SOURCE: Vanguard Health Systems

Vanguard Health Systems

August 25, 2010 18:50 ET

Vanguard Reports Fourth Quarter and Year-End Results

NASHVILLE, TN--(Marketwire - August 25, 2010) - Vanguard Health Systems, Inc. (Vanguard) today announced results for the fourth quarter and fiscal year ended June 30, 2010.

Total revenues for the quarter ended June 30, 2010 were $858.4 million, an increase of $31.9 million or 3.9% from the prior year quarter. Patient service revenues increased $17.4 million from the prior year quarter. Health plan premium revenues increased $14.5 million from the prior year quarter. The increase in patient service revenues was attributable to a 3.3% increase in adjusted discharges offset by a 0.2% decrease in patient revenue per adjusted discharge during the current year quarter compared to the prior year quarter. Absent the implementation of an insured discount policy in our Phoenix and San Antonio hospitals effective July 1, 2009, similar to the program implemented in our two Illinois hospitals on April 1, 2009, and a change to the Medicaid pending policy at all of our hospitals, patient revenue per adjusted discharge would have increased 3.2% during the current year quarter compared to the prior year quarter. The increase in health plan premium revenues was primarily attributable to a 17.1% increase in average membership in Phoenix Health Plan (PHP) during the current year quarter compared to the prior year quarter. Economic conditions in Arizona continue to increase the number of individuals eligible for coverage under the Arizona Health Care Cost Containment System (AHCCCS) and thus expand PHP's membership.

Vanguard reported income from continuing operations of $3.4 million for the current year quarter compared to $2.1 million during the prior year quarter. During the current year quarter, Vanguard's net income attributable to Vanguard Health Systems, Inc. stockholders was $2.8 million compared to $1.8 million during the prior year quarter. Many quarter over quarter comparisons of individual cost and expense items, particularly for health plan claims expense and the provision for doubtful accounts, as a percentage of total revenues during the current year quarter were impacted by the significant growth in health plan premium revenues and the uninsured discount and Medicaid pending policy changes. A table describing the impact of adjustments to certain expenses and revenues and related ratios for our acute care services segment and to certain statistical measures is included in this release in the attached Supplemental Operating Measures Adjusted for Comparative Analysis.

Adjusted EBITDA for the current year quarter was $82.9 million, an 11.3% increase compared to the prior year quarter. A reconciliation of Adjusted EBITDA to net income (loss) attributable to Vanguard Health Systems, Inc. stockholders as determined in accordance with generally accepted accounting principles for the quarters ended June 30, 2009 and 2010 is included in the attached supplemental financial information.

The consolidated operating results for the current year quarter reflect a 1.8% increase in discharges and a 3.3% increase in adjusted discharges compared to the prior year quarter. Emergency room visits increased 1.0%, while inpatient surgeries and outpatient surgeries decreased 3.0% and 2.2%, respectively, during the current year quarter compared to the prior year quarter. General economic weakness in the United States economy continues to impact demand for elective surgical procedures.

Total revenues for the year ended June 30, 2010 were $3,376.9 million, an increase of $191.5 million or 6.0% from the prior year. Patient service revenues and health plan premium revenues increased $29.8 million and $161.7 million, respectively, from the prior year. Total revenues during the current year were positively impacted by a 2.4% increase in adjusted discharges but were negatively impacted by a 1.1% decrease in patient revenue per adjusted discharge compared to the prior year. Absent the previously discussed uninsured discount and Medicaid pending policy changes, patient revenue per adjusted discharge would have increased 2.8% during the current year compared to the prior year. Health plan premium revenues increased 23.8% during the current year primarily due to the significant enrollment increase associated with PHP's new contract with AHCCCS that went into effect on October 1, 2008.

Vanguard reported a loss from continuing operations of $44.6 million during the current year compared to income from continuing operations of $32.1 million during the prior year. Net loss attributable to Vanguard Health Systems, Inc. stockholders for the current year was $49.2 million compared to net income attributable to Vanguard Health Systems, Inc. stockholders of $28.6 million during the prior year. Each of these current year measures was negatively impacted by the goodwill impairment loss related to our Illinois hospitals recognized in December 2009 and by debt extinguishment costs incurred to complete a refinancing of our indebtedness in January 2010. Many year over year comparisons of individual cost and expense items as a percentage of total revenues, particularly for health plan claims expense and the provision for doubtful accounts, were impacted by the significant growth in health plan premium revenues and the uninsured discount and Medicaid pending policy changes previously discussed. The Supplemental Operating Measures Adjusted for Comparative Analysis table included elsewhere in this release sets forth the impact of the uninsured discount and Medicaid pending policy changes to certain expenses and revenues and related ratios for our acute care services segment and to certain statistical measures. Health plan claims expense as a percentage of health plan premium revenues increased to 79.3% during the current year compared to 77.5% during the prior year primarily as a result of changes to capitation and supplemental payment rates, enrollee medical costs and enrollee demographic mix under PHP's new contract with AHCCCS that went into effect on October 1, 2008.

Adjusted EBITDA was $326.6 million for the current year, an increase of $23.9 million or 7.9% from the prior year. A reconciliation of Adjusted EBITDA to net income (loss) attributable to Vanguard Health Systems, Inc. stockholders as determined in accordance with generally accepted accounting principles for the years ended June 30, 2009 and 2010 is included in the attached supplemental financial information.

Cash flows from operating activities were $315.2 million for the current year, an increase of $2.1 million from the prior year. Current year operating cash flows were negatively impacted by AHCCCS' deferral of the June 2010 capitation and supplemental payments to PHP of approximately $62.0 million until July 2010. Current year operating cash flows were positively impacted by an improvement in net days revenue in accounts receivable from 45 days at June 30, 2009 to 41 days at June 30, 2010. Cash flows from operating activities were also positively impacted by the timing of payments of accounts payable during the current year compared to the prior year. Vanguard's cash and cash equivalents balance was $257.6 million at June 30, 2010 compared to $308.2 million at June 30, 2009.

On June 10, 2010, Vanguard entered into a definitive agreement to purchase Detroit Medical Center (DMC), which owns and operates eight hospitals in and around Detroit, Michigan with 1,734 licensed beds. Under the purchase agreement, Vanguard will acquire all of DMC's assets (other than donor restricted and certain other assets) and assume all of its liabilities (other than its outstanding bonds and other certain liabilities) for $417.0 million in cash, substantially all of which will be used to repay all such non-assumed debt. The acquisition is pending review and approval by the Michigan Attorney General. Detailed information regarding the purchase price, assets acquired, liabilities assumed and future commitments related to the DMC purchase are set forth in Vanguard's Form 8-K filed with the Securities and Exchange Commission on June 15, 2010. If approval is obtained, Vanguard expects the DMC transaction to close during its second quarter of fiscal 2011.

On July 14, 2010, certain of Vanguard's subsidiaries issued $225.0 million aggregate principal amount of 8% Senior Notes due 2018 (the Add-On Notes) utilizing the same indenture governing the $950.0 million 8% Senior Notes previously issued in January 2010. The Add-On Notes were issued at an offering price of 96.250% plus accrued interest from January 29, 2010. The proceeds from the issuance of the Add-On Notes will be used to fund a portion of the DMC purchase price if such acquisition is approved by the Michigan Attorney General or else used for general corporate purposes including other potential acquisitions. Additional information regarding the Add-On Notes is set forth in Vanguard's Form 8-K filed with the Securities and Exchange Commission on July 19, 2010.

On August 1, 2010, Vanguard completed the purchase of Westlake Hospital and West Suburban Medical Center in the western suburbs of Chicago, Illinois from Resurrection Health Care. As part of the purchase, Vanguard acquired certain assets and assumed certain liabilities of these hospitals for a total cash purchase price of approximately $45.0 million. These hospitals have a combined 459 licensed beds and are each located within 10 miles of Vanguard's MacNeal Hospital. Additional information related to this acquisition is set forth in Vanguard's Form 8-K filed with the Securities and Exchange Commission on August 4, 2010.

Vanguard will host a conference call for investors at 11:00 am EDT on August 26, 2010. All interested investors are invited to access a live audio broadcast of the call, via webcast. The live webcast can be accessed on the home page of Vanguard's Web site at www.vanguardhealth.com by clicking on "Fourth Quarter Webcast" or at http://visualwebcaster.com/event.asp?id=71303. If you are unable to participate during the live webcast, the call will be available on a replay basis on Vanguard's Web site www.vanguardhealth.com. To access the replay, click on the Investor Relations of www.vanguardhealth.com. The replay will be available via this link for one year.

Vanguard owns and operates 17 acute care hospitals and complementary facilities and services in Chicago, Illinois; Phoenix, Arizona; San Antonio, Texas; and Massachusetts. Vanguard's strategy is to develop locally branded, comprehensive healthcare delivery networks in urban markets. Vanguard will pursue acquisitions where there are opportunities to partner with leading delivery systems in new urban markets or to increase its presence in existing markets. Upon acquiring a facility or network of facilities, Vanguard implements strategic and operational improvement initiatives including expanding services, strengthening relationships with physicians and managed care organizations, recruiting new physicians and upgrading information systems and other capital equipment. These strategies improve quality and network coverage in a cost effective and accessible manner for the communities Vanguard serves.

This press release contains forward-looking statements within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. These forward-looking statements include all statements that are not historical statements of fact and those statements regarding Vanguard's intent, belief or expectations. Do not rely on any forward-looking statements as such statements are subject to numerous factors, risks and uncertainties that could cause Vanguard's actual outcomes, results, performance or achievements to be materially different from those projected. These factors, risks and uncertainties include, among others, Vanguard's high degree of leverage and interest rate risk; Vanguard's ability to incur substantially more debt; operating and financial restrictions in Vanguard's debt agreements; Vanguard's ability to successfully implement its business strategies; Vanguard's ability to successfully integrate any future acquisitions; conflicts of interest that may arise as a result of Vanguard's control by a small number of stockholders; the highly competitive nature of the healthcare business; governmental regulation of the industry including Medicare and Medicaid reimbursement levels; changes in Federal, state or local regulation affecting the healthcare industry; the currently unknown effect on us of the major federal healthcare reforms enacted by Congress in March 2010 or other potential additional federal or state healthcare reforms; pressures to contain costs by managed care organizations and other insurers and Vanguard's ability to negotiate acceptable terms with these third party payers; the ability to attract and retain qualified management and personnel, including physicians and nurses; claims and legal actions relating to professional liabilities or other matters; the impacts of a prolonged economic recession and tightened credit and capital markets on Vanguard's results of operations, financial position and cash flows including its ability to successfully service its debt and remain in compliance with debt covenants under its senior secured credit agreement; Vanguard's exposure to the increased amounts of and collection risks associated with uninsured accounts and the co-pay and deductible portions of insured accounts; Vanguard's ability to maintain or increase patient membership and control costs of its managed healthcare plans; the availability and terms of capital to fund the expansion of Vanguard's business; the geographic concentration of Vanguard's operations; the technological and pharmaceutical improvements that increase the cost of providing healthcare services or reduce the demand for such services; the timeliness of reimbursement payments received under government programs; the potential adverse impact of known and unknown government investigations; and those factors, risks and uncertainties detailed in Vanguard's filings from time to time with the Securities and Exchange Commission, including, among others, Vanguard's Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.

Although Vanguard believes that the assumptions underlying the forward-looking statements contained in this press release are reasonable, any of these assumptions could prove to be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as a representation by Vanguard that its objectives and plans anticipated by the forward-looking statements will occur or be achieved, or if any of them do, what impact they will have on Vanguard's results of operations and financial condition. Vanguard undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

                          VANGUARD HEALTH SYSTEMS
        Condensed Consolidated Statements of Operations (Unaudited)
                              (In millions)


                                              Quarter ended June 30,
                                        ----------------------------------
                                              2009
                                          (as adjusted)         2010
                                        ----------------  ----------------
Patient service revenues                $ 629.3     76.1% $ 646.7     75.3%
Premium revenues                          197.2     23.9    211.7     24.7
                                        -------  -------  -------  -------
   Total revenues                         826.5    100.0    858.4    100.0
Costs and expenses:
   Salaries and benefits (includes
    stock compensation of $1.0 and $0.7,
    respectively)                         314.9     38.1    333.6     38.9
   Health plan claims expense             154.9     18.7    165.9     19.3
   Supplies                               116.1     14.0    116.7     13.6
   Provision for doubtful accounts         55.3      6.7     39.5      4.6
   Purchased services                      41.5      5.0     44.5      5.2
   Non-income taxes                        12.6      1.5     14.1      1.6
   Rents and leases                        10.8      1.3     11.0      1.3
   Other operating expenses                46.9      5.7     50.9      5.9
   Depreciation and amortization           34.2      4.1     37.7      4.4
   Interest, net                           27.0      3.3     30.8      3.6
   Debt extinguishment costs                  -        -      0.3        -
   Impairment loss                          6.2      0.8        -        -
   Other                                    0.7      0.1      5.6      0.7
                                        -------  -------  -------  -------
      Total costs and expenses            821.1     99.3    850.6     99.1
                                        -------  -------  -------  -------
Income from continuing operations
 before income taxes                        5.4      0.7      7.8      0.9
Income tax expense                         (3.3)    (0.4)    (4.4)    (0.5)
                                        -------  -------  -------  -------
Income from continuing operations           2.1      0.3      3.4      0.4
Income from discontinued operations,
 net of taxes                               0.6      0.1      0.2        -
                                        -------  -------  -------  -------
Net income                                  2.7      0.3      3.6      0.4
Less: Net income attributable to
 non-controlling interests                 (0.9)    (0.1)    (0.8)    (0.1)
                                        -------  -------  -------  -------
Net income attributable to Vanguard
 Health Systems, Inc. stockholders      $   1.8      0.2% $   2.8      0.3%
                                        =======  =======  =======  =======




                      VANGUARD HEALTH SYSTEMS, INC.
        Condensed Consolidated Statements of Operations (Unaudited)
                              (In millions)


                                            Year ended June 30,
                                ------------------------------------------
                                        2009                  2010
                                --------------------  --------------------
Patient service revenues        $ 2,507.4       78.7% $ 2,537.2      75.1%
Premium revenues                    678.0       21.3      839.7      24.9
                                ---------  ---------  ---------  --------
   Total revenues                 3,185.4      100.0    3,376.9     100.0
Costs and expenses:
   Salaries and benefits
    (includes stock
    compensation
    of $4.4 and $4.2,
    respectively)                 1,233.8       38.7    1,296.2      38.4
   Health plan claims expense       525.6       16.5      665.8      19.7
   Supplies                         455.5       14.3      456.1      13.5
   Provision for doubtful
    accounts                        210.3        6.6      152.5       4.5
   Purchased services               163.8        5.1      179.5       5.3
   Non-income taxes                  52.2        1.6       52.9       1.6
   Rents and leases                  42.6        1.3       43.8       1.3
   Other operating expenses         203.3        6.4      207.7       6.2
   Depreciation and
    amortization                    128.9        4.0      139.6       4.1
   Interest, net                    111.6        3.5      115.5       3.4
   Debt extinguishment costs            -          -       73.5       2.2
   Impairment loss                    6.2        0.2       43.1       1.3
   Other                              2.7        0.1        9.1       0.3
                                ---------  ---------  ---------  --------
      Total costs and expenses    3,136.5       98.5    3,435.3     101.7
                                ---------  ---------  ---------  --------
Income (loss) from continuing
 operations before income taxes      48.9        1.5      (58.4)     (1.7)
Income tax benefit (expense)        (16.8)      (0.5)      13.8       0.4
                                ---------  ---------  ---------  --------
Income (loss) from continuing
 operations                          32.1        1.0      (44.6)     (1.3)
Loss from discontinued
 operations, net of taxes            (0.3)      (0.0)      (1.7)     (0.1)
                                ---------  ---------  ---------  --------
Net income (loss)                    31.8        1.0      (46.3)     (1.4)
Less: Net income attributable
 to non-controlling interests        (3.2)      (0.1)      (2.9)     (0.1)
                                ---------  ---------  ---------  --------
Net income (loss) attributable
 to Vanguard Health Systems, Inc.
 stockholders                   $    28.6        0.9% $   (49.2)     (1.5)%
                                =========  =========  =========  ========




                      VANGUARD HEALTH SYSTEMS, INC.
              Supplemental Financial Information (Unaudited)
  Reconciliation of Adjusted EBITDA to Net Income (Loss) Attributable to
                Vanguard Health Systems, Inc. Stockholders
                              (In millions)


                                          Quarter Ended      Year Ended
                                             June 30,          June 30,
                                        ----------------  ----------------
                                          2009     2010     2009     2010
                                        -------  -------  -------  -------
Net income (loss) attributable to
 Vanguard Health Systems, Inc.
 stockholders                           $   1.8  $   2.8  $  28.6  $ (49.2)
Interest, net                              27.0     30.8    111.6    115.5
Income tax expense (benefit)                3.3      4.4     16.8    (13.8)
Depreciation and amortization              34.2     37.7    128.9    139.6
Non-controlling interests                   0.9      0.8      3.2      2.9
Loss (gain) on disposal of assets          (0.2)     1.4     (2.3)     1.8
Equity method income                       (0.4)    (0.1)    (0.8)    (0.9)
Stock compensation                          1.0      0.7      4.4      4.2
Monitoring fees and expenses                1.3      1.2      5.2      5.1
Realized loss on investments                  -        -      0.6        -
Impairment loss                             6.2        -      6.2     43.1
Acquisition related expenses                  -      3.1        -      3.1
Debt extinguishment costs                     -      0.3        -     73.5
Discontinued operations, net of taxes      (0.6)    (0.2)     0.3      1.7
                                        -------  -------  -------  -------
    Adjusted EBITDA (1)                 $  74.5  $  82.9  $ 302.7  $ 326.6
                                        =======  =======  =======  =======


(1) Adjusted EBITDA is defined as income before interest expense (net of
    interest income), income taxes, depreciation and amortization,
    non-controlling interests, gain or loss on disposal of assets, equity
    method income, stock compensation, monitoring fees and expenses,
    realized holding loss on investments, acquisition related expenses,
    debt extinguishment costs, impairment loss and discontinued operations,
    net of taxes. Adjusted EBITDA is not intended as a substitute for net
    income (loss) attributable to Vanguard Health Systems, Inc.
    stockholders, operating cash flows or other cash flow data determined
    in accordance with accounting principles generally accepted in the
    United States. Due to varying methods of calculation, Adjusted EBITDA
    as presented may not be comparable to similarly titled measures of
    other companies.




                      VANGUARD HEALTH SYSTEMS, INC.
                        Consolidated Balance Sheets
                              (In millions)


                                                      June 30,   June 30,
ASSETS                                                  2009       2010
                                                      ---------  ---------
Current assets:
  Cash and cash equivalents                           $   308.2  $   257.6
  Restricted cash                                           1.9        2.3
  Accounts receivable, net of allowance for doubtful
   accounts of approximately $121.5 and $75.6 at
   June 30, 2009 and June 30, 2010, respectively          275.3      270.4
  Inventories                                              48.3       49.6
  Deferred tax assets                                      29.6       21.9
  Prepaid expenses and other current assets                68.4      119.2
                                                      ---------  ---------
    Total current assets                                  731.7      721.0
Property, plant and equipment, net of accumulated
 depreciation                                           1,174.1    1,203.8
Goodwill                                                  692.1      649.1
Intangible assets, net of accumulated amortization         54.6       66.0
Deferred tax assets, noncurrent                            38.0       50.0
Investments in auction rate securities                     21.6       19.8
Other assets                                               19.0       19.9
                                                      ---------  ---------
    Total assets                                      $ 2,731.1  $ 2,729.6
                                                      =========  =========

LIABILITIES AND  EQUITY
Current liabilities:
  Accounts payable                                    $   127.9  $   194.8
  Accrued salaries and benefits                           133.9      144.9
  Accrued health plan claims and settlements              117.6      149.8
  Accrued interest                                         13.2       41.4
  Other accrued expenses and current liabilities           79.5       76.9
  Current maturities of long-term debt                      8.0        8.2
                                                      ---------  ---------
    Total current liabilities                             480.1      616.0
Professional and general liability and workers
 compensation reserves                                     76.7       83.6
Other liabilities                                          34.9       31.6
Long-term debt, less current maturities                 1,543.6    1,743.8
Commitments and contingencies
Equity:
  Vanguard Health Systems, Inc. stockholders' equity:
   Common stock                                               -          -
   Additional paid-in capital                             651.3      354.9
   Accumulated other comprehensive loss                    (6.8)      (2.5)
   Retained deficit                                       (56.7)    (105.9)
                                                      ---------  ---------
    Total Vanguard Health Systems, Inc. stockholders'
     equity                                               587.8      246.5
  Non-controlling interests                                 8.0        8.1
                                                      ---------  ---------
    Total equity                                          595.8      254.6
                                                      ---------  ---------
    Total liabilities and equity                      $ 2,731.1  $ 2,729.6
                                                      =========  =========




                         VANGUARD HEALTH SYSTEMS, INC.
                     Consolidated Statements of Cash Flows
                                 (In millions)


                                                            Year Ended
                                                             June 30,
                                                        ------------------
                                                          2009      2010
                                                        --------  --------
Operating activities:

Net income (loss)                                       $   31.8  $  (46.3)
Adjustments to reconcile net income (loss) to net cash
 provided by operating activities:
  Loss from discontinued operations                          0.3       1.7
  Depreciation and amortization                            128.9     139.6
  Provision for doubtful accounts                          210.3     152.5
  Amortization of loan costs and accretion of principal
   on notes                                                 27.2      11.7
  Loss (gain) on disposal of assets                         (2.3)      1.8
  Stock compensation                                         4.4       4.2
  Deferred income taxes                                      6.4      (8.5)
  Impairment loss                                            6.2      43.1
  Realized holding loss on investments                       0.6         -
  Acquisition related expenses                                 -       3.1
  Debt extinguishment costs                                    -      73.5
  Changes in operating assets and liabilities:
   Accounts receivable                                    (185.6)   (148.3)
   Inventories                                               1.0      (1.3)
   Prepaid expenses and other current assets               (12.7)    (80.5)
   Accounts payable                                        (27.5)     67.1
   Accrued expenses and other liabilities                  122.7     102.8
                                                        --------  --------
Net cash provided by operating activities - continuing
 operations                                                311.7     316.2
Net cash provided by (used in) operating activities -
 discontinued operations                                     1.4      (1.0)
                                                        --------  --------
Net cash provided by operating activities                  313.1     315.2

Investing activities:
Acquisitions and related expenses                           (4.4)     (4.6)
Capital expenditures                                      (132.0)   (155.9)
Proceeds from asset dispositions                             4.9       2.0
Sales of auction rate securities                               -       1.8
Other                                                       (2.0)      0.3
                                                        --------  --------
Net cash used in investing activities - continuing
 operations                                               (133.5)   (156.4)
Net cash used in investing activities - discontinued
 operations                                                 (0.1)     (0.1)
                                                        --------  --------
Net cash used in investing activities                     (133.6)   (156.5)

Financing activities:
Payments of long-term debt                                  (7.8) (1,557.4)
Proceeds from debt borrowings                                  -   1,751.3
Payments of refinancing costs and fees                         -     (93.6)
Repurchases of stock and stock options                      (0.2)   (300.6)
Payments related to derivative instrument with
 financing element                                             -      (6.2)
Distributions paid to non-controlling interests and
 other                                                      (4.9)     (2.8)
                                                        --------  --------
Net cash used in financing activities                      (12.9)   (209.3)
                                                        --------  --------
Net increase (decrease) in cash and cash equivalents       166.6     (50.6)
Cash and cash equivalents, beginning of year               141.6     308.2
                                                        --------  --------
Cash and cash equivalents, end of year                  $  308.2  $  257.6
                                                        ========  ========




                      VANGUARD HEALTH SYSTEMS, INC.
                      Segment Information (Unaudited)
                              (In millions)


                                Three months ended June 30, 2009
                      ----------------------------------------------------
                       Acute
                       Care     % of     Health   % of    Elimin-  Consol-
                     Services Revenues   Plans  Revenues  ations   idated
                      -------  ------   -------- -------  -------  -------
Patient service
 revenues(1)          $ 638.3   100.0%  $      -       -% $  (9.0) $ 629.3
Premium revenues            -       -      197.2   100.0        -    197.2
                      -------  ------   -------- -------  -------  -------
   Total revenues       638.3   100.0      197.2   100.0     (9.0)   826.5

Salaries and benefits
 (excludes stock
 compensation)          306.0    47.9        7.9     4.0        -    313.9
Health plan claims
 expense                    -       -      163.9    83.1     (9.0)   154.9
Supplies                116.0    18.2        0.1     0.1        -    116.1
Provision for
 doubtful
 accounts                55.3     8.7          -       -        -     55.3
Other operating
 expenses               102.2    16.0        9.6     4.9        -    111.8
                      -------  ------   -------- -------  -------  -------
   Total operating
    expenses            579.5    90.8      181.5    92.0     (9.0)   752.0
                      -------  ------   -------- -------  -------  -------
   Segment EBITDA(2)     58.8     9.2       15.7     8.0        -     74.5
Less:
 Interest, net           26.8     4.2        0.2     0.1        -     27.0
 Depreciation and
  amortization           33.1     5.2        1.1     0.6        -     34.2
 Equity method income    (0.4)   (0.1)         -       -        -     (0.4)
 Stock compensation       1.0     0.2          -       -        -      1.0
 Gain on disposal of
  assets                 (0.2)   (0.0)         -       -        -     (0.2)
 Monitoring fees and
  expenses                1.3     0.2          -       -        -      1.3
Impairment loss           6.2     1.0          -       -        -      6.2
                      -------  ------   -------- -------  -------  -------
 Income (loss) from
  continuing operations
  before income taxes $  (9.0)   (1.4)% $   14.4     7.3% $     -  $   5.4
                      =======  ======   ======== =======  =======  =======


(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its healthcare facilities attributable to services provided
    to enrollees in its owned health plans and eliminates the corresponding
    medical claims expenses incurred by the health plans for those
    services.

(2) Segment EBITDA is defined as income (loss) from continuing operations
    before income taxes less interest expense (net of interest income),
    depreciation and amortization, equity method income, stock
    compensation, gain or loss on disposal of assets, realized holding
    losses on investments, monitoring fees and expenses, acquisition
    related expenses, debt extinguishment costs and impairment losses.
    Management uses Segment EBITDA to measure performance for Vanguard's
    segments and to develop strategic objectives and operating plans for
    those segments. Segment EBITDA eliminates the uneven effect of non-cash
    depreciation of tangible assets and amortization of intangible assets,
    much of which results from acquisitions accounted for under the
    purchase method of accounting. Segment EBITDA also eliminates the
    effects of changes in interest rates which management believes relate
    to general trends in global capital markets, but are not necessarily
    indicative of the operating performance of Vanguard's segments.
    Management believes that Segment EBITDA provides useful information
    about the financial performance of Vanguard's segments to investors,
    lenders, financial analysts and rating agencies. Additionally,
    management believes that investors and lenders view Segment EBITDA as
    an important factor in making investment decisions and assessing the
    value of Vanguard. Segment EBITDA is not a substitute for net income
    (loss), operating cash flows or other cash flow statement data
    determined in accordance with accounting principles generally accepted
    in the United States. Segment EBITDA, as presented, may not be
    comparable to similar  measures of other companies.




                      VANGUARD HEALTH SYSTEMS, INC.
                      Segment Information (Unaudited)
                              (In millions)


                               Three months ended June 30, 2010
                  --------------------------------------------------------
                   Acute
                    Care      % of    Health     % of   Elimina-  Consoli-
                  Services  Revenues   Plans   Revenues  tions     dated
                  --------  -------   -------  -------  --------  --------
Patient service
 revenues(1)      $  657.8    100.0%  $     -        -% $  (11.1) $  646.7
Premium revenues         -        -     211.7    100.0         -     211.7
                  --------  -------   -------  -------  --------  --------
 Total revenues      657.8    100.0     211.7    100.0     (11.1)    858.4

Salaries and
 benefits
 (excludes stock
 compensation)       324.0     49.3       8.9      4.2         -     332.9
Health plan
 claims expense          -        -     177.0     83.6     (11.1)    165.9
Supplies             116.7     17.7         -        -         -     116.7
Provision for
 doubtful
 accounts             39.5      6.0         -        -         -      39.5
Other operating
 expenses            110.8     16.8       9.7      4.6         -     120.5
                  --------  -------   -------  -------  --------  --------
  Total operating
   expenses          591.0     89.8     195.6     92.4     (11.1)    775.5
                  --------  -------   -------  -------  --------  --------
  Segment EBITDA(2)   66.8     10.2      16.1      7.6         -      82.9
Less:
 Interest, net        31.2      4.7      (0.4)    (0.2)        -      30.8
 Depreciation and
  amortization        36.6      5.6       1.1      0.5         -      37.7
 Equity method
  income              (0.1)    (0.0)        -        -         -      (0.1)
 Stock compensation    0.7      0.1         -        -         -       0.7
 Loss on disposal
  of assets            1.4      0.2         -        -         -       1.4
 Monitoring fees
  and expenses         1.2      0.2         -        -         -       1.2
 Acquisition
  related expenses     3.1      0.5         -        -         -       3.1
 Debt
  extinguishment
  costs                0.3        -         -        -         -       0.3
                  --------  -------   -------  -------  --------  --------
  Income (loss)
   from continuing
   operations
   before income
   taxes          $   (7.6)    (1.2)% $  15.4      7.3% $      -  $    7.8
                  ========  =======   =======  =======  ========  ========


(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its healthcare facilities attributable to services provided
    to enrollees in its owned health plans and eliminates the
    corresponding medical claims expenses incurred by the health plans for
    those services.

(2) Segment EBITDA is defined as income (loss) from continuing operations
    before income taxes less interest expense (net of interest income),
    depreciation and amortization, equity method income, stock
    compensation, gain or loss on disposal of assets, realized holding
    losses on investments, monitoring fees and expenses, acquisition
    related expenses, debt extinguishment costs and impairment losses.
    Management uses Segment EBITDA to measure performance for Vanguard's
    segments and to develop strategic objectives and operating plans for
    those segments. Segment EBITDA eliminates the uneven effect of
    non-cash depreciation of tangible assets and amortization of
    intangible assets, much of which results from acquisitions accounted
    for under the purchase method of accounting. Segment EBITDA also
    eliminates the effects of changes in interest rates which management
    believes relate to general trends in global capital markets, but are
    not necessarily indicative of the operating performance of Vanguard's
    segments. Management believes that Segment EBITDA provides useful
    information about the financial performance of Vanguard's segments to
    investors, lenders, financial analysts and rating agencies.
    Additionally, management believes that investors and lenders view
    Segment EBITDA as an important factor in making investment decisions
    and assessing the value of Vanguard. Segment EBITDA is not a
    substitute for net income (loss), operating cash flows or other cash
    flow statement data determined in accordance with accounting
    principles generally accepted in the United States. Segment EBITDA,
    as presented, may not be comparable to similar
    measures of other companies.




                      VANGUARD HEALTH SYSTEMS, INC.
                      Segment Information (Unaudited)
                              (In millions)


                                  Year ended June 30, 2009
                  --------------------------------------------------------
                    Acute
                    Care      % of    Health    % of    Elimina-  Consoli-
                  Services  Revenues  Plans   Revenues    tions     dated
                  --------  --------  ------  --------  --------  --------
Patient service
 revenues(1)      $2,541.4     100.0% $    -         -% $  (34.0) $2,507.4
Premium revenues         -         -   678.0     100.0         -     678.0
                  --------  --------  ------  --------  --------  --------
  Total revenues   2,541.4     100.0   678.0     100.0     (34.0)  3,185.4

Salaries and
 benefits
 (excludes stock
 compensation)     1,198.8      47.2    30.6       4.5         -   1,229.4
Health plan
 claims expense          -         -   559.6      82.5     (34.0)    525.6
Supplies             455.2      17.9     0.3         -         -     455.5
Provision for
 doubtful
 accounts            210.3       8.3       -         -         -     210.3
Other operating
 expenses            425.5      16.7    36.4       5.4         -     461.9
                  --------  --------  ------  --------  --------  --------
  Total operating
   expenses        2,289.8      90.1   626.9      92.5     (34.0)  2,882.7
                  --------  --------  ------  --------  --------  --------
  Segment EBITDA(2)  251.6       9.9    51.1       7.5         -     302.7
Less:
 Interest, net       112.2       4.4    (0.6)     (0.1)        -     111.6
 Depreciation and
  amortization       124.8       4.9     4.1       0.6         -     128.9
 Equity method
  income              (0.8)     (0.0)      -         -         -      (0.8)
 Stock
  compensation         4.4       0.2       -         -         -       4.4
 Gain on disposal
  of assets           (2.3)     (0.1)      -         -         -      (2.3)
 Monitoring fees
  and expenses         5.2       0.2       -         -         -       5.2
 Realized holding
  loss on
  investments          0.6         -       -         -         -       0.6
 Impairment loss       6.2       0.2       -         -         -       6.2
                  --------  --------  ------  --------  --------  --------
  Income from
   continuing
   operations
   before income
   taxes          $    1.3       0.1% $ 47.6       7.0% $      -  $   48.9
                  ========  ========  ======  ========  ========  ========


(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its healthcare facilities attributable to services provided
    to enrollees in its owned health plans and eliminates the
    corresponding medical claims expenses incurred by the health plans for
    those services

(2) Segment EBITDA is defined as income (loss) from continuing operations
    before income taxes less interest expense (net of interest income),
    depreciation and amortization, equity method income, stock
    compensation, gain or loss on disposal of assets, realized holding
    losses on investments, monitoring fees and expenses, acquisition
    related expenses, debt extinguishment costs and impairment losses.
    Management uses Segment EBITDA to measure performance for Vanguard's
    segments and to develop strategic objectives and operating plans for
    those segments. Segment EBITDA eliminates the uneven effect of
    non-cash depreciation of tangible assets and amortization of
    intangible assets, much of which results from acquisitions accounted
    for under the purchase method of accounting. Segment EBITDA also
    eliminates the effects of changes in interest rates which management
    believes relate to general trends in global capital markets, but are
    not necessarily indicative of the operating performance of Vanguard's
    segments. Management believes that Segment EBITDA provides useful
    information about the financial performance of Vanguard's segments to
    investors, lenders, financial analysts and rating agencies.
    Additionally, management believes that investors and lenders view
    Segment EBITDA as an important factor in making investment decisions
    and assessing the value of Vanguard. Segment EBITDA is not a
    substitute for net income (loss), operating cash flows or other cash
    flow statement data determined in accordance with accounting
    principles generally accepted in the United States. Segment EBITDA,
    as presented, may not be comparable to similar measures of other
    companies.




                      VANGUARD HEALTH SYSTEMS, INC.
                      Segment Information (Unaudited)
                              (In millions)


                                  Year ended June 30, 2010
                  --------------------------------------------------------
                    Acute
                    Care      % of    Health     % of   Elimina-  Consoli-
                  Services  Revenues   Plans   Revenues  tions     dated
                  --------  -------   -------  -------  --------  --------
Patient service
 revenues(1)      $2,580.0    100.0 % $     -        -% $  (42.8) $2,537.2
Premium revenues         -        -     839.7    100.0         -     839.7
                  --------  -------   -------  -------  --------  --------
  Total revenues   2,580.0    100.0     839.7    100.0     (42.8)  3,376.9

Salaries and
 benefits
 (excludes stock
 compensation)     1,257.9     48.8      34.1      4.1         -   1,292.0
Health plan
 claims expense          -        -     708.6     84.4     (42.8)    665.8
Supplies             456.0     17.7       0.1        -         -     456.1
Provision for
 doubtful
 accounts            152.5      5.9         -        -         -     152.5
Other operating
 expenses            447.0     17.3      36.9      4.4         -     483.9
                  --------  -------   -------  -------  --------  --------
  Total operating
   expenses        2,313.4     89.7     779.7     92.9     (42.8)  3,050.3
                  --------  -------   -------  -------  --------  --------
  Segment EBITDA(2)  266.6     10.3      60.0      7.1         -     326.6
Less:
 Interest, net       116.5      4.5      (1.0)    (0.1)        -     115.5
 Depreciation and
  amortization       135.2      5.2       4.4      0.5         -     139.6
 Equity method
  income              (0.9)    (0.0)        -        -         -      (0.9)
 Stock
  compensation         4.2      0.2         -        -         -       4.2
 Loss on disposal
  of assets            1.8      0.1         -        -         -       1.8
 Monitoring fees
  and expenses         5.1      0.2         -        -         -       5.1
 Acquisition
  related expenses     3.1      0.1         -        -         -       3.1
 Debt
  extinguishment
  costs               73.5      2.8         -        -         -      73.5
 Impairment loss      43.1      1.7         -        -         -      43.1
                  --------  -------   -------  -------  --------  --------
  Income (loss)
   from
   continuing
   operations
   before income
   taxes          $ (115.0)    (4.5)% $  56.6      6.7% $      -  $  (58.4)
                  ========  =======   =======  =======  ========  ========


(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its healthcare facilities attributable to services provided
    to enrollees in its owned health plans and eliminates the corresponding
    medical claims expenses incurred by the health plans for  those
services.

(2) Segment EBITDA is defined as income (loss) from continuing operations
    before income taxes less interest expense (net of interest income),
    depreciation and amortization, equity method income, stock
    compensation, gain or loss on disposal of assets, realized holding
    losses on investments, monitoring fees and expenses, acquisition
    related expenses, debt extinguishment costs and impairment losses.
    Management uses Segment EBITDA to measure performance for Vanguard's
    segments and to develop strategic objectives and operating plans for
    those segments. Segment EBITDA eliminates the uneven effect of non-cash
    depreciation of tangible assets and amortization of intangible assets,
    much of which results from acquisitions accounted for under the
    purchase method of accounting. Segment EBITDA also eliminates the
    effects of changes in interest rates which management believes relate
    to general trends in global capital markets, but are not necessarily
    indicative of the operating performance of Vanguard's segments.
    Management believes that Segment EBITDA provides useful information
    about the financial performance of Vanguard's segments to investors,
    lenders, financial analysts and rating agencies. Additionally,
    management believes that investors and lenders view Segment EBITDA as
    an important factor in making investment decisions and assessing the
    value of Vanguard. Segment EBITDA is not a substitute for net income
    (loss), operating cash flows or other cash flow statement data
    determined in accordance with accounting principles generally accepted
    in the United States. Segment EBITDA, as presented, may not be
    comparable to similar measures of other companies.




                      VANGUARD HEALTH SYSTEMS, INC.
                      Selected Operating Statistics
                                (Unaudited)

                                                Three months ended
                                                     June 30,
                                                 ----------------
                                                   2009     2010   % Change
                                                 -------  -------  -------
Number of hospitals at end of period                  15       15
Licensed beds at end of period                     4,135    4,135
Discharges                                        41,400   42,159      1.8%
Adjusted discharges                               73,210   75,620      3.3
Adjusted discharges - hospitals                   69,258   71,657      3.5
Average length of stay                              4.18     4.09     (2.2)
Patient days                                     173,022  172,388     (0.4)
Adjusted patient days                            305,966  309,209      1.1
Adjusted patient days - hospitals                289,447  293,003      1.2
Patient revenue per adjusted discharge           $ 8,422  $ 8,407     (0.2)
Patient revenue per adjusted discharge -
 hospitals                                       $ 8,850  $ 8,560     (3.3)
Inpatient surgeries                                9,530    9,244     (3.0)
Outpatient surgeries                              19,521   19,084     (2.2)
Emergency room visits                            158,936  160,523      1.0%

Charity care and uninsured discounts as a
 percent of acute care segment revenues
 (prior to these discounts)(1)                       4.9%    10.8%

Provision for doubtful accounts as a percent of
 acute care services segment revenues (prior to
 charity and uninsured discounts)(1)                 8.2%     5.4%

Net patient revenue payer mix:
   Medicare                                         24.8%    25.0%
   Medicaid                                          7.7      7.6
   Managed Medicare                                 14.7     14.7
   Managed Medicaid                                  9.1      9.3
   Managed care                                     34.0     35.2
   Commercial                                        0.9      1.0
   Self pay                                          8.8      7.2
                                                 -------  -------
      Total                                        100.0%   100.0%
                                                 =======  =======

Discharges by payer:
   Medicare                                         26.7%    27.8%
   Medicaid(1)                                       9.7      9.3
   Managed Medicare                                 16.5     16.3
   Managed Medicaid                                 14.3     15.2
   Managed care                                     28.3     26.4
   Commercial                                        0.4      0.4
   Self pay(1)                                       4.1      4.6
                                                 -------  -------
      Total                                        100.0%   100.0%
                                                 =======  =======


(1) See Supplemental Operating Measures Adjusted For Comparative Analysis
    for the impact to the ratio of charity and uninsured discounts as a
    percent of acute care services segment revenues, the ratio of
    provision for doubtful accounts as a percent of acute care services
    segment revenues and Medicaid and self pay discharges of the change
    in our Medicaid pending policy during the three months ended June
    30, 2010.




                      VANGUARD HEALTH SYSTEMS, INC.
                      Selected Operating Statistics
                          (Unaudited) (continued)


                                            Year ended June 30,
                                           --------------------
                                             2009       2010     % Change
                                           ---------  ---------  ---------
Number of hospitals at end of period              15         15
Licensed beds at end of period                 4,135      4,135
Discharges                                   167,880    168,370        0.3%
Adjusted discharges                          288,807    295,702        2.4
Adjusted discharges - hospitals              274,767    280,437        2.1
Average length of stay                          4.23       4.17       (1.4)
Patient days                                 709,952    701,265       (1.2)
Adjusted patient days                      1,221,345  1,231,604        0.8
Adjusted patient days - hospitals          1,161,967  1,168,027        0.5
Patient revenue per adjusted discharge     $   8,503  $   8,408       (1.1)
Patient revenue per adjusted discharge -
 hospitals                                 $   8,623  $   8,516       (1.2)
Inpatient surgeries                           37,970     37,320       (1.7)
Outpatient surgeries                          76,378     75,969       (0.5)
Emergency room visits                        605,729    626,237        3.4%

Charity care and uninsured discounts as a
 percent of acute care services segment
 revenues (prior to these discounts)             3.9%      10.5%

Provision for doubtful accounts as a
 percent of acute care services segment
 revenues (prior to charity and uninsured
 discounts)(1)                                   8.0%       5.3%

Net patient revenue payer mix:
   Medicare                                     25.3%      25.5%
   Medicaid                                      7.9        7.4
   Managed Medicare                             14.1       14.8
   Managed Medicaid                              8.8        9.5
   Managed care                                 34.7       34.9
   Commercial                                    0.9        1.1
   Self pay                                      8.3        6.8
                                           ---------  ---------
      Total                                    100.0%     100.0%
                                           =========  =========

Discharges by payer:
   Medicare                                     27.1%      27.5%
   Medicaid (1)                                 10.2        8.8
   Managed Medicare                             16.0       16.3
   Managed Medicaid                             13.8       15.3
   Managed care                                 29.2       26.8
   Commercial                                    0.3        0.4
   Self pay (1)                                  3.4        4.9
                                           ---------  ---------
      Total                                    100.0%     100.0%
                                           =========  =========

(1) See Supplemental Operating Measures Adjusted For Comparative Analysis
    for the impact to the ratio of charity and uninsured discounts as a
    percent of acute care services segment revenues, the ratio of provision
    for doubtful accounts as a percent of acute care services segment
    revenues and Medicaid and self pay discharges of the change in our
    Medicaid pending policy during the year ended June 30, 2010.




                      VANGUARD HEALTH SYSTEMS, INC.
    Supplemental Operating Measures Adjusted for Comparative Analysis
                 For the three months ended June 30, 2010
          (dollars in millions, except for statistical measures)
                                (Unaudited)


                         Impact of Policy           % of Segment Revenues
                             Changes                ----------------------
                 GAAP-   ----------------  Non-GAAP           Non-GAAP
                 basis  Uninsured Medicaid adjusted  GAAP    adjusted(4)
                 amounts discounts pending amounts   basis  --------------
                   (1)      (2)      (3)     (4)     2010    2009    2010
                 ------- --------  ------  -------  ------  ------  ------
Acute care
 services
 segment:
 Total
  revenues(5)    $ 657.8 $   33.5  $ (4.7) $ 686.6   100.0%  100.0%  100.0%
 Salaries and
  benefits(8)    $ 324.7 $      -  $    -  $ 324.7    49.4    47.6    47.3
 Supplies        $ 116.7 $      -  $    -  $ 116.7    17.7    18.0    17.0
 Provision for
  doubtful
  accounts       $  39.5 $   33.5  $ (3.6) $  69.4     6.0     9.6    10.1
 Other operating
  expenses       $ 110.8 $      -  $    -  $ 110.8    16.8    15.8    16.1
 Total operating
  expenses       $ 591.7 $   33.5  $ (3.6) $ 621.6    90.0%   91.0 %  90.5%


                                                    % of Segment Revenues
                                                     Prior to Charity and
                         Impact of Policy            Uninsured Discounts
                             Changes                ----------------------
                 GAAP-   ----------------  Non-GAAP           Non-GAAP
                 basis  Uninsured Medicaid adjusted  GAAP    adjusted(4)
                 amounts discounts pending amounts   basis  --------------
                   (1)      (2)      (3)     (4)     2010     2009   2010
                 ------- --------  ------  -------  ------  ------  ------
Uncompensated
 care(6)         $ 117.8 $  (21.2) $ (3.6) $  93.0    16.0%   12.4%   13.1%
Total revenues,
 prior
 to charity(7)   $ 681.3 $   33.5  $ (4.7) $ 710.1


                  2010                           2010
              Statistical   2010      2010   Statistical   2009    Current
Vanguard        Measure   Uninsured Medicaid   Measure   Measure    year
consolidated:      as     discounts  pending      as        as    change as
               reported      (2)       (3)    adjusted  adjusted  adjusted
                -------   --------   ------    -------   -------   ------
Patient revenue
 per total
 adjusted
 discharge      $ 8,407   $    443   $  (62)   $ 8,788   $ 8,516      3.2%
Self-pay
 discharges       1,942          -     (600)     1,342     1,526    (12.1)%
Medicaid
 discharges       3,910          -      600      4,510     4,197      7.5%




                      VANGUARD HEALTH SYSTEMS, INC.
    Supplemental Operating Measures Adjusted for Comparative Analysis
                     For the year ended June 30, 2010
          (dollars in millions, except for statistical measures)
                                (Unaudited)


                         Impact of Policy           % of Segment Revenues
                             Changes               -----------------------
                 GAAP-   ---------------   Non-GAAP           Non-GAAP
                 basis  Uninsured Medicaid adjusted GAAP    adjusted(4)
                 amounts discounts pending amounts  basis  ---------------
                   (1)      (2)      (3)     (4)    2010    2009     2010
                 -------- ------  ------  -------- ------  -----   -------
Acute care
 services
 segment:
 Total
  revenues(5)    $2,580.0 $128.7  $(22.9) $2,685.8  100.0% 100.0%    100.0%
 Salaries and
  benefits(8)    $1,262.1 $    -  $    -  $1,262.1   48.9   47.2      47.0
 Supplies        $  456.0 $    -  $    -  $  456.0   17.7   17.9      17.0
 Provision for
  doubtful
  accounts       $  152.5 $128.7  $(22.3) $  258.9    5.9    8.5       9.6
 Other operating
  expenses       $  447.0 $    -  $    -  $  447.0   17.3   16.7      16.6
 Total operating
  expenses       $2,317.6 $128.7  $(22.3) $2,424.0   89.8%  90.3%     90.3%


                                                    % of Segment Revenues
                                                     Prior to Charity and
                         Impact of Policy            Uninsured Discounts
                             Changes                ----------------------
                 GAAP-   ----------------  Non-GAAP           Non-GAAP
                 basis  Uninsured Medicaid adjusted  GAAP    adjusted(4)
                 amounts   dis-   pending  amounts  basis  ---------------
                   (1)   counts(2)  (3)     (4)      2010   2009     2010
                 -------- ------  ------  --------  -----  -----    ------
Uncompensated
 care(6)         $  455.9 $(87.0) $(22.3) $  346.6   15.8%  11.6%     12.5%

Total revenues,
 prior to
 charity(7)      $2,667.7 $128.7  $(22.9) $2,773.5


                  2010                           2010
              Statistical   2010      2010   Statistical   2009    Current
Vanguard        Measure   Uninsured Medicaid   Measure   Measure    year
consolidated:      as     discounts  pending      as        as    change as
               reported      (2)       (3)    adjusted  adjusted  adjusted
                -------   --------   ------    -------   -------   ------
Patient revenue
 per total
 adjusted
 discharge      $ 8,408   $    435   $  (79)   $ 8,764   $ 8,527      2.8%
Self-pay
 discharges       8,168          -   (2,717)     5,451     5,483     (0.6)%
Medicaid
 discharges      14,867          -    2,717     17,584    17,235      2.0%


(1) Amounts reflected in or components of amounts reflected in the
    segment information tables included in this release. These amounts
    are based upon revenues or expenses determined in accordance with
    accounting principles generally accepted in the United States.

(2) Includes the impact of the uninsured discount policy implemented
    for Vanguard's Illinois hospitals effective April 1, 2009 and for
    it Phoenix and San Antonio hospitals effective July 1, 2009. Under
    this policy, Vanguard applies an uninsured discount (calculated as
    a standard percentage of gross revenues) at the time of patient
    billing and includes the discount as a reduction of revenues. This
    uninsured discount program applies to patients receiving hospital
    services who have no insurance coverage and do not otherwise meet
    Vanguard's charity care guidelines. Vanguard recorded a total of
    $11.7 million and $54.7 million of uninsured discounts relates to
    its acute care services segment during the three months ended June
    30, 2009 and 2010, respectively. Of these amounts $7.6 million and
    $33.5 million for the three months ended June 30, 2009 and 2010,
    respectively, related to non-Medicaid pending accounts that reduced
    revenues as a result of implementing this policy. Vanguard recorded
    a total of $11.7 million and $215.7 million of uninsured discounts
    related to its acute care services segment during the years ended
    June 30, 2009 and 2010, respectively. Of these amounts, $7.6 million
    and $128.7 million for the years ended June 30, 2009 and 2010,
    respectively, related to non-Medicaid pending accounts that reduced
    revenues as a result of implementing this policy.

(3) Includes the impact of Vanguard's policy change for accounts pending
    Medicaid qualification. Prior to the implementation of its new
    uninsured discount policy, Vanguard classified accounts pending
    Medicaid qualification as Medicaid revenues (and Medicaid discharges)
    and recorded a contractual discount for these accounts based upon
    the average Medicaid reimbursement rate for each specific state until
    qualification was confirmed. Vanguard implemented a new Medicaid
    pending policy for all of its hospitals whereby Medicaid pending
    accounts are classified as self-pay revenues (and self-pay discharges)
    with an uninsured discount applied. The balance of these accounts is
    subject to Vanguard's allowance for doubtful accounts policy. For
    those accounts that subsequently qualify for Medicaid coverage, the
    uninsured discount is reversed and the account is reclassified to
    Medicaid revenues (and Medicaid discharges) with the appropriate
    contractual discount applied. The difference between the
    state-specific Medicaid contractual discounts under the previous
    policy and the uninsured discount percentage applied to Medicaid
    pending accounts under the new policy increased total revenues by
    $0.7 million, $4.7 million, $0.7 million and $22.9 million for the
    three months ended June 30, 2009 and 2010 and the years ended June
    30, 2009 and 2010, respectively. The provision for doubtful accounts
    recorded for Medicaid pending accounts, after the uninsured discounts
    were applied, were $1.0 million, $3.6 million, $1.0 million and $22.3
    million for the three months ended June 30, 2009 and 2010 and the
    years ended June 30, 2009 and 2010, respectively.

(4) Revenues, certain expenses and those expenses as a percentage of
    revenues for the acute care services segment for the three months and
    year ended June 30, 2010 have been adjusted to allow for comparative
    measurement on a basis consistent with the three months and year ended
    June 30, 2009 (before implementation of the majority of the uninsured
    discount policy or the change to the Medicaid pending policy).
    Management believes these non-GAAP measures will provide investors,
    analysts and general users of this financial information an effective
    means to compare the operating results of Vanguard's acute care
    services segment for the current year periods to those of the prior
    year periods. However, these non-GAAP operating measures are not
    meant to replace GAAP-basis revenues, expenses or expenses as a
    percentage of revenues as operating performance indicators for the
    acute care services segment.

(5) Total revenues for the acute care services segment represent revenues
    prior to the elimination in consolidation of revenues earned by
    Vanguard's hospitals for services provided to enrollees in Vanguard's
    owned health plans.

(6) Uncompensated care is defined as the sum of uninsured discounts,
    charity deductions and the provision for doubtful accounts.

(7) Represents total revenues for the acute care services segment plus
    charity deductions.

(8) Includes stock compensation.

Contact Information

  • Contact:
    Vanguard Health Systems, Inc.
    Gary Willis
    Senior Vice President and Chief Accounting Officer
    (615) 665-6098