SOURCE: Vanguard Health Systems, Inc.

Vanguard Health Systems, Inc.

February 08, 2010 19:01 ET

Vanguard Reports Second Quarter Results

NASHVILLE, TN--(Marketwire - February 8, 2010) - Vanguard Health Systems, Inc. ("Vanguard") today announced results for the second quarter ended December 31, 2009.

Total revenues for the quarter ended December 31, 2009 were $843.6 million, an increase of $51.0 million or 6.4% from the prior year quarter. Patient service revenues and health plan premium revenues increased $16.9 million and $34.1 million, respectively, from the prior year quarter. The increase in patient service revenues was primarily attributable to a 2.9% increase in total adjusted discharges and a 0.3% decrease in patient revenue per total adjusted discharge during the current year quarter compared to the prior year quarter. The decrease in patient revenue per total adjusted discharge during the current year quarter was due to the implementation of an uninsured discount policy in our Phoenix and San Antonio hospitals effective July 1, 2009, similar to the program implemented in our Illinois hospitals on April 1, 2009, and a change to the Medicaid pending policy at these same hospitals as previously disclosed. Absent these policy changes, patient revenue per total adjusted discharge would have increased by 5.2% during the current year quarter compared to the prior year quarter. The increase in health plan premium revenues was primarily attributable to a 20.5% increase in average membership in Phoenix Health Plan (PHP) during the current year quarter compared to the prior year quarter. Economic conditions in Arizona have resulted in an increase in the number of individuals eligible for coverage under the Arizona Health Care Cost Containment System (AHCCCS) during the current year quarter resulting in more enrollees in PHP.

For the quarter ended December 31, 2008, Vanguard had a loss from continuing operations of $20.0 million compared to income from continuing operations of $10.9 million during the prior year quarter primarily resulting from the $43.1 million ($31.8 million, net of taxes) goodwill impairment loss related to our two Chicago hospitals during the current year quarter, as previously disclosed. Many comparisons of individual cost and expense items 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 press release in the attached Supplemental Operating Measures Adjusted for Comparative Analysis. Health plan claims expense as a percentage of health plan premium revenues increased to 80.5% during the current year quarter compared to 79.0% during the prior year quarter primarily due to changes to enrollee medical costs and enrollee demographic mix at PHP.

During the quarter ended December 31, 2009, net loss attributable to Vanguard Health Systems, Inc. stockholders was $20.7 million compared to $10.1 million net income attributable to Vanguard Health Systems, Inc. stockholders during the prior year quarter.

Adjusted EBITDA was $83.8 million for the quarter ended December 31, 2009, an increase of $5.3 million or 6.8% from 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 December 31, 2008 and 2009 is included in the attached supplemental financial information.

The consolidated operating results for the quarter ended December 31, 2009 reflect a 1.0% increase in discharges and a 2.9% increase in total adjusted discharges compared to the prior year quarter. Outpatient surgeries and emergency room visits increased 0.6% and 9.2%, respectively, during the current year quarter compared to the prior year quarter. Inpatient surgeries during the current year quarter were flat compared to the prior year quarter.

Total revenues for the six months ended December 31, 2009 were $1,667.0 million, an increase of $155.4 million or 10.3% from the prior year period. Patient service revenues and health plan premium revenues increased $37.7 million and $117.7 million, respectively, from the prior year period. Patient service revenues for the current year period were positively impacted by a 2.8% increase in total adjusted discharges and a 0.4% increase in patient revenue per adjusted total discharge compared to the prior year period. Absent the previously discussed uninsured discount and Medicaid pending policy changes, patient revenue per adjusted total discharge would have increased 5.6% during the current year period compared to the prior year period. Health plan premium revenues increased 39.4% during the current year period primarily due to the significant enrollment increase for PHP's new contract with AHCCCS that went into effect on October 1, 2008, as previously discussed.

For the six months ended December 31, 2009, Vanguard had a loss from continuing operations of $17.4 million compared to income from continuing operations of $11.7 million during the prior year period, primarily resulting from the goodwill impairment loss recognized during the current year period as described above and as previously publicly disclosed. Many comparisons of individual cost and expense items as a percentage of total revenues during the current year period 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 later in this press release sets forth the impact of the uninsured discount and Medicaid pending policy changes to certain expenses and revenues and related ratios of our acute care services segment and to certain statistical measures. Health plan claims expense as a percentage of health plan premium revenues increased to 79.6% during the current year period compared to 76.2% during the prior year period as a result of changes to capitation rates, enrollee medical costs and enrollee demographic mix under PHP's new contract with AHCCCS that went into effect on October 1, 2008.

During the six months ended December 31, 2009, net loss attributable to Vanguard Health Systems, Inc. stockholders was $19.2 million compared to $11.0 million net income attributable to Vanguard Health Systems, Inc. stockholders during the prior year period.

Adjusted EBITDA was $152.5 million for the six months ended December 31, 2009, an increase of $10.8 million or 7.6% from the prior year period. A reconciliation of Adjusted EBITDA to income (loss) attributable to Vanguard Health Systems, Inc. stockholders as determined in accordance with generally accepted accounting principles for the six-month periods ended December 31, 2008 and 2009 is included in the attached supplemental financial information.

The consolidated operating results for the six months ended December 31, 2009 reflect a 2.8% increase in total adjusted discharges compared to the prior year period, while discharges were flat period over period. Inpatient surgeries and outpatient surgeries increased 0.1% and 1.4%, respectively, while emergency room visits increased 7.2% during the current year period compared to the prior year period.

Cash flows from operating activities were $149.6 million for the six months ended December 31, 2009, a $4.6 million decrease from the prior year period. Net days in accounts receivable was 46 days, 45 days and 50 days as of December 31, 2009, June 30, 2009 and December 31, 2008, respectively.

Vanguard will host a conference call for investors at 11:00 am EST on February 9, 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 "Second Quarter Webcast" or at http://visualwebcaster.com/event.asp?id=65311. 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 Latest News link on the Investor Relations page of www.vanguardhealth.com. The replay will be available via this link for one year.

Vanguard owns and operates 15 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. 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 we serve.

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 generate cash to service its debt; potential liability related to disclosures of relationships between physicians and Vanguard's hospitals; Vanguard's ability to grow its business and successfully implement its business strategies; Vanguard's ability to successfully integrate any future acquisitions; the potential that acquisitions could be costly, unsuccessful or subject Vanguard to unexpected liabilities; post-payment claims reviews by governmental agencies that could result in additional costs to Vanguard; 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 possible enactment of Federal or state healthcare reform; 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 weakened economic conditions and volatile capital markets on Vanguard's results of operations, financial position and cash flows; Vanguard's failure to adequately enhance its facilities with technologically advanced equipment could adversely affect its revenues and market position; 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 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, INC.
        Condensed Consolidated Statements of Operations (Unaudited)
                              (In millions)

                                            Three months ended
                                                December 31,
                                    -------------------------------------
                                           2008
                                      (as adjusted)            2009
                                    -------- --------   -------- --------

Patient service revenues            $  614.4     77.5%  $  631.3     74.8%
Premium revenues                       178.2     22.5      212.3     25.2
                                    -------- --------   -------- --------
Total revenues                         792.6    100.0      843.6    100.0

Costs and Expenses:
  Salaries and benefits (includes
   stock compensation of $0.8 and
   $1.0, respectively)                 302.7     38.2      324.5     38.5
  Health plan claims expense           140.7     17.8      170.8     20.2
  Supplies                             112.8     14.2      114.8     13.6
  Provision for doubtful accounts       48.3      6.1       35.0      4.1
  Purchased services                    40.3      5.1       44.7      5.3
  Non-income taxes                      10.9      1.4       10.7      1.3
  Rents and leases                      10.3      1.3       11.2      1.3
  Other operating expenses              48.9      6.1       49.1      5.8
  Depreciation and amortization         32.1      4.1       34.3      4.1
  Interest, net                         28.6      3.6       27.5      3.3
  Impairment loss                         --      0.0       43.1      5.1
  Other                                  1.0      0.1        1.5      0.2
                                    -------- --------   -------- --------
      Total costs and expenses         776.6     98.0      867.2    102.8
                                    -------- --------   -------- --------
Income (loss) from continuing
 operations before income taxes         16.0      2.0      (23.6)    (2.8)
Income tax benefit (expense)            (5.1)    (0.6)       3.6      0.4
                                    -------- --------   -------- --------
Income (loss) from continuing
 operations                             10.9      1.4      (20.0)    (2.4)
Income (loss) from discontinued
 operations, net of taxes               (0.1)     0.0        0.1      0.0
                                    -------- --------   -------- --------
Net income (loss)                       10.8      1.4      (19.9)    (2.4)
Less: Net income attributable to
 non-controlling interests              (0.7)    (0.1)      (0.8)    (0.1)
                                    -------- --------   -------- --------
Net income (loss) attributable to
 Vanguard Health Systems, Inc.
 stockholders                       $   10.1      1.3%  $  (20.7)    (2.5)%
                                    ========            ========
Amounts attributable to Vanguard
 Health Systems, Inc.
 stockholders:
  Income (loss) from continuing
   operations, net of taxes         $   10.2      1.3%  $  (20.8)    (2.5)%
  Income (loss) from discontinued
   operations, net of taxes             (0.1)     0.0        0.1      0.0
                                    -------- --------   -------- --------
Net income (loss) attributable to
 Vanguard Health Systems, Inc.
 stockholders                       $   10.1      1.3%  $  (20.7)    (2.5)%
                                    ========            ========




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

                                             Six months ended
                                                December 31,
                                    -------------------------------------
                                           2008
                                      (as adjusted)            2009
                                    -------- --------    ------- --------

Patient service revenues            $1,212.7     80.2%  $1,250.4     75.0%
Premium revenues                       298.9     19.8      416.6     25.0
                                    -------- --------   -------- --------
Total revenues                       1,511.6    100.0    1,667.0    100.0

Costs and Expenses:
  Salaries and benefits (includes
   stock compensation of $2.2 and
   $2.9, respectively)                 595.3     39.4      638.9     38.3
  Health plan claims expense           227.7     15.1      331.8     19.9
  Supplies                             224.6     14.8      225.8     13.5
  Provision for doubtful accounts      102.9      6.8       72.2      4.3
  Purchased services                    81.7      5.4       92.3      5.5
  Non-income taxes                      19.0      1.3       24.9      1.5
  Rents and leases                      21.5      1.4       22.3      1.3
  Other operating expenses              99.4      6.6      109.2      6.6
  Depreciation and amortization         64.4      4.3       68.3      4.1
  Interest, net                         57.3      3.8       54.7      3.3
  Impairment loss                         --      0.0       43.1      2.6
  Other                                  0.8      0.0        2.6      0.2
                                    -------- --------   -------- --------
      Total costs and expenses       1,494.6     98.9    1,686.1    101.1
                                    -------- --------   -------- --------
Income (loss) from continuing
 operations before income taxes         17.0      1.1      (19.1)    (1.1)
Income tax benefit (expense)            (5.3)    (0.4)       1.7      0.1
                                    -------- --------   -------- --------
Income (loss) from continuing
 operations                             11.7      0.7      (17.4)    (1.0)
Income (loss) from discontinued
 operations, net of taxes                0.9      0.1       (0.1)     0.0
                                    -------- --------   -------- --------
Net income (loss)                       12.6      0.8      (17.5)    (1.0)
Less: Net income attributable to
 non-controlling interests              (1.6)    (0.1)      (1.7)    (0.1)
                                    -------- --------   -------- --------
Net income (loss) attributable to
 Vanguard Health Systems, Inc.
 stockholders                       $   11.0      0.7%  $  (19.2)    (1.1)%
                                    ========            ========
Amounts attributable to Vanguard
 Health Systems, Inc.
 stockholders:
  Income (loss) from continuing
   operations, net of taxes         $   10.1      0.6%  $  (19.1)    (1.1)%
  Income (loss) from discontinued
   operations, net of taxes              0.9      0.1       (0.1)     0.0
                                    -------- --------   -------- --------
Net income (loss) attributable to
 Vanguard Health Systems, Inc.
 stockholders                       $   11.0      0.7%  $  (19.2)    (1.1)%
                                    ========            ========



                      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)


                                   Three months ended    Six months ended
                                       December 31,         December 31,
                                     2008      2009       2008      2009
                                   --------  --------   --------  --------
Net income (loss) attributable
 to Vanguard Health Systems,
 Inc. stockholders                 $   10.1  $  (20.7)  $   11.0  $  (19.2)
Interest, net                          28.6      27.5       57.3      54.7
Income tax expense (benefit)            5.1      (3.6)       5.3      (1.7)
Depreciation and amortization          32.1      34.3       64.4      68.3
Non-controlling interests               0.7       0.8        1.6       1.7
Loss (gain) on disposal of assets         -       0.4       (2.1)      0.4
Equity method income                   (0.3)     (0.3)      (0.3)     (0.5)
Stock compensation                      0.8       1.0        2.2       2.9
Monitoring fees and expenses            1.3       1.4        2.6       2.7
Realized holding loss on
 investments                             --        --        0.6        --
Impairment loss                          --      43.1         --      43.1
Discontinued operations, net of
 taxes                                  0.1      (0.1)      (0.9)      0.1
                                   --------  --------   --------  --------
  Adjusted EBITDA (a)              $   78.5  $   83.8   $  141.7  $  152.5
                                   ========  ========   ========  ========

(a) 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 the disposal of assets,
    equity method income, stock compensation, monitoring fees and expenses,
    realized holding loss on investments, impairment loss, debt
    extinguishment costs 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 statement 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.
                  Condensed Consolidated Balance Sheets
                             (In millions)


                                                               (Unaudited)
                                                     June 30,  December 31,
                                                       2009       2009
                                                     ---------  ---------
                      ASSETS
Current assets:
  Cash and cash equivalents                          $   308.2  $   358.0
  Restricted cash                                          1.9       21.9
  Accounts receivable, net of allowance for doubtful
   accounts of $121.5 and $69.9 at June 30, 2009 and
   December 31, 2009, respectively                       275.3      288.6
  Inventories                                             48.3       50.1
  Deferred income taxes                                   29.6       13.2
  Prepaid expenses and other current assets               68.4       61.4
                                                     ---------  ---------
      Total current assets                               731.7      793.2
Property, plant and equipment, net                     1,174.1    1,164.3
Goodwill                                                 692.1      649.1
Intangible assets, net                                    54.6       50.6
Deferred income taxes                                     38.0       60.7
Investments in auction rate securities                    21.6       21.6
Other assets                                              19.0       20.1
                                                     ---------  ---------
      Total assets                                   $ 2,731.1  $ 2,759.6
                                                     =========  =========
                LIABILITIES AND EQUITY
Current liabilities:
  Accounts payable                                   $   127.9  $   148.5
  Accrued salaries and benefits                          133.9      121.5
  Accrued health plan claims                             117.6      136.0
  Accrued interest                                        13.2       19.2
  Other accrued expenses and current liabilities          79.5       79.1
  Current maturities of long-term debt                     8.0        8.0
                                                     ---------  ---------
      Total current liabilities                          480.1      512.3
Professional and general liability and workers
 compensation reserves                                    76.7       83.0
Other liabilities                                         34.9       36.6
Long-term debt, less current maturities                1,543.6    1,545.6
Commitments and contingencies
Equity:
  Vanguard Health Systems, Inc. stockholders' equity:
    Common stock                                            --         --
    Additional paid-in capital                           651.3      654.2
    Accumulated other comprehensive loss                  (6.8)      (4.1)
    Retained deficit                                     (56.7)     (75.9)
                                                     ---------  ---------
      Total Vanguard Health Systems, Inc.
       stockholders' equity                              587.8      574.2
    Non-controlling interests                              8.0        7.9
                                                     ---------  ---------
      Total equity                                       595.8      582.1
                                                     ---------  ---------
      Total liabilities and equity                   $ 2,731.1  $ 2,759.6
                                                     =========  =========




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


                                                       Six months ended
                                                          December 31,
                                                      --------------------
                                                        2008
                                                    (as adjusted)  2009
                                                      ---------  ---------

Operating activities:
Net income (loss)                                     $    12.6  $   (17.5)
Adjustments to reconcile net income (loss) to net
 cash provided by operating activities:
  Loss (income) from discontinued operations,
   net of taxes                                            (0.9)       0.1
  Depreciation and amortization                            64.4       68.3
  Provision for doubtful accounts                         102.9       72.2
  Deferred income taxes                                     1.6       (7.7)
  Amortization of loan costs                                2.6        2.9
  Accretion of principal on senior discount notes          10.6        5.8
  Loss (gain) on sale of assets                            (2.1)       0.4
  Stock compensation                                        2.2        2.9
  Non-cash realized holding loss on investments             0.6         --
  Impairment loss                                            --       43.1
  Changes in operating assets and liabilities:
    Accounts receivable                                  (103.6)     (85.5)
    Inventories                                            (1.3)      (1.8)
    Prepaid expenses and other current assets               2.1        5.2
    Accounts payable                                        4.4       20.6
    Accrued expenses and other liabilities                 57.2       40.7
                                                      ---------  ---------
Net cash provided by operating activities -
 continuing operations                                    153.3      149.7
Net cash provided by (used in) operating activities -
 discontinued operations                                    0.9       (0.1)
                                                      ---------  ---------
Net cash provided by operating activities                 154.2      149.6
Investing activities:
Capital expenditures                                      (54.7)     (68.4)
Acquisitions                                               (3.6)      (1.5)
Proceeds from asset dispositions                            4.0        1.4
Increase in restricted cash                                  --      (20.0)
Other                                                      (0.3)      (0.3)
                                                      ---------  ---------
Net cash used in investing activities                     (54.6)     (88.8)
Financing activities:
Payments of long-term debt                                 (3.9)      (3.8)
Payments related to derivative instrument with
 financing element                                           --       (5.4)
Distributions paid to non-controlling interests            (2.7)      (1.8)
                                                      ---------  ---------
Net cash used in financing activities                      (6.6)     (11.0)
                                                      ---------  ---------
Net increase in cash and cash equivalents                  93.0       49.8
Cash and cash equivalents, beginning of period            141.6      308.2
                                                      ---------  ---------
Cash and cash equivalents, end of period              $   234.6  $   358.0
                                                      =========  =========
Net cash paid for interest                            $    45.1  $    41.9
                                                      =========  =========
Net cash paid (received) for income taxes             $     1.0  $   (13.2)
                                                      =========  =========




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


                              Three Months Ended December 31, 2008
                       ---------------------------------------------------
                       Acute   % of             % of
                        Care   Reve-     Health Reve-     Elimi-   Consol-
                      Services nues      Plans  nues      nations  idated
                       ------- -----    ------- -----     -------  -------
Patient service
 revenues(1)           $ 622.2 100.0 %  $    --   0.0 %   $  (7.8) $ 614.4
Premium revenues             -   0.0 %    178.2 100.0 %        --    178.2
                       ------- -----    ------- -----     -------  -------
    Total revenues       622.2 100.0 %    178.2 100.0 %      (7.8)   792.6

Salaries and
 benefits (excludes
 stock compensation)     294.6  47.4 %      7.3   4.1 %        --    301.9
Health plan expense          -   0.0 %    148.5  83.3 %      (7.8)   140.7
Supplies                 112.7  18.1 %      0.1   0.0 %        --    112.8
Provision for
 doubtful accounts        48.3   7.8 %        -   0.0 %        --     48.3
Other operating
 expenses                101.0  16.2 %      9.4   5.3 %        --    110.4
                       ------- -----    ------- -----     -------  -------
    Total operating
     expenses            556.6  89.5 %    165.3  92.7 %      (7.8)   714.1
                       ------- -----    ------- -----     -------  -------
    Segment EBITDA(2)     65.6  10.5 %     12.9   7.3 %        --     78.5

Less:
  Interest, net           28.9   4.7 %     (0.3) (0.2)%        --     28.6
  Depreciation and
   amortization           31.1   5.0 %      1.0   0.6 %        --     32.1
  Equity method income    (0.3) (0.1)%       --   0.0 %        --     (0.3)
  Stock compensation       0.8   0.1 %       --   0.0 %        --      0.8
  Monitoring fees and
   expenses                1.3   0.2 %       --   0.0 %        --      1.3
                       ------- -----    ------- -----     -------  -------
    Income from
     continuing
     operations before
     income taxes      $   3.8   0.6 %  $  12.2   6.9 %   $    --  $  16.0
                       ======= =====    ======= =====     =======  =======

(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its hospitals and related healthcare facilities attributable
    to services provided to enrollees in its health plans and also
    eliminates the corresponding medical claims expenses incurred by its
    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, monitoring fees and
    expenses, realized holding loss on investments, impairment loss and
    debt extinguishment costs. 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
    that 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, 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 similarly titled measures of other companies.




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


                              Three Months Ended December 31, 2009
                       ---------------------------------------------------
                       Acute   % of             % of
                        Care   Reve-     Health Reve-     Elimi-   Consol-
                      Services nues      Plans  nues      nations  idated
                       ------- -----    ------- -----     -------  -------
Patient service
 revenues(1)           $ 641.7 100.0 %  $    --   0.0 %   $ (10.4) $ 631.3
Premium revenues            --   0.0 %    212.3 100.0 %         -    212.3
                       ------- -----    ------- -----     -------  -------
    Total revenues       641.7 100.0 %    212.3 100.0 %     (10.4)   843.6

Salaries and
 benefits (excludes
 stock compensation)     315.2  49.1 %      8.3   3.9 %        --    323.5
Health plan claims
 expense                    --   0.0 %    181.2  85.4 %     (10.4)   170.8
Supplies                 114.7  17.9 %      0.1   0.0 %        --    114.8
Provision for doubtful
 accounts                 35.0   5.4 %        -   0.0 %        --     35.0
Other operating
 expenses                107.7  16.8 %      8.0   3.8 %        --    115.7
                       ------- -----    ------- -----     -------  -------
    Total operating
     expenses            572.6  89.2 %    197.6  93.1 %     (10.4)   759.8
                       ------- -----    ------- -----     -------  -------
    Segment EBITDA(2)     69.1  10.8 %     14.7   6.9 %        --     83.8

Less:
  Interest, net           27.6   4.3 %     (0.1) (0.1)%        --     27.5
  Depreciation and
   amortization           33.1   5.2 %      1.2   0.6 %        --     34.3
  Equity method income    (0.3) (0.1)%       --   0.0 %        --     (0.3)
  Stock compensation       1.0   0.2 %       --   0.0 %        --      1.0
  Loss on disposal of
   assets                  0.4   0.1 %       --   0.0 %        --      0.4
  Monitoring fees and
   expenses                1.4   0.2 %       --   0.0 %        --      1.4
  Impairment loss         43.1   6.7 %       --   0.0 %        --     43.1
                       ------- -----    ------- -----     -------  -------
Income (loss) from
 continuing operations
 before income taxes   $ (37.2) (5.8)%  $  13.6   6.4 %   $    --  $ (23.6)
                       ======= =====    ======= =====     =======  =======

(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its hospitals and related healthcare facilities attributable
    to services provided to enrollees in its health plans and also
    eliminates the corresponding medical claims expenses incurred by its
    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, monitoring fees and
    expenses, realized holding loss on investments, impairment loss and
    debt extinguishment costs. 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
    that 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, 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 similarly titled measures of other companies.





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


                               Six Months Ended December 31, 2008
                 ---------------------------------------------------------
                  Acute    % of                % of
                   Care    Reve-      Health   Reve-    Elimi-     Consol-
                 Services  nues        Plans   nues     nations    idated
                 --------  -----     --------  -----    -------   --------
Patient service
 revenues(1)     $1,230.0  100.0 %   $     --    0.0 %  $ (17.3)  $1,212.7
Premium
 revenues              --    0.0 %      298.9  100.0 %        -      298.9
                 --------  -----     --------  -----    -------   --------
    Total
     revenues     1,230.0  100.0 %      298.9  100.0 %    (17.3)   1,511.6

Salaries and
 benefits
 (excludes stock
 compensation)      578.6   47.0 %       14.5    4.8 %       --      593.1
Health plan
 expense               --    0.0 %      245.0   82.0 %    (17.3)     227.7
Supplies            224.4   18.3 %        0.2    0.1 %       --      224.6
Provision for
 doubtful
 accounts           102.9    8.4 %         --    0.0 %       --      102.9
Other operating
 expenses           204.3   16.6 %       17.3    5.8 %       --      221.6
                 --------  -----     --------  -----    -------   --------
    Total
     operating
     expenses     1,110.2   90.3 %      277.0   92.7 %    (17.3)   1,369.9
                 --------  -----     --------  -----    -------   --------
    Segment
     EBITDA(2)      119.8    9.7 %       21.9    7.3 %       --      141.7

Less:
  Interest, net      58.4    4.7 %       (1.1)  (0.4)%       --       57.3
  Depreciation
   and
   amortization      62.4    5.1 %        2.0    0.7 %       --       64.4
  Equity method
   income            (0.3)  (0.1)%         --    0.0 %       --       (0.3)
  Stock
   compensation       2.2    0.2 %         --    0.0 %       --        2.2
  Gain on
   disposal of
   assets            (2.1)  (0.2)%         --    0.0 %       --       (2.1)
  Monitoring fees
   and expenses       2.6    0.2 %         --    0.0 %       --        2.6
  Realized
   holding loss
   on investments     0.6    0.1 %         --    0.0 %       --        0.6
                 --------  -----     --------  -----    -------   --------
    Income (loss)
     from
     continuing
     operations
     before income
     taxes       $   (4.0)  (0.3)%   $   21.0    7.0 %  $    --   $   17.0
                 ========  =====     ========  =====    =======   ========

(1) Vanguard eliminates in consolidation those patient service revenues
    earned by its hospitals and related healthcare facilities attributable
    to services provided to enrollees in its health plans and also
    eliminates the corresponding medical claims expenses incurred by its
    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, monitoring fees and
    expenses, realized holding loss on investments, impairment loss and
    debt extinguishment costs. 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 that 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, 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 similarly titled
    measures of other companies.





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


                               Six Months Ended December 31, 2009
                 ---------------------------------------------------------
                  Acute    % of                % of
                   Care    Reve-      Health   Reve-    Elimi-     Consol-
                 Services  nues        Plans   nues     nations    idated
                 --------  -----     --------  -----    -------   --------
Patient service
 revenues(1)     $1,271.4  100.0 %   $     --    0.0 %  $ (21.0)  $1,250.4
Premium revenues       --    0.0 %      416.6  100.0 %       --      416.6
                 --------  -----     --------  -----    -------   --------
    Total
     revenues     1,271.4  100.0 %      416.6  100.0 %    (21.0)   1,667.0

Salaries and
 benefits
 (excludes
 stock
 compensation)      619.2   48.7 %       16.8    4.1 %       --     636.0
Health plan
 claims expense        --    0.0 %      352.8   84.7 %    (21.0)     331.8
Supplies            225.7   17.7 %        0.1    0.0 %       --     225.8
Provision for
 doubtful accounts   72.2    5.7 %         --    0.0 %       --      72.2
Other operating
 expenses           230.9   18.2 %       17.8    4.3 %       --     248.7
                 --------  -----     --------  -----    -------   --------
    Total
     operating
     expenses     1,148.0   90.3 %      387.5   93.1 %    (21.0)   1,514.5
                 --------  -----     --------  -----    -------   --------
    Segment
     EBITDA(2)      123.4    9.7 %       29.1    6.9 %       --      152.5

Less:
  Interest, net      55.0    4.3 %       (0.3)  (0.1)%       --       54.7
  Depreciation
   and
   amortization      66.1    5.2 %        2.2    0.5 %       --       68.3
  Equity method
   income            (0.5)  (0.1)%         --    0.0 %       --       (0.5)
  Stock
   compensation       2.9    0.2 %         --    0.0 %       --        2.9
  Gain on disposal
   of assets          0.4    0.1 %         --    0.0 %       --        0.4
  Monitoring fees
   and expenses       2.7    0.2 %         --    0.0 %       --        2.7
  Realized holding
   loss on
   investments         --    0.0 %         --    0.0 %       --         --
  Impairment loss    43.1    3.4 %         --    0.0 %       --       43.1
                 --------  -----     --------  -----    -------   --------
    Income (loss)
     from
     continuing
     operations
     before income
     taxes       $  (46.3)  (3.6)%   $   27.2    6.5 %  $    --   $  (19.1)
                 ========  =====     ========  =====    =======   ========

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

(2) Segment EBITDA is defined as income (loss) from continuing operations
    before income taxes les interest expense (net of interest income),
    depreciation and amortization, equity method income, stock
    compensation, gain or loss on disposal of assets, monitoring fees and
    expenses, realized holding loss on investments, impairment loss and
    debt extinguishment costs. 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
    that 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, 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 similarly titled measures of other companies.




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

                                                  Three months
                                                     ended
                                                   December 31
                                                ----------------    %
                                                 2008     2009    Change
                                                -------  -------  -------
Number of hospitals at end of period                 15       15
Licensed beds at end of period                    4,135    4,135
Discharges                                       41,604   42,037      1.0 %
Adjusted discharges                              70,939   72,990      2.9 %
Adjusted discharges-hospitals                    67,377   69,022      2.4 %
Average length of stay                             4.23     4.19     (0.9)%
Patient days                                    175,944  176,233      0.2 %
Adjusted patient days                           300,003  306,000      2.0 %
Adjusted patient days-hospitals                 284,937  289,364      1.6 %
Patient revenue per adjusted discharge          $ 8,495  $ 8,470     (0.3)%
Patient revenue per adjusted
 discharge-hospitals                            $ 8,626  $ 8,533     (1.1)%
Inpatient surgeries                               9,384    9,380      0.0 %
Outpatient surgeries                             19,026   19,143      0.6 %
Emergency room visits                           142,671  155,818      9.2 %

Charity care and uninsured discounts as a
 percent of acute care services segment
 revenues (prior to these discounts)                3.5%    10.2%

Provision for doubtful accounts as a percent
 of acute care services segment revenues
 (prior to charity and uninsured discounts)         7.5%     4.9%

Net patient revenue payer mix:
  Medicare                                         25.9%    26.1%
  Medicaid                                          7.1%     6.7%
  Managed Medicare                                 14.2%    15.1%
  Managed Medicaid                                  8.9%     9.3%
  Managed care                                     35.3%    35.0%
  Commercial                                        0.9%     1.1%
  Self pay                                          7.7%     6.7%
                                                -------  -------
        Total                                     100.0%   100.0%
                                                =======  =======


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


                                                  Six months
                                                     ended
                                                  December 31,
                                                ----------------    %
                                                  2008     2009   Change
                                                -------  -------  -------
Number of hospitals at end of period                 15       15
Licensed beds at end of period                    4,135    4,135
Discharges                                       83,885   83,920      0.0 %
Adjusted discharges                             143,261  147,213      2.8 %
Adjusted discharges-hospitals                   136,044  139,126      2.3 %
Average length of stay                             4.22     4.15     (1.7)%
Patient days                                    354,058  348,199     (1.7)%
Adjusted patient days                           604,668  610,811      1.0 %
Adjusted patient days-hospitals                 574,207  577,260      0.5 %
Patient revenue per adjusted discharge          $ 8,284  $ 8,314      0.4 %
Patient revenue per adjusted
 discharge-hospitals                            $ 8,449  $ 8,384     (0.8)%
Inpatient surgeries                              18,862   18,888      0.1 %
Outpatient surgeries                             37,926   38,460      1.4 %
Emergency room visits                           289,853  310,727      7.2 %

Charity care and uninsured discounts as a
 percent of acute care services segment
 revenues (prior to these discounts)                3.8%    10.9%

Provision for doubtful accounts as a percent
 of acute care services segment revenues
 (prior to charity and uninsured discounts)         8.0%     5.1%

Net patient revenue payer mix:
  Medicare                                         25.8%    25.3%
  Medicaid                                          7.3%     7.2%
  Managed Medicare                                 13.8%    14.8%
  Managed Medicaid                                  9.2%     9.9%
  Managed care                                     34.8%    35.0%
  Commercial                                        1.0%     1.0%
  Self pay                                          8.1%     6.8%
                                                -------  -------
        Total                                     100.0%   100.0%
                                                =======  =======


                 VANGUARD HEALTH SYSTEMS, INC.
   Supplemental Operating Measures Adjusted for Comparative Analysis
            For the three months ended December 31, 2009
       (dollars in millions, except for statistical measures)
                           (Unaudited)

                                                             %
                                                    of Segment Revenues
                                                    -------------------
                          Impact of                            Non-GAAP
                        Policy Changes                             as
                       ------------------              GAAP-   adjusted
                GAAP-  Uninsured Medicaid Non-GAAP     basis       (4)
                basis  Discounts Pending  Adjusted  ------------  -----
             Amounts(1)  (2)       (3)    Amounts(4) 2009   2008   2009
               ------- --------- -------- --------  -----  -----  -----
Acute care
 services
 segment:
Total
 revenues(5)   $ 641.7 $    37.8 $  (3.9) $  675.6  100.0% 100.0% 100.0%
Salaries and
 benefits(8)   $ 316.2 $       - $     -  $  316.2   49.3%  47.5%  46.8%
Supplies       $ 114.7 $       - $     -  $  114.7   17.9%  18.1%  17.0%
Provision
 for
 doubtful
 accounts      $  35.0 $    37.8 $  (4.3) $   68.5    5.4%   7.8%  10.1%
Other
 operating
 expenses      $ 107.7 $       - $     -  $  107.7   16.8%  16.2%  16.0%
Total
 operating
 expenses      $ 573.6 $    37.8 $  (4.3) $  607.1   89.4%  89.6%  89.9%


                                                             %
                                                    of Segment Revenues
                                                    Prior to Charity and
                                                    Uninsured Discounts
                                                    -------------------
                          Impact of                             Non-GAAP
                         Policy Changes                             as
                       -----------------  Non-GAAP     GAAP-    adjusted
               GAAP-   Uninsured Medicaid Adjusted     basis        (4)
               basis   Discounts Pending  Amounts  -------------   -----
             Amounts(1)  (2)       (3)     (4)      2009    2008    2009
              ------- -------  --------  --------  -----   -----   -----
Uncompensated
 care(6)      $ 107.6 $ (14.1) $   (4.3) $   89.2   15.1%   11.0%   12.8%
Total
 revenues,
 prior to
 charity(7)   $ 662.4 $  37.8  $   (3.9) $  696.3



                       Impact of Policy
                          Changes                               Current
           Statistical ----------------   Statisical  Prior      Year
              Measure, Uninsured Medicaid  Measure,    Year     Change,
                as     Discounts Pending     as     Statistical   as
              reported     (2)     (3)     adjusted   Measure   adjusted
              -------  --------- ------   ---------- -------   ---------
Vanguard
 consolidated:
  Patient
   revenue
   per total
   adjusted
   discharge  $ 8,470  $     518 $  (53)  $    8,935 $ 8,495         5.2 %
Self-pay
 discharges     1,999          -   (578)       1,421   1,220        16.5 %
Medicaid
 discharges     3,672          -    578        4,250   4,313        (1.5)%






                 VANGUARD HEALTH SYSTEMS, INC.
   Supplemental Operating Measures Adjusted for Comparative Analysis
             For the six months ended December 31, 2009
       (dollars in millions, except for statistical measures)
                           (Unaudited)

                                                             %
                                                    of Segment Revenues
                                                    -------------------
                          Impact of                            Non-GAAP
                        Policy Changes                              as
                       ------------------              GAAP-   adjusted
                GAAP-  Uninsured Medicaid Non-GAAP     basis       (4)
                basis  Discounts Pending  Adjusted  ------------  -----
             Amounts(1)  (2)       (3)    Amounts(4) 2009   2008   2009
               ------- --------- -------- --------  -----  -----  -----
Acute care
 services
 segment:
  Total
   revenues
   (5)         $1,271.4 $   74.2 $ (10.7) $1,334.9  100.0% 100.0% 100.0%
  Salaries
   and
   benefits
   (8)         $  622.1 $      - $     -  $  622.1   48.9%  47.2%  46.6%
  Supplies     $  225.7 $      - $     -  $  225.7   17.7%  18.3%  16.9%
  Provision
   for
   doubtful
   accounts    $   72.2 $   74.2 $ (14.0) $  132.4    5.7%   8.4%   9.9%
  Other
   operating
   expenses    $  230.9 $      - $     -  $  230.9   18.2%  16.6%  17.3%
   Total
    operating
    expenses   $1,150.9 $   74.2 $ (14.0) $1,211.1   90.5%  90.5%  90.7%


                                                             %
                                                    of Segment Revenues
                                                    Prior to Charity and
                                                    Uninsured Discounts
                                                    -------------------
                          Impact of                             Non-GAAP
                        Policy Changes                              as
                      -----------------   Non-GAAP    GAAP-     adjusted
               GAAP-   Uninsured Medicaid Adjusted    basis         (4)
               basis   Discounts Pending  Amounts  ------------    -----
             Amounts(1)  (2)       (3)     (4)      2009    2008    2009
              ------- -------  --------  --------  -----   -----   -----
Acute care
 services
 segment:
  Uncompen-
   sated
   care(6)    $  228.3 $ (38.7) $ (14.0) $  175.6   16.0%   11.8%   12.7%
  Total
   revenues,
   prior to
   charity(7) $1,314.6 $  74.2  $ (10.7) $1,378.1



                       Impact of Policy
                           Changes                                 Current
           Statistical ------------------   Statisical  Prior       Year
              Measure,  Uninsured Medicaid   Measure,    Year      Change,
                as      Discounts Pending      as      Statistical   as
              reported     (2)      (3)      adjusted    Measure   adjusted
              -------  ---------  -------   ---------- --------   ---------
Vanguard
 consolidated:
  Patient
   revenue
   per total
   adjusted
   discharge  $ 8,314  $     504  $   (72)  $    8,746 $  8,284       5.6 %
  Self-pay
   discharges   4,257          -   (1,425)       2,832    2,635       7.5 %
  Medicaid
   discharges   7,264          -    1,425        8,689    8,764      (0.9)%


(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 its
    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 this discount as a reduction to 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 $51.9 million of
    uninsured discounts related to its acute care services segment during
    the three months ended December 31, 2009, $37.8 million of which
    related to non-Medicaid pending accounts that reduced revenues as a
    result of implementing this policy. Vanguard recorded a total of $112.9
    million of uninsured discounts related to its acute care services
    segment during the six months ended December 31, 2009, $74.2 million of
    which related to non-Medicaid pending accounts that reduced revenues as
    a result of implementing this policy.

(3) Includes the impact of Vanguard's accounting 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 those hospitals that have implemented the uninsured
    discount policy 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 $3.9 million and $10.7 million for the
    three months and six months ended December 31, 2009, respectively.
    The provision for doubtful accounts recorded for Medicaid pending
    accounts, after the uninsured discounts were applied, were $4.3 million
    and $14.0 million for the three months and six months ended December
    31, 2009, respectively.

(4) Revenues, certain expenses and those expenses as a percentage of
    revenues for the acute care services segment for the three months and
    six months ended December 31, 2009 have been adjusted to allow for
    comparative measurement on a basis consistent with the three months and
    six months ended December 31, 2008 (before implementation 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