major cuts to the
340B drug program with a boost to nondrug items and services.

Conifer Health Solutions. Through its Conifer subsidiary, Tenet provides comprehensive revenue
cycle management (RCM) services and a host of other value-based solutions to healthcare provid-
ers. The RCM offering includes centralized insurance and bene it veri ication, inancial counseling
services, productivity and quality improvement programs, coding and compliance support, and
third-party billing and collections. Other services offered include customized patient communica-
tions and engagement services, inancial risk management, clinical integration and population
health tools, and management consulting services.

In total, Conifer has more than 800 hospital and other clients in 40 states, managing more than $29
billion in net patient revenue and more than 24 million unique patient interactions; however, about
40% of revenue comes from Tenet hospitals and roughly 35% comes from hospitals under the CHI
(Catholic Health Initiatives) umbrella. The 10-year CHI contract was announced in May 2012 and
at the time included over 50 CHI hospitals. In January 2015, Conifer announced a 10-year extension
and expansion of its agreement with CHI to provide patient access, revenue integrity, and patient
inancial services to 90 CHI hospitals through 2032. As part of that extension, CHI increased its
ownership stake to 23.8% in Conifer Health Solutions, Conifer’s operating subsidiary.

Conifer generates roughly 8.5% of total company revenue (up from about 5% in iscal 2016) and
about 12% of EBITDA. Conifer’s segment-level EBITDA margins in the high teens (about 17% TTM)
are more than double the current segment-level EBITDA margins of the hospital business.

Payer Mix
About one-third of Tenet’s hospital admissions and about 27% of patient revenues are related to
traditional Medicare and Medicaid patients. When USPI was acquired, more than three-fourths of
its revenue came from commercial payers, with Medicare at about 20% and Medicaid the balance.

16 Matt Larew +1 312 364 8242

 William Blair

Competition
Tenet positions itself competitively by owning the No. 1 or No. 2 position on the acute-care side (a
position it has in about 80% of its markets pro forma for the active divestiture plan) and augment-
ing that reach with an extensive outpatient presence.

While Tenet owns and operates facilities and offers services across the country, from a competitive
standpoint healthcare delivery is distinctly local. Brand value varies by market, and in many cases
for-pro it entities compete for patients with local community hospitals or healthcare organizations
and large not-for-pro it entities and academic medical centers. In terms of local competition, the
most heavily concentrated Tenet markets are Maricopa County (Phoenix), Miami-Dade County,
Bexar County (San Antonio), and Wayne County (Detroit).

Financial Overview
Top Line
As exhibit 7 demonstrates, over 80% of revenue is generated from Tenet’s hospital business, with
nearly 10% coming from the ambulatory care segment and 8% from Conifer.

The key same-store drivers on the inpatient side of the hospital business are available beds, admis-
sions per bed, outpatient equivalent admissions, and revenue per adjusted admission. Over the last
ive years, same-store adjusted admissions growth has averaged 1.6%, with revenue per equivalent
up an average of 2.4% per year over the same period. Year-to-date, those trends are markedly worse,
with same-store adjusted admissions down about 2% and revenue per adjusted admissions up about
1.5%. Inpatient revenue per admission is primarily driven by the yearly Medicare rate update to
the Inpatient Prospective Payment System (IPPS), which has averaged 1.4% for the last ive years;
payer mix; and patient mix. Outpatient revenue per equivalent admission is primarily driven by
the yearly Medicare rate update to the Outpatient Prospective Payment System (OPPS), which has
averaged 1.5% for the last ive years; payer mix; and patient mix.

The key drivers of the ambulatory business are case growth and revenue per case, while Conifer
revenue is driven by new customer acquisition and expanding the service offering at existing hospital
clients. The Medicare ASC payment update has averaged 0.9% over the past ive years; however, only
about 20% of USPI revenue is generated from Medicare, with the majority coming from privately
insured patients. Roughly three-fourths of Conifer revenue is generated from Tenet-owned hospitals
and hospitals owned by Catholic Health Initiatives (CHI). CHI is a minority owner in Conifer (nearly
25% ownership), and in January 2015, Conifer announced a 10-year extension and expansion of
its agreement with CHI to provide patient access, revenue integrity, and patient inancial services
to 90 CHI hospitals through 2032.

Growth outlook. In total, we forecast a 0.9% CAGR through 2020, with 7% USPI growth and 5%
Conifer growth providing the majority of the growth as we expect total hospital revenue to have
essentially a 0% CAGR through 2020 (and note that three hospital sales with nearly 1,000 combined
beds will be closed by mid-2018).

Proϐitability
The majority of Tenet’s operating expenses are directly related to providing patient care and com-
pensating employees for providing patient care. Salaries, wages, and bene its (SWB) as a percent-
age of sales have increased from an average of 47% from 2010 to 2014 to 48.4% over the past six

Matt Larew +1 312 364 8242 17

 William Blair

quarters, although the company’s recently announced restructuring program is expected to lower
annual operating expenses by $150 million per year (about 6% of 2017 operating expenses), with
the majority coming from SWB through headcount reductions.

Tenet has lower bad-debt levels than its peers, in part because of its higher exposure to ambulatory
care (which has lower levels of bad debt, in the low single digits) and its Conifer business.

Exhibit 10
Tenet Healthcare Corporation
Bad-Debt Comparison

16.0% TTM Provision for Doubtful Accounts THC Doubtful Accounts Trend
13.9% 8.2%
14.0% Average: 13.3%
11.1% 12.6%
8.0% 7.9%
12.0%
7.8%

10.0% 7.6%
8.5% 7.3%
7.4% 7.3%
8.0% 7.1% 7.2%
7.2%
6.0% 7.0% 6.9%
6.8%
4.0%
6.6%
2.0%
6.4%

0.0% 6.2%
THC HCA LPNT CYH UHS '10-'13 '14 '15 '16 '17E
Source: Company reports

From 2010 to 2014, Tenet spent an average of 5.7% of sales on capital expenditures, although that
has dropped off since the USPI acquisition and averaged 4.0% over the past six quarters. Over the
longer term, we expect capital expenditures roughly in line with current levels of 4.5% or less of
sales. In an environment where the IPPS, OPPS, and ASC payment rates are modestly increased each
year, we expect the growing contribution of Conifer and USPI (and increased USPI ownership) will
help boost EBITDA margins by an average of 30 basis points per year through 2020.

Proϔitability outlook. We forecast roughly 70 basis points of EBITDA margin expansion in 2018,
driven primarily by the company’s restructuring program and increased contribution from USPI,
which has segment-level EBITDA margins above 30% versus high single digits from the core hospital
business. A number of one-time items affected 2017 EBITDA that will not or are unlikely to recur,
including a $9 million HITECH bene it, an approximately $15 million headwind from not being in-
network with Humana, and a roughly $30 million headwind from the hurricanes. On a like-for-like
basis, we forecast approximately 3% EBITDA growth in 2018.

Through 2020, we forecast approximately 120 basis points of EBITDA margin expansion, from
10.7% in 2017 to 11.9% in 2020. This level of margin expansion along with the modest top-line
growth we forecast would generate a 4.5% EBITDA CAGR from 2017 to 2020. We note that given
the ongoing facility sales and corporate restructuring, long-term EBITDA targets are likely to move
around a number of times over the next 12 months.

18 Matt Larew +1 312 364 8242

 William Blair

Bottom Line
Earnings growth has not correlated with EBIT growth over the past several years, as a result of a
signi icant increase in interest payments, a ramp-up of net income attributable to noncontrolling
interest since the USPI acquisition, and tax rate luctuations from the company’s use of NOLs. From
2014 to 2017, we estimate EBIT will have grown at an 11.1% compound annual rate, while earn-
ings per share have declined at a roughly 25% compound annual rate despite a relatively consistent
share count. We forecast EBIT growth of 5.2% through 2020, while the company’s earnings growth
beyond that level will be tied to deleveraging.

Balance Sheet and Cash Flow

At the end of the third quarter, Tenet had cash and equivalents of $429 million and total long-term
debt of $14.9 billion, yielding a net-debt-to-trailing-adjusted-EBITDA multiple of 6.5 times. Total-
debt-to-EBITDA is 6.7 times, which is above average for the acute-care sector (average of about 5
times, ranging from 2.5 to 7.5 times) and trails just Community Health as the highest in the sector.
The company has about $1 billion of debt that is due in 2018, $1.6 billion in 2019, and $3.4 billion
in 2020.

William Blair Estimates

We are introducing estimates for iscal years 2017-2020. Our estimates do not include any M&A
activity or divestitures beyond what the company has announced. Our estimates include $40 mil-
lion-$50 million per year of acquired USPI revenue.

In 2017, we forecast revenue of $19.02 billion (down 3.0%), adjusted EBITDA of $2.39 billion
(10.7% EBITDA margin), and adjusted EPS of $0.63. Current guidance calls for revenue of $18.9
billion-$19.1 billion, adjusted EBITDA of $2.375 billion-$2.425 billion, and $0.59-$0.75 of adjusted
EPS. Our 2018 forecasts include revenue of $18.58 billion (down 2.3%), adjusted EBITDA of $2.47
billion (11.4% EBITDA margin), and $1.26 of adjusted EPS.

Exhibit 11 summarizes our estimates through 2020 and, where available, compares our targets
with the Street consensus. Our detailed inancial model and revenue build are presented on the
following pages.

Exhibit 11
Tenet Healthcare Corporation
Summary of William Blair Estimates
($
($inin000s,
000s,expect EPS) EPS)
expect 2016A 2017E
2016A 2018E
2017E 2019E
2018E 2020E 2019E
CAGR 2020E CAGR
Revenue
Revenue
Blair 19,621 19,024 18,579 19,162 19,566 0.9%
Blair
Street 19,621
19,034 19,024
18,625 18,579
19,292 NA19,162 19,566 0.9%
Street
Delta -0.1% 19,034
-0.2% 18,625
-0.7% 19,292 NA
EBITDA
Delta -0.1% -0.2% -0.7%
Blair 2,441 2,390 2,474 2,613 2,727 4.5%
EBITDA
Street 2,392 2,478 2,582 NA
Blair
Delta 2,441
0.0% 2,390
-0.2% 2,474
1.2% 2,613 2,727 4.5%
Earnings
Street per share 2,392 2,478 2,582 NA
Blair $1.04 $0.63 $1.26 $1.84 $2.08 48.8%
Delta 0.0% -0.2% 1.2%
Street $ 0.68 $ 1.39 $ 1.97 NA
Earnings
Delta per share -7.2% -9.5% -6.6%
Blair $1.04 $0.63 $1.26 $1.84 $2.08 48.8%
Street $ 0.68 $ 1.39 $ 1.97 NA
Delta -7.2% -9.5% -6.6%
Sources: William Blair estimates and FactSet consensus

Detailed inancial statements are available on the following pages.

Matt Larew +1 312 364 8242 19

20
William Blair

Exhibit 12
Tenet Healthcare Corporation
Income Statement
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Fiscal year ending December
($ in millions, except per share items) Q1'16A Q2'16A Q3'16A Q4'16A Q1'17A Q2'17A Q3'17A Q4'17E Q1'18E Q2'18E Q3'18E Q4'18E 2015A 2016A 2017E 2018E 2019E 2020E

Matt Larew +1 312 364 8242

Revenue:
Gross revenue 5,420 5,220 5,216 5,214 5,196 5,173 4,941 5,193 5,060 5,043 4,903 5,012 20,111 21,070 20,503 20,017 20,644 21,079
Provision for doubtful accounts 376 352 367 354 383 371 355 370 365 362 352 360 1,477 1,449 1,479 1,438 1,482 1,513
% of gross revenue 6.9% 6.7% 7.0% 6.8% 7.4% 7.2% 7.2% 7.1% 7.2% 7.2% 7.2% 7.2% 7.3% 6.9% 7.2% 7.2% 7.2% 7.2%
Net revenue 5,044 4,868 4,849 4,860 4,813 4,802 4,586 4,823 4,695 4,681 4,551 4,652 18,634 19,621 19,024 18,579 19,162 19,566
% growth/(decline) 14.0% 8.4% 3.3% (3.3%) (4.6%) (1.4%) (5.4%) (0.8%) (2.5%) (2.5%) (0.8%) (3.5%) 12.2% 5.3% (3.0%) (2.3%) 3.1% 2.1%
Equity in earnings of unconsol. affiliates 24 30 31 46 29 28 38 54 32 36 44 63 99 131 149 176 202 222
Expenses:
Salaries, wages and benefits 2,395 2,309 2,314 2,324 2,380 2,346 2,264 2,272 2,286 2,271 2,203 2,185 9,011 9,342 9,262 8,945 9,203 9,374
Supplies 811 773 767 773 765 780 740 743 747 745 721 726 2,963 3,124 3,028 2,940 3,025 3,081
Other operating expenses 1,242 1,213 1,225 1,205 1,187 1,159 1,120 1,088 1,124 1,112 1,077 1,082 4,555 4,885 4,554 4,396 4,522 4,606
Total operating expenses 4,448 4,295 4,306 4,302 4,332 4,285 4,124 4,102 4,157 4,128 4,002 3,993 16,529 17,351 16,843 16,281 16,751 17,061
Other income (HCIT incentives) - (21) (2) (9) (1) (6) (1) (2) - - - - (72) (32) (10) - - -
EBITDA 620 624 576 613 511 551 501 778 570 589 593 722 2,276 2,433 2,340 2,474 2,613 2,727
Adjusted EBITDA 617 629 582 613 527 570 507 787 570 589 593 722 2,276 2,441 2,390 2,474 2,613 2,727
EBITDA margin % (-NCI) 11.0% 11.2% 10.2% 10.4% 9.2% 10.1% 9.3% 14.1% 10.2% 10.7% 11.1% 13.4% 11.2% 10.6% 10.7% 11.4% 11.6% 11.9%
Y/y growth % 17.2% 9.9% 1.7% (0.0%) (17.6%) (11.7%) (13.1%) 26.9% 11.5% 6.9% 18.5% (7.2%) 16.6% 6.9% (3.8%) 5.7% 5.6% 4.4%
Depreciation and amortization 212 215 205 218 221 222 219 217 206 210 212 218 796 850 880 846 917 968
D&A % of revenue 4.2% 4.4% 4.2% 4.5% 4.6% 4.6% 4.8% 4.5% 4.4% 4.5% 4.7% 4.7% 4.3% 4.3% 4.6% 4.6% 4.8% 4.9%
EBIT 405 414 377 395 306 348 287 569 363 379 381 504 1,480 1,591 1,511 1,628 1,695 1,759
Interest expense 243 244 243 249 258 260 257 257 251 250 248 246 912 979 1,032 995 953 956
Other non-op. (income)/expense, net 6 5 6 (6) 5 5 2 8 5 5 5 5 2 11 20 20 20 20
Pretax income 156 165 128 152 43 83 28 305 107 125 128 253 567 601 458 613 722 782
Income tax expense/(benefit) 36 40 21 39 (19) 13 (34) 74 13 20 21 67 162 136 34 121 141 150
Non-controlling interest 75 85 87 107 89 87 78 106 89 89 88 98 197 354 361 363 389 408
NCI % of revenue 1.5% 1.7% 1.8% 2.2% 1.8% 1.8% 1.7% 2.2% 1.9% 1.9% 1.9% 2.1% 1.1% 1.8% 1.9% 2.0% 2.0% 2.1%
Benefit/(loss) from disc. ops, net of tax 4 2 1 0 1 (1) (1) (1) - - - - 4 7 (2) - - -
Net income/(loss) attributable to THC 45 40 20 6 (27) (17) (17) 124 6 16 19 88 208 111 63 129 193 225
EPS, adjusted $0.45 $0.40 $0.20 $0.06 ($0.27) ($0.17) ($0.17) $1.23 $0.06 $0.16 $0.19 $0.85 $2.05 $1.04 $0.63 $1.26 $1.84 $2.08
Diluted shares outstanding, non-GAAP 100 101 101 101 100 101 101 101 101 102 102 103 102 101 101 102 105 108
Margin analysis:
SWB % of revenue 47.5% 47.4% 47.7% 47.8% 49.4% 48.9% 49.4% 47.1% 48.7% 48.5% 48.4% 47.0% 48.4% 47.6% 48.7% 48.1% 48.0% 47.9%
Supplies % of revenue 16.1% 15.9% 15.8% 15.9% 15.9% 16.2% 16.1% 15.4% 15.9% 15.9% 15.8% 15.6% 15.9% 15.9% 15.9% 15.8% 15.8% 15.7%
Other OpEx % of revenue 24.6% 24.9% 25.3% 24.8% 24.7% 24.1% 24.4% 22.6% 23.9% 23.8% 23.7% 23.2% 24.4% 24.9% 23.9% 23.7% 23.6% 23.5%
Total OpEx as a % of revenue 88.2% 88.2% 88.8% 88.5% 90.0% 89.2% 89.9% 85.1% 88.6% 88.2% 87.9% 85.8% 88.7% 88.4% 88.5% 87.6% 87.4% 87.2%
Adjusted EBITDA margin % 12.2% 12.9% 12.0% 12.6% 10.9% 11.9% 11.0% 16.3% 12.1% 12.6% 13.0% 15.5% 12.2% 12.4% 12.6% 13.3% 13.6% 13.9%
Important metrics
Leverage (Debt-to-TTM EBITDA) 6.14x 5.98x 5.94x 6.25x 6.47x 6.61x 6.71x 6.18x 6.03x 5.95x 5.70x 5.76x 6.37x 6.25x 6.18x 5.76x 5.22x 4.98x
Return on invested capital (ROIC) 8.2% 8.5% 8.5% 8.3% 7.6% 7.3% 7.0% 8.1% 8.4% 8.6% 9.1% 8.8% 7.8% 8.1% 8.1% 8.8% 9.3% 9.4%
Sources: Company reports and William Blair estimates
 Exhibit 13
Tenet Healthcare Corporation
Balance Sheet
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Fiscal year ending December
$ million, unless noted Q1'16A Q2'16A Q3'16A Q4'16A Q1'17A Q2'17A Q3'17A Q4'17E Q1'18E Q2'18E Q3'18E Q4'18E 2015A 2016A 2017E 2018E 2019E 2020E
Current assets
Cash and equivalents 728 656 649 716 572 475 429 501 330 743 766 609 356 716 501 609 458 982
Accounts receivable, net 2,807 2,734 2,786 2,897 2,960 2,706 2,567 2,778 2,827 2,633 2,581 2,727 2,704 2,897 2,778 2,727 2,759 2,839
Inventories of supplies, at cost 312 316 322 326 324 316 297 297 304 303 296 298 309 326 297 298 300 308
Income tax receivable 0 3 11 4 26 7 14 14 14 14 14 14 7 4 14 14 14 14
Assets held for sale 2 2 17 29 3 705 842 842 842 842 842 842 550 29 842 842 842 842
Current portion of deferred income taxes - - - - - - - - - - - - - - - - - -
Other current assets excl. assets held for sale 1,280 1,282 1,331 1,285 1,167 1,173 1,160 1,105 1,105 1,105 1,105 1,105 1,245 1,285 1,105 1,105 1,105 1,105
Total current assets 5,129 4,993 5,116 5,257 5,052 5,382 5,309 5,537 5,422 5,641 5,604 5,595 5,171 5,257 5,537 5,595 5,478 6,090
Investments and other assets 1,142 1,317 1,324 1,250 1,260 1,238 1,253 1,253 1,253 1,253 1,253 1,253 1,175 1,250 1,253 1,253 1,253 1,253
Deferred income taxes 726 797 840 871 930 1,020 783 783 783 783 783 783 776 871 783 783 783 783
PP&E, net 7,961 7,977 7,965 8,053 7,976 7,738 7,077 7,110 6,933 6,774 6,737 6,744 7,915 8,053 7,110 6,744 6,676 6,558
Goodwill 7,122 7,291 7,376 7,425 7,429 7,157 7,022 7,022 7,022 7,022 7,022 7,022 6,970 7,425 7,022 7,022 7,022 7,022
Other intangible assets 1,686 1,865 1,853 1,845 1,863 1,806 1,764 1,764 1,764 1,764 1,764 1,764 1,675 1,845 1,764 1,764 1,764 1,764
Total assets 23,766 24,240 24,474 24,701 24,510 24,341 23,208 23,469 23,177 23,237 23,163 23,161 23,682 24,701 23,469 23,161 22,977 23,470
Current liabilities
Short-term borrowings
Current portion of long-term debt 172 181 184 191 147 143 140 140 140 140 140 140 127 191 140 140 140 140
Accounts payable 1,228 1,272 1,228 1,329 1,179 1,086 1,100 1,235 1,159 1,151 1,120 1,219 1,380 1,329 1,235 1,219 1,225 1,260
Accrued compensation and benefits 772 843 809 872 739 749 800 855 720 770 777 830 880 872 855 830 844 866
Professional and general liability reserves 161 179 185 181 201 208 210 210 210 210 210 210 177 181 210 210 210 210
Accrued interest payable 307 205 308 210 327 238 336 336 336 336 336 336 205 210 336 336 336 336
Liabilities held for sale - - 13 9 - 51 407 407 407 407 407 407 101 9 407 407 407 407
Accrued legal settlement costs 423 525 527 8 11 1 - - - - - - 294 8 - - - -
Other current liabilities 1,205 1,225 1,293 1,234 1,163 1,861 1,146 1,161 1,128 1,170 1,175 1,151 1,144 1,234 1,161 1,151 1,159 1,195
Total current liabilities 4,268 4,430 4,547 4,034 3,767 4,337 4,139 4,344 4,099 4,185 4,165 4,292 4,308 4,034 4,344 4,292 4,321 4,415
Long-term debt, net of current portion 14,350 14,320 14,323 15,064 15,071 15,012 14,741 14,641 14,541 14,441 14,341 14,100 14,383 15,064 14,641 14,100 13,500 13,450
Professional and general liability reserves 623 613 620 613 614 644 617 581 589 609 597 574 578 613 581 574 579 597
Defined benefit plan obligations 593 594 586 626 624 618 596 596 596 596 596 596 595 626 596 596 596 596
Deferred income taxes - 274 320 279 289 296 - - - - - - 37 279 - - - -
Other long-term liabilities 625 582 606 610 621 598 604 604 604 604 604 604 557 610 604 604 604 604
Total liabilities 20,459 20,813 21,002 21,226 20,986 21,505 20,697 20,766 20,430 20,434 20,303 20,166 20,458 21,226 20,766 20,166 19,600 19,661
Commitments and contingencies - - - - - - - - - - - - - - - - - -
Redeemable NCI in equity of consol. subsidiaries 2,381 2,275 2,307 2,393 2,430 1,781 1,816 1,816 1,816 1,816 1,816 1,816 2,266 2,393 1,816 1,816 1,816 1,816
Shareholders' equity: - - - - - - - - - - - - - - - - - -
Preferred stock - - - - - - - - - - - - - - - - - -
Common stock 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
Additional paid-in capital 4,804 4,791 4,801 4,827 4,834 4,819 4,835 4,835 4,835 4,835 4,835 4,835 4,815 4,827 4,835 4,835 4,835 4,835
Accumulated other comprehensive loss (160) (203) (200) (258) (255) (242) (238) (238) (238) (238) (238) (238) (164) (258) (238) (238) (238) (238)
Accumulated deficit (1,609) (1,655) (1,663) (1,742) (1,739) (1,794) (2,161) (1,984) (1,955) (1,915) (1,873) (1,752) (1,550) (1,742) (1,984) (1,752) (1,431) (1,059)
Common stock in treasury, at cost (2,417) (2,417) (2,417) (2,417) (2,417) (2,417) (2,419) (2,404) (2,389) (2,374) (2,359) (2,344) (2,417) (2,417) (2,404) (2,344) (2,284) (2,224)
Total shareholder equity 625 523 528 417 430 373 24 216 260 315 372 508 691 417 216 508 889 1,322
Non-controlling interests 301 629 637 665 664 682 671 671 671 671 671 671 267 665 671 671 671 671
Total equity 926 1,152 1,165 1,082 1,094 1,055 695 887 931 987 1,043 1,179 958 1,082 887 1,179 1,560 1,993
Total liabilities and shareholder equity 23,766 24,240 24,474 24,701 24,510 24,341 23,208 23,469 23,177 23,237 23,163 23,161 23,682 24,701 23,469 23,161 22,977 23,470
Working capital metrics:
Non-financial working capital (1,149) (1,380) (1,439) (811) (483) (1,315) (1,275) (1,268) (969) (1,248) (1,288) (1,267) (1,295) (811) (1,268) (1,267) (1,262) (1,267)
Days sales outstanding ("DSO") 50.6 51.1 52.9 54.8 55.4 51.3 51.5 53.0 54.2 51.2 52.2 53.9 53.0 54.0 53.3 53.6 52.6 53.1
Days' inventory on-hand ("DIO") 35.0 37.2 38.6 38.8 38.1 36.9 36.9 36.8 36.6 37.0 37.8 37.8 38.1 38.2 35.8 37.0 36.2 36.6
Days' payables on-hand ("DPO") 46.7 50.1 48.8 52.6 44.6 42.1 44.7 50.0 45.6 46.1 46.8 51.3 55.9 52.1 48.7 49.7 48.6 49.2
Cash conversion cycle (days) 39.0 38.2 42.7 41.0 48.9 46.0 43.7 39.8 45.1 42.1 43.2 40.4 35.1 40.2 40.5 40.9 40.2 40.6
CapEx % of sales 4.1% 4.2% 4.1% 5.4% 4.1% 3.1% 3.1% 5.2% 4.3% 3.7% 3.8% 4.8% 4.5% 4.5% 3.9% 4.2% 4.4% 4.3%
Sources: Company reports and William Blair estimates

Matt Larew +1 312 364 8242

William Blair

21
22
Exhibit 14
Tenet Healthcare Corporation
Cash Flow Statement
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Fiscal year ending December
William Blair

$ million, unless noted Q1'16A Q2'16A Q3'16A Q4'16A Q1'17A Q2'17A Q3'17A Q4'17E Q1'18E Q2'18E Q3'18E Q4'18E 2015A 2016A 2017E 2018E 2019E 2020E
Beginning cash balance 356 728 656 649 716 572 475 429 501 330 743 766 193 356 716 501 609 459
Cash flows from operating activities:
Net income / loss 34 39 80 23 36 32 (289) 257 125 135 137 215 78 176 36 612 701 753
Depreciation and amortization 212 215 205 218 221 222 219 217 206 210 212 218 797 850 879 846 917 968

Matt Larew +1 312 364 8242

D&A as a % of gross PP&E 1.7% 1.7% 1.6% 1.7% 1.7% 1.8% 1.9% 1.8% 1.7% 1.7% 1.7% 1.7% 6.5% 6.5% 7.3% 6.7% 6.8% 6.8%
Provision for doubtful accounts 376 352 367 354 383 371 355 370 365 362 352 360 1,477 1,449 1,479 1,438 1,482 1,513
Deferred income tax expense / benefit 31 6 (5) 9 - (81) (64) - - - - - 42 41 (145) - - -
Stock-based compensation expense 16 19 16 17 13 16 15 15 15 15 15 15 69 68 59 60 60 60
Impairment, restructuring charges, M&A costs 28 22 31 121 33 41 329 50 - - - - 318 202 453 - - -
Litigation and investigation costs 173 114 4 2 5 1 6 5 - - - - 291 293 17 - - -
Loss / gain from early extinguishment of debt - - - - - 26 138 - - - - - 1 - 164 - - -
Gains on sales, consolidation/ deconsolidation of facilities (147) (1) (3) - (15) (23) (104) - - - - - (186) (151) (142) - - -
Equity in earnings of unconsol. affiliates, net of distributions 12 (2) (8) (15) 4 - (8) - (5) (5) (5) (5) (99) (13) (4) (20) (20) (20)
Amortization of debt discount and debt issuance costs 10 11 12 8 11 11 11 - - - - - 41 41 33 - - -
Other items, net 2 (4) (1) 2 (2) (23) 6 (36) 8 19 (12) (23) 59 (1) (55) (8) 5 18
Pre-tax loss / income from discontinued operations 5 2 (2) 1 2 (2) 1 - - - - - (3) 6 1 - - -
Change in cash from operating assets and liabilities: - - - - - - - - - - - - - - - - - -
Accounts receivable (453) (272) (431) (448) (446) (227) (373) (582) (414) (168) (300) (505) (1,632) (1,604) (1,628) (1,386) (1,515) (1,593)
Inventories and other current assets (18) (12) (65) 12 132 28 (63) (0) (7) 0 7 (2) (130) (83) 97 (1) (1) (9)
Income taxes 28 (45) 16 (7) (34) 27 (7) - - - - - 18 (8) (14) - - -
Accounts payable, accrued exp., other current liabilities (114) 8 71 (16) (161) (184) 204 205 (244) 85 (20) 127 68 (51) 64 (52) 29 93
Other long-term liabilities 24 10 14 (8) 26 22 (41) - - - - - 38 40 7 - - -
Payments for restructuring, AQR, litigation, settlements (69) (30) (33) (559) (24) (38) (26) (15) (30) (30) (30) (30) (200) (691) (103) (120) (120) (120)
Net cash used in / provided by disc. ops (3) 3 1 (7) 2 (4) (1) - - - - - (21) (6) (3) - - -
Total operating cash flows 147 435 269 (293) 186 215 308 487 19 623 357 369 1,026 558 1,196 1,369 1,539 1,663
Cash flows from investing activities: - - - - - - - - - - - - - - - - - -
Purchases of PP&E - continuing operations (208) (205) (201) (261) (198) (150) (144) (250) (200) (175) (175) (225) (842) (875) (742) (775) (850) (850)
Purchases of businesses / JV interests, net of acquired cash (29) (65) (2) (21) (6) (20) (15) - - - - - (940) (117) (41) - - -
Proceeds from sales of facilities and other assets 573 0 0 0 20 54 752 - 170 125 - - 549 573 826 295 - -
Proceeds/(purchases) of mktble securities and other assets (6) (5) 10 24 8 6 (58) - - - - - (74) 23 (44) - - -
Other items, net (10) 9 (11) (22) (13) (9) - - - - - - (10) (34) (22) - - -
Total investing cash flows 320 (266) (204) (280) (189) (119) 535 (250) (30) (50) (175) (225) (1,317) (430) (23) (480) (850) (850)
Cash flows from financing activities: - - - - - - - - - - - - - - - - - -
Repayments of borrowings under credit facility (995) (200) 0 (700) 0 (100) (750) (100) (100) (100) (100) - (2,815) (1,895) (950) (300) (200) -
Proceeds from borrowings under credit facility 995 200 0 700 0 100 750 - - - - - 2,595 1,895 850 - - -
Repayments of other borrowings ex. proceeds (38) (38) (36) (42) (89) (940) (3,070) - - - - (1,041) (2,049) (154) (4,099) (1,041) (1,600) (4,250)
Proceeds from other borrowings 1 (1) 4 756 6 831 2,951 - - - - 800 3,158 760 3,788 800 1,200 4,200
Debt issuance costs 0 0 (1) (11) (2) (27) (33) - - - - - (80) (12) (62) - - -
Distributions paid to noncontrolling interests (44) (51) (56) (67) (63) (60) (55) (65) (60) (60) (60) (60) (110) (218) (243) (240) (240) (240)
Purchase of noncontrolling interests - (177) (3) (6) 10 (15) (717) - - - - - (268) (186) (722) - - -
Contributions from noncontrolling interests - 15 4 3 - 14 15 - - - - - 11 22 29 - - -
Proceeds from exercise of stock options - 3 1 - 2 1 2 - - - - - 15 4 5 - - -
Other items, net (14) 8 15 7 (5) 3 18 - - - - - 37 16 16 - - -
Repurchases of preferred stock - - - - - - - - - - - - - - - - - -
Repurchases of common stock - - - - - - - - - - - - (40) - - - - -
Cash dividends on preferred stock - - - - - - - - - - - - - - - - - -
Total financing cash flows (95) (241) (72) 640 (141) (193) (889) (165) (160) (160) (160) (301) 454 232 (1,388) (781) (840) (290)
Net increase/(decrease) 372 (72) (7) 67 (144) (97) (46) 72 (171) 413 22 (157) 163 360 (215) 108 (151) 523
Ending cash balance 728 656 649 716 572 475 429 501 330 743 766 609 356 716 501 609 459 982
Sources: Company reports and William Blair estimates
 William Blair

The prices of the common stock of other public companies mentioned in this report follow:

Humana Inc. $233.46

Matt Larew +1 312 364 8242 23

 William Blair

IMPORTANT DISCLOSURES

William Blair or an affiliate is a market maker in the security of Tenet Healthcare Corporation.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from Tenet Healthcare
Corporation or an affiliate within the next three months.

Officers and employees of William Blair or its affiliates (other than research analysts) may have a financial interest in the securities of Tenet
Healthcare Corporation.

This report is available in electronic form to registered users via R*Docs™ at https://williamblairlibrary.bluematrix.com or
www.williamblair.com.

Please contact us at +1 800 621 0687 or consult williamblair.com/Research-and-Insights/Equity-Research/Coverage.aspx for all disclosures.

Matt Larew attests that 1) all of the views expressed in this research report accurately reflect his/her personal views about any and all of
the securities and companies covered by this report, and 2) no part of his/her compensation was, is, or will be related, directly or indirectly,
to the specific recommendations or views expressed by him/her in this report. We seek to update our research as appropriate. Other than
certain periodical industry reports, the majority of reports are published at irregular intervals as deemed appropriate by the research
analyst.

DOW JONES: 23430.30

S&P 500: 2582.14
NASDAQ: 6790.72

Tenet Healthcare Corporation Rating History as of 1 1 / 2 0 / 2 0 1 7

powered by: BlueMatrix

70
60
50
40
30
20
10
Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17

Closing Price
OP: Outperform Mkt: Market Perform UP: Under Perform NR: Not Rated I: Initiation of Coverage D: Dropped Coverage

Source: FactSet & William Blair

Additional information is available upon request.

Current Rating Distribution (as of November 21, 2017):

Coverage Universe Percent Inv. Banking Relationships * Percent

Outperform (Buy) 63 Outperform (Buy) 20

Market Perform (Hold) 35 Market Perform (Hold) 9
Underperform (Sell) 1 Underperform (Sell) 0
*Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has
received compensation for investment banking services within the past 12 months.

The compensation of the research analyst is based on a variety of factors, including performance of his or her stock recommendations;
contributions to all of the firm’s departments, including asset management, corporate finance, institutional sales, and retail brokerage; firm
profitability; and competitive factors.

24 | Matt Larew +1 312 364 8242

 William Blair

OTHER IMPORTANT DISCLOSURES

Stock ratings and valuation methodologies: William Blair & Company, L.L.C. uses a three-point system to rate stocks. Individual ratings reflect
the expected performance of the stock relative to the broader market (generally the S&P 500, unless otherwise indicated) over the next
12 months. The assessment of expected performance is a function of near-, intermediate-, and long-term company fundamentals, industry
outlook, confidence in earnings estimates, valuation (and our valuation methodology), and other factors. Outperform (O) - stock expected
to outperform the broader market over the next 12 months; Market Perform (M) - stock expected to perform approximately in line with
the broader market over the next 12 months; Underperform (U) - stock expected to underperform the broader market over the next 12
months; not rated (NR) - the stock is not currently rated. The valuation methodologies include (but are not limited to) price-to-earnings
multiple (P/E), relative P/E (compared with the relevant market), P/E-to-growth-rate (PEG) ratio, market capitalization/revenue multiple,
enterprise value/EBITDA ratio, discounted cash flow, and others. Stock ratings and valuation methodologies should not be used or relied
upon as investment advice. Past performance is not necessarily a guide to future performance.

The ratings and valuation methodologies reflect the opinion of the individual analyst and are subject to change at any time.

Our salespeople, traders, and other professionals may provide oral or written market commentary, short-term trade ideas, or trading
strategies-to our clients, prospective clients, and our trading desks-that are contrary to opinions expressed in this research report. Certain
outstanding research reports may contain discussions or investment opinions relating to securities, financial instruments and/or issuers
that are no longer current. Always refer to the most recent report on a company or issuer. Our asset management and trading desks may
make investment decisions that are inconsistent with recommendations or views expressed in this report. We will from time to time have
long or short positions in, act as principal in, and buy or sell the securities referred to in this report. Our research is disseminated primarily
electronically, and in some instances in printed form. Research is simultaneously available to all clients. This research report is for our clients
only. No part of this material may be copied or duplicated in any form by any means or redistributed without the prior written consent of
William Blair & Company, L.L.C.

This is not in any sense an offer or solicitation for the purchase or sale of a security or financial instrument. The factual statements
herein have been take from sources we believe to be reliable, but such statements are made without any representation as to accuracy or
completeness or otherwise, except with respect to any disclosures relative to William Blair or its research analysts. Opinions expressed are
our own unless otherwise stated and are subject to change without notice. Prices shown are approximate.

This material is distributed in the United Kingdom and the European Economic Area (EEA) by William Blair International, Ltd., authorized
and regulated by the Financial Conduct Authority (FCA), and is only directed at and is only made available to persons falling within articles
19, 38, 47, and 49 of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 (all such persons being referred to as
“relevant persons”).

“William Blair” and “R*Docs” are registered trademarks of William Blair & Company, L.L.C. Copyright 2017, William Blair & Company, L.L.C.
All rights reserved.

25 | Matt Larew +1 312 364 8242

Equity Research Directory
John F. O’Toole, Partner Manager and Director of Research +1 312 364 8612
Kyle Harris, CFA, Partner Operations Manager +1 312 364 8230

FINANCIAL SERVICES AND TECHNOLOGY CONSUMER

Adam Klauber, CFA, Partner +1 312 364 8232 Sharon Zack ia, CFA, Partner +1 312 364 5386
Co-Group Head–Financial Services and Technology Group Head–Consumer
Financial Analytic Service Providers, Insurance Brokers, Lifestyle and Leisure Brands, Restaurants
Property & Casualty Insurance
Jon Andersen, CFA, Partner +1 312 364 8697
Robert Napoli, Partner +1 312 364 8496 Consumer Products
Co-Group Head–Financial Services and Technology Dylan Carden +1 312 801 7857
Business Development Companies, Financial Technology, Specialty Apparel and Accessories
Finance
Ryan Domyancic, CFA +1 312 364 5412
Chris Shutler, CFA +1 312 364 8197 E-commerce, Food Retail
Asset Management, Financial Technology
Daniel Ho kin +1 312 364 8965
GLOBAL SERVICES Hardlines, Specialty Retail
Brandon Dobell, Partner +1 312 364 8773 Ryan Sundby, CFA +1 312 364 5443
Group Head–Global Services Outdoor and Recreation
Information Services, Marketing Services, Real Estate Services and
Technology, Education Services and Technology GLOBAL INDUSTRIAL INFRASTRUCTURE
Timothy McHugh, CFA, Partner +1 312 364 8229 Nick Heymann +1 212 237 2740
Consulting, HR Technology, Information Services, Stafϔing Co-Group Head–Global Industrial Infrastructure
Multi-industry
Tim Mulrooney +1 312 364 8123
Larry De Maria, CFA +1 212 237 2753
Commercial Services
Co-Group Head–Global Industrial Infrastructure
HEALTHCARE Capital Goods

Biotechnology Brian Drab, CFA, Partner +1 312 364 8280

Industrial Technology
Tim Lugo, Partner +1 415 248 2870
Co-Group Head–Biotechnology Ryan Merkel, CFA +1 312 364 8603
Therapeutics Commercial Services, Industrial Distribution

Y. Katherine Xu, Ph.D., Partner +1 212 237 2758 TECHNOLOGY, MEDIA, AND COMMUNICATIONS
Co-Group Head–Biotechnology Jason Ader, CFA, Partner +1 617 235 7519
Biotechnology Co-Group Head–Technology, Media, and Communications
Andy T. Hsieh, Ph.D. +1 312 364 5051 Enterprise and Cloud Infrastructure
Biotechnology Bhavan Suri, Partner +1 312 364 5341
Matt Phipps, Ph.D. +1 312 364 8602 Co-Group Head–Technology, Media, and Communications
Biotechnology IT Services, Software, Software as a Service
Jim Breen, CFA +1 617 235 7513
Raju Prasad, Ph.D. +1 312 364 8469
Internet Infrastructure and Communication Services
Therapeutics
Anil Doradla +1 312 364 8016
Healthcare Technology and Services IT Services, Technical Software, Semiconductors and Wireless
Ryan Daniels, CFA, Partner +1 312 364 8418 Justin Furby, CFA +1 312 364 8201
Co-Group Head–Healthcare Technology and Services Software as a Service
Healthcare Technology, Healthcare Services
Jonathan Ho +1 312 364 8276
John Kreger, Partner +1 312 364 8597 Cybersecurity, Security Technology
Co-Group Head–Healthcare Technology and Services
Distribution, Outsourcing, Pharmacy Beneϔit Management Dmitry Netis +1 212 237 2714
Uniϔied Communications and Communications Equipment
Jeffrey Garro, CFA +1 312 364 8022
Healthcare Technology Matthew Pfau, CFA +1 312 364 8694
Software as a Service
Margaret Kaczor, CFA +1 312 364 8608
Ralph Schackart III, CFA, Partner +1 312 364 8753
Medical Technology
Digital Media, Internet
Kaila Krum +1 312 364 5169
Medical Technology EDITORIAL AND SUPERVISORY ANALYSTS
Matt Larew +1 312 364 8242 Steve Goldsmith, Head Editor and SA +1 312 364 8540
Healthcare Delivery Beth Pekol Porto, Editor and SA +1 312 364 8924
Kelsey Swanekamp, Editor and SA +1 312 364 8174
Amanda Murphy, CFA, Partner +1 312 364 8951 Lisa Zurcher, Editor and SA +44 20 7868 4549
Diagnostic Services, Life Sciences
Brian Weinstein, CFA, Partner +1 312 364 8170
Diagnostic Products, Medical Technology