SOURCE: Vanguard Health Systems

May 09, 2005 16:30 ET

Vanguard Reports Third Quarter Results

NASHVILLE, TN -- (MARKET WIRE) -- May 9, 2005 -- Vanguard Health Systems, Inc. (the "Company" or "Vanguard") today announced results for the third quarter ended March 31, 2005.

Total revenues for the quarter ended March 31, 2005 were $643.0 million, an increase of $181.3 million or 39.3% from the prior year quarter. Patient service revenues and health plan premium revenues increased $174.3 million and $7.0 million, respectively, from the prior year quarter. $121.5 million of the quarter over quarter increase in total revenues related to the Company's acquisition of three acute care hospitals and related businesses in Massachusetts on December 31, 2004, as described below.

For the quarter ended March 31, 2005, the Company reported income before income taxes of $33.2 million compared to income before income taxes of $21.7 million for the prior year quarter. The increase resulted from improved operating results including the Massachusetts acquisition offset by a $14.3 million increase in interest expense resulting from additional debt incurred to fund the Blackstone transaction on September 23, 2004 and $150.0 million of acquisition delayed draw term facility borrowings on December 31, 2004 and February 18, 2005, as described below. Net income was $19.6 million for the quarter ended March 31, 2005, compared to $13.8 million for the prior year quarter.

Adjusted EBITDA was $73.5 million for the quarter ended March 31, 2005, an increase of $26.1 million or 55.1% from the prior year quarter. A reconciliation of Adjusted EBITDA to net income as determined in accordance with generally accepted accounting principles for the quarters ended March 31, 2004 and 2005 is included in the attached supplemental financial information.

The consolidated operating results for the quarter ended March 31, 2005 reflect a 27.7% increase in discharges and a 37.0% increase in hospital adjusted discharges compared to the prior year quarter. These volume improvements resulted from the Company's acquisition of the Massachusetts hospitals on December 31, 2004 and its service expansion strategies and physician initiatives. On a same hospital basis, quarter over quarter discharges and hospital adjusted discharges increased 5.2% and 7.3%, respectively.

Total revenues for the nine months ended March 31, 2005 were $1,636.5 million, an increase of $322.9 million or 24.6% from the prior year period. Patient service revenues and health plan premium revenues increased $289.7 million and $33.2 million, respectively, from the prior year period. The Company's acquisition of the Massachusetts hospitals accounted for $121.5 million of the period over period increase. On a same hospital basis, revenues increased $201.4 million or 15.3% during the current year period compared to the prior year period.

For the nine months ended March 31, 2005, the Company reported a loss before income taxes of $120.7 million compared to income before income taxes of $48.3 million for the prior year period. The current year loss before income taxes resulted from costs directly attributable to the Blackstone transaction including stock compensation of $96.7 million, debt extinguishment costs of $62.2 million and merger expenses of $23.2 million. The net loss for the nine months ended March 31, 2005 was $85.9 million compared to net income of $29.9 million during the prior year period. The Company's current year net loss resulted from the after tax effect of the Blackstone-related costs.

Adjusted EBITDA was $179.7 million for the nine months ended March 31, 2005, an increase of $57.9 million or 47.5% from the prior year period. A reconciliation of Adjusted EBITDA to net income (loss) as determined in accordance with generally accepted accounting principles for the nine-month periods ended March 31, 2004 and 2005 is included in the attached supplemental financial information.

The consolidated operating results for the nine months ended March 31, 2005 reflect a 13.1% increase in discharges and a 17.1% increase in hospital adjusted discharges compared to the prior year period. These volume improvements resulted from the Company's acquisition of the Massachusetts hospitals on December 31, 2004, and its service expansion strategies and physician initiatives. On a same hospital basis, period over period discharges and hospital adjusted discharges increased 5.4% and 7.0%, respectively.

As previously announced, on December 31, 2004, certain subsidiaries of the Company acquired three acute care hospitals with a total of 768 beds and related healthcare businesses located in or around the cities of Worcester, Framingham and Natick in Massachusetts from subsidiaries of Tenet Healthcare Corporation. The Company's subsidiaries paid approximately $87.4 million at closing to purchase the property, plant and equipment and certain other assets and assumed certain liabilities of the hospitals and related healthcare businesses including transaction closing costs. The Company's subsidiaries funded the purchase price by borrowing $60.0 million of the $150.0 million acquisition delayed draw term facility under the Company's new senior secured credit facilities and by utilizing $27.4 million of cash on hand. The new secured credit facilities were entered into during September 2004 in connection with the purchase of a majority of the equity interests in the Company by affiliates of the Blackstone Group. The Company invested an additional $37.4 million during the current year quarter to build from operations net working capital for the purchased facilities. On February 18, 2005, the Company borrowed the remaining $90.0 million available under the acquisition delayed draw term facility to fund the working capital buildup and capital expenditures.

Cash flows from operating activities were $141.5 million for the nine months ended March 31, 2005, an increase of $82.1 million from the prior year period. The significant increase was primarily due to improved operational performance during the current year period. Cash used in investing activities increased to $281.2 million during the nine months ended March 31, 2005, from $108.9 million during the prior year period as a result of $51.2 million paid for Blackstone-related acquisition costs, $87.4 million paid to acquire the Massachusetts hospitals and increased capital expenditures associated with the significant expansion projects underway in San Antonio and Phoenix. Cash flows from financing activities were significantly affected by the equity and debt transactions associated with the Blackstone transaction and the $150.0 million borrowed under the acquisition delayed draw term loan facility.

"We continue to benefit from our market-focused expansion and quality of care initiatives as reflected in our third quarter operating results," commented Charles N. Martin, Jr., Chairman and Chief Executive Officer. "Our success is the result of the tireless efforts of our employees and physician associates to improve the quality of life in the communities we serve. We hope to maintain this momentum as we broaden our service capabilities, invest in new and more efficient technologies and clinical information systems and integrate the operations of our recently acquired Massachusetts facilities with Vanguard's strategic goals and objectives."

The Company will host a conference call for investors at 11:00 am EDT on May 10, 2005. 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 the Company's Web site at www.vanguardhealth.com by clicking on Third Quarter Webcast or at http://www.visualwebcaster.com/event.asp?id=28552. If you are unable to participate during the live webcast, the call will be available on a replay basis on the Company's Web site www.vanguardhealth.com. To access the replay, click on Third Quarter Webcast on the Company's home page or later on the Latest News link on the Investor Relations page of www.vanguardhealth.com.

Vanguard Health Systems, Inc. owns and operates 19 acute care hospitals and complementary facilities and services in Chicago, Illinois; Phoenix, Arizona; Orange County, California; San Antonio, Texas and Massachusetts. The Company'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 the Company'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 the Company's actual outcomes, results, performance or achievements to be materially different from those projected. These factors, risks and uncertainties include, among others, the Company's high degree of leverage; the Company's ability to incur substantially more debt; operating and financial restrictions in the Company's debt agreements; the Company's ability to successfully implement its business strategies; the Company's ability to successfully integrate its recent and any future acquisitions; 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; 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; changes in accounting practices; changes in general economic conditions; the Company's exposure to the increased amounts of and collection risks associated with uninsured accounts and the co-pay and deductible portions of insured accounts; the impact of changes to the Company's charity care and self-pay discounting policies; the ability to enter into managed care provider and other payer arrangements on acceptable terms; the efforts of insurers, managed care payers, employers and others to contain healthcare costs; the availability and terms of capital to fund the expansion of the Company's business; 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 the Company's filings from time to time with the Securities and Exchange Commission, including, among others, the Company's annual reports on Form 10-K, its quarterly reports on Form 10-Q and its registration statement on Form S-4 (Registration No. 333-120436) first filed with the Securities and Exchange Commission on November 12, 2004.

Although the Company 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 the Company 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 the Company's results of operations and financial condition.

The Company's forward-looking statements speak only as of the date made. Other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of new information, future events or otherwise.

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

                                         Three months ended
                                              March 31,

                                   2004                     2005
                                (predecessor)
                            ---------------------   ---------------------

Patient service revenues    $   385.0        83.4%  $   559.3        87.0%
Premium revenues                 76.7        16.6        83.7        13.0
                            ---------   ---------   ---------   ---------

Total revenues                  461.7       100.0       643.0       100.0

Costs and Expenses:
  Salaries and benefits
   (including $0.1 and
   $0.2 of stock
   compensation,
   respectively)                190.3        41.2       271.6        42.2
  Supplies                       73.7        16.0       108.8        16.9
  Medical claims expense         55.8        12.1        62.2         9.7
  Provision for doubtful
   accounts                      29.4         6.4        40.2         6.3
  Other operating expenses       65.2        14.1        86.9        13.5
  Depreciation and
   amortization                  15.7         3.4        13.1         2.0
  Interest, net                  11.1         2.4        25.4         4.0
  Merger expenses                   -         0.0         0.1         0.0
  Other                          (1.2)       (0.3)        1.5         0.2
                            ---------   ---------   ---------   ---------

Total costs and expenses        440.0        95.3       609.8        94.8
                            ---------   ---------   ---------   ---------


Income before income taxes       21.7         4.7        33.2         5.2
Income tax expense                7.9         1.7        13.6         2.1
                            ---------   ---------   ---------   ---------


Net income                       13.8         3.0        19.6         3.1
Preferred dividends              (1.0)       (0.2)          -         0.0
                            ---------   ---------   ---------   ---------

Net income attributable to
 common stockholders        $    12.8         2.8%  $    19.6         3.1%
                            =========               =========



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

                                         Nine months ended
                                              March 31,

                                   2004                     2005
                                (predecessor)          (combined basis)
                            ---------------------   ---------------------

Patient service revenues    $ 1,100.0        83.7%  $ 1,389.7        84.9%
Premium revenues                213.6        16.3       246.8        15.1
                            ---------   ---------   ---------   ---------

Total revenues                1,313.6       100.0     1,636.5       100.0

Costs and Expenses:
  Salaries and benefits
   (including $0.1 and
   $97.1 of stock
   compensation,
   respectively)                549.3        41.8       764.6        46.7
  Supplies                      207.5        15.8       268.8        16.4
  Medical claims expense        156.7        11.9       179.1        11.0
  Provision for doubtful
   accounts                      89.7         6.8       110.2         6.8
  Other operating expenses      188.7        14.4       231.2        14.1
  Depreciation and
   amortization                  46.7         3.5        53.0         3.3
  Interest, net                  32.4         2.5        62.3         3.8
  Debt extinguishment costs         -         0.0        62.2         3.8
  Merger expenses                   -         0.0        23.2         1.4
  Other                          (5.7)       (0.4)        2.6         0.1
                            ---------   ---------   ---------   ---------

    Total costs and
     expenses                 1,265.3        96.3     1,757.2       107.4
                            ---------   ---------   ---------   ---------

Income (loss) before
 income taxes                    48.3         3.7      (120.7)       (7.4)
Income tax expense (benefit)     18.4         1.4       (34.8)       (2.1)
                            ---------   ---------   ---------   ---------

Net income (loss)                29.9         2.3       (85.9)       (5.3)
Preferred dividends              (2.9)       (0.2)       (1.0)       (0.0)
                            ---------   ---------   ---------   ---------

Net income (loss)
 attributable to common
 stockholders               $    27.0         2.1%  $   (86.9)       (5.3)%
                            =========               =========


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

                                 Predecessor
                                 -----------  September 23,  Nine months
                                 July 1,2004      2004          ended
                                   through      through       March 31,
                                September 22,   March 31,        2005
                                    2004          2005    (combined basis)
                                 -----------   ----------    -------------


Patient service revenues         $   377.3      $ 1,012.4      $ 1,389.7
Premium revenues                      72.3          174.5          246.8
                                 ---------      ---------      ---------

Total revenues                       449.6        1,186.9        1,636.5

Costs and expenses:
     Salaries and benefits
      (including $96.7, $0.4
      and $97.1 of stock
      compensation,
      respectively)                  275.4          489.2          764.6
     Supplies                         72.3          196.5          268.8
     Medical claims expense           55.0          124.1          179.1
     Provision for doubtful
      accounts                        31.5           78.7          110.2
     Other operating expenses         65.0          166.2          231.2
     Depreciation and amortization    17.4           35.6           53.0
     Interest, net                     9.8           52.5           62.3
     Debt extinguishment costs        62.2              -           62.2
     Merger expenses                  23.1            0.1           23.2
     Other                            (0.1)           2.7            2.6
                                 ---------      ---------      ---------

      Total costs and expenses       611.6        1,145.6        1,757.2
                                 ---------      ---------      ---------

Income (loss) before income taxes   (162.0)          41.3         (120.7)
Income tax expense (benefit)         (51.3)          16.5          (34.8)
                                 ---------      ---------      ---------

Net income (loss)                   (110.7)          24.8          (85.9)
Preferred stock dividends             (1.0)             -           (1.0)
                                 ---------      ---------      ---------

Net income (loss) attributable
to common stockholders           $  (111.7)     $    24.8      $   (86.9)
                                 =========      =========      =========


                 VANGUARD HEALTH SYSTEMS, INC.
             Supplemental Financial Information (Unaudited)
         Reconciliation of Adjusted EBITDA to Net Income (Loss)
                             (In millions)

                         Three months ended          Nine months ended
                              March 31,                   March 31,
                                                                   2005
                         2004                        2004       (combined
                    (predecessor)      2005     (predecessor)      basis)
                      ----------    ----------    ----------    ----------


Net income (loss)     $     13.8    $     19.6    $     29.9    $    (85.9)
Interest, net               11.1          25.4          32.4          62.3
Income tax expense
 (benefit)                   7.9          13.6          18.4         (34.8)
Depreciation and
 amortization               15.7          13.1          46.7          53.0
Minority interests          (0.4)          0.3          (2.3)         (0.5)
Loss (gain) on sale
 of assets                     -           0.2          (0.8)          1.0
Equity method income        (0.8)         (0.3)         (2.6)         (0.6)
Stock compensation           0.1           0.2           0.1          97.1
Debt extinguishment
 costs                         -             -             -          62.2
Merger expenses                -           0.1             -          23.2
Monitoring fees                -           1.3             -           2.7
                      ----------    ----------    ----------    ----------

  Adjusted EBITDA (a) $     47.4    $     73.5    $    121.8    $    179.7
                      ==========    ==========    ==========    ==========


(a) Adjusted EBITDA is defined as income before interest expense (net of
    interest income), income taxes, depreciation and amortization,
    minority interests, gain or loss on the sale of assets, equity method
    income or loss, stock compensation, debt extinguishment costs, merger
    expenses and monitoring fees.  Merger expenses include legal and
    advisory fees, accounting fees, bridge loan commitment fees and
    management transaction bonuses incurred in connection with the purchase
    of a majority of the equity interests in the Company by affiliates of
    The Blackstone Group ("Blackstone") on September 23, 2004.  Monitoring
    fees represent fees paid to Blackstone and Metalmark Subadvisor LLC for
    advisory and oversight services.  Adjusted EBITDA is not intended as 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.  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)

                                       Predecessor
                                       -----------       (Unaudited)
                                         June 30,          March 31,
                                           2004              2005
                                        --------          --------
ASSETS
Current assets:
  Cash and cash equivalents             $  108.1          $   99.4
  Accounts receivable, net of
   allowance for uncollectible
   accounts of approximately
   $63.5 and $80.6 at June 30,
   2004 and March 31, 2005,
   respectively                            224.7             294.5
  Supplies                                  34.6              42.1
  Prepaid expenses and other
   current assets                           33.7              38.0
                                        --------          --------
   Total current assets                    401.1             474.0

Property, plant and equipment, net         866.9             982.1
Goodwill                                   109.3             806.1
Intangible assets, net                      41.8              76.0
Other assets                                 8.7              62.7
                                        --------          --------
   Total assets                         $1,427.8          $2,400.9
                                        ========          ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                      $   80.7          $  122.0
  Accrued health claims                     41.6              52.1
  Other accrued expenses and current
   liabilities                             109.8             151.7
  Current maturities of long-term debt       6.3               8.0
                                        --------          --------
    Total current liabilities              238.4             333.8
Other liabilities                           99.2              75.3
Long-term debt, less current maturities    617.2           1,324.6

Payable-In-Kind Preferred Stock             61.0                 -

Stockholders' equity:
Common Stock                                   -                 -
Additional paid-in capital                 348.7             642.4
Retained earnings                           63.3              24.8
                                        --------          --------
    Total liabilities and
     stockholders' equity               $1,427.8          $2,400.9
                                        ========          ========


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

                                        Nine months ended March 31,

                                          2004              2005
                                      (predecessor)   (combined basis)
                                        --------          --------
Operating activities:
Net income (loss)                       $   29.9          $  (85.9)
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
  Depreciation and amortization             46.7              53.0
  Provision for doubtful accounts           89.7             110.2
  Deferred income taxes                     11.3             (34.8)
  Amortization of loan costs                 1.4               2.3
  Accretion of principal on senior
   discount notes                              -               7.3
  (Gain) loss on sale of assets             (0.8)              1.0
  Stock compensation                         0.1              97.1
  Debt extinguishment costs                    -              62.2
  Merger expenses                              -              23.2
  Changes in operating assets and
   liabilities, net of effects of
   acquisitions:
    Accounts receivable                   (115.0)           (126.8)
    Buildup of accounts receivable
     for recent acquisitions                   -             (53.2)
    Supplies                                (1.9)             (1.5)
    Prepaid expenses and other
     current assets                          2.9               7.8
    Accounts payable                        (1.2)             34.0
    Accrued expenses and other
     liabilities                            (3.7)             45.6
                                        --------          --------
Net cash provided by operating activities   59.4             141.5

Investing activities:
Acquisitions                               (12.3)           (138.6)
Capital expenditures                      (102.1)           (137.3)
Proceeds from asset dispositions             6.2               0.7
Other                                       (0.7)             (6.0)
                                        --------          --------
Net cash used in investing activities     (108.9)           (281.2)

Financing activities:
Proceeds from long-term debt               177.5           1,324.7
Payments of long-term debt and
 capital leases                           (130.6)           (688.3)
Payments of loan costs and debt
 termination fees                              -             (44.1)
Proceeds from issuance of common stock         -             495.5
Payments to retire stock and
 stock options                              (0.1)           (964.9)
Proceeds from joint venture
 partner contributions                       3.0               8.0
Exercise of stock options                    0.1               0.1
                                        --------          --------
Net cash provided by financing
 activities                                 49.9             131.0
                                        --------          --------
Net increase (decrease) in cash and
 cash equivalents                            0.4              (8.7)
Cash and cash equivalents,
 beginning of period                        27.2             108.1
                                        --------          --------
Cash and cash equivalents, end
 of period                              $   27.6          $   99.4
                                        ========          ========
Net cash paid for interest              $   41.1          $   41.1
                                        ========          ========
Net cash paid for income taxes          $    1.6          $      -
                                        ========          ========


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

                                     Predecessor
                                      ----------               Nine months
                                        July 1,   September 23,   ended
                                         2004         2004       March 31,
                                       through      through        2005
                                    September 22,   March 31,   (combined
                                         2004         2005        basis)
                                      ----------   ----------   ----------

Operating activities:
Net income (loss)                     $   (110.7)  $     24.8   $    (85.9)
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
    Depreciation and amortization           17.4         35.6         53.0
    Provision for doubtful accounts         31.5         78.7        110.2
    Deferred income taxes                  (50.9)        16.1        (34.8)
    Amortization of loan costs               0.5          1.8          2.3
    Accretion of principal on senior
     discount notes                            -          7.3          7.3
    Loss on sale of assets                   0.6          0.4          1.0
    Stock compensation                      96.7          0.4         97.1
    Debt extinguishment costs               62.2            -         62.2
    Merger expenses                         23.1          0.1         23.2
    Changes in operating assets and
     liabilities, net of effects of
     acquisitions:
      Accounts receivable                  (42.1)       (84.7)      (126.8)
      Buildup of accounts receivable
       for recent acquisitions                 -        (53.2)       (53.2)
      Supplies                              (0.3)        (1.2)        (1.5)
      Prepaid expenses and other
       current assets                        2.4          5.4          7.8
      Accounts payable                      41.4         (7.4)        34.0
      Accrued expenses and other
       liabilities                           7.0         38.6         45.6
                                      ----------   ----------   ----------

Net cash provided by operating
 activities                                 78.8         62.7        141.5

Investing activities:
Acquisitions                               (50.8)       (87.8)      (138.6)
Capital expenditures                       (29.8)      (107.5)      (137.3)
Proceeds from asset dispositions             0.5          0.2          0.7
Other                                        0.1         (6.1)        (6.0)
                                      ----------   ----------   ----------

Net cash used in investing activities      (80.0)      (201.2)      (281.2)

Financing activities:
Proceeds from long-term debt             1,174.7        150.0      1,324.7
Payments of long-term debt and
 capital leases                           (683.9)        (4.4)      (688.3)
Payments of loan costs and debt
 termination fees                          (40.9)        (3.2)       (44.1)
Proceeds from issuance of common
 stock                                     494.9          0.6        495.5
Payments to retire stock and stock
 options                                  (964.9)           -       (964.9)
Proceeds from joint venture partner
 contributions                                 -          8.0          8.0
Exercise of stock options                    0.1            -          0.1
                                      ----------   ----------   ----------

Net cash provided by (used in)
 financing activities                      (20.0)       151.0        131.0
                                      ----------   ----------   ----------

Net increase (decrease) in cash and
 cash equivalents                          (21.2)        12.5         (8.7)
Cash and cash equivalents,
 beginning of period                       108.1         86.9        108.1
                                      ----------   ----------   ----------

Cash and cash equivalents,
 end of period                        $     86.9   $     99.4   $     99.4
                                      ==========   ==========   ==========

Net cash paid for interest            $     23.6   $     17.5   $     41.1
                                      ==========   ==========   ==========

Net cash paid (received) for
 income taxes                         $     (0.1)  $      0.1   $        -
                                      ==========   ==========   ==========


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

                                        Three months ended
                                             March 31,
                                      -----------------------

                                         2004
                                    (predecessor)     2005       % Change
                                      ----------   ----------   ----------

Actual:
Number of hospitals at end of period          16           19
Licensed beds at end of period             3,784        4,518
Discharges                                37,887       48,363         27.7%
Adjusted discharges-hospitals             54,714       74,957         37.0%
Average length of stay                      4.25         4.43          4.2%
Patient days                             161,127      214,373         33.0%
Adjusted patient days-hospitals          232,688      332,253         42.8%
Patient revenue per adjusted
 discharge-hospitals                  $    6,658   $    6,990          5.0%
Outpatient surgeries                      15,317       21,062         37.5%
Emergency room visits                    128,052      167,605         30.9%

Charity care as a percent of patient
    service revenues                         2.2%         2.6%

Provision for doubtful accounts as a
 percent of patient service revenues         7.6%         7.2%

Gross revenue payer mix:
  Medicare                                  32.1%        31.2%
  Medicaid                                   8.5%         8.1%
  Managed care                              53.1%        54.6%
  Commercial                                 2.0%         1.7%
  Self pay                                   4.3%         4.4%
                                      ----------   ----------

    Total                                  100.0%       100.0%
                                      ==========   ==========

Same hospital:
Number of hospitals                           16           16
Total revenues (in millions)          $    461.7   $    521.5         13.0%
Discharges                                37,887       39,870          5.2%
Adjusted discharges-hospitals             54,714       58,696          7.3%
Average length of stay                      4.25         4.32          1.6%
Patient days                             161,127      172,157          6.8%
Adjusted patient days-hospitals          232,688      253,447          8.9%
Patient revenue per adjusted
 discharge-hospitals                  $    6,658   $    6,967          4.6%
Outpatient surgeries                      15,317       16,268          6.2%
Emergency room visits                    128,052      139,822          9.2%


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

                                         Nine months ended
                                             March 31,
                                      -----------------------
                                                      2005
                                         2004      (combined
                                    (predecessor)    basis)      % Change
                                      ----------   ----------   ----------

Actual:
Number of hospitals at end of period          16           19
Licensed beds at end of period             3,784        4,518
Discharges                               110,449      124,870         13.1%
Adjusted discharges-hospitals            160,810      188,371         17.1%
Average length of stay                      4.21         4.25          1.0%
Patient days                             464,699      531,159         14.3%
Adjusted patient days-hospitals          676,588      801,272         18.4%
Patient revenue per adjusted
 discharge-hospitals                  $    6,439   $    6,926          7.6%
Outpatient surgeries                      44,747       52,854         18.1%
Emergency room visits                    383,753      426,646         11.2%

Charity care as a percent of patient
 service revenues                            2.3%         2.7%

Provision for doubtful accounts as a
 percent of patient service revenues         8.2%         7.9%

Gross revenue payer mix:
  Medicare                                  31.0%        31.0%
  Medicaid                                   8.4%         8.4%
  Managed care                              53.9%        54.1%
  Commercial                                 2.0%         1.6%
  Self pay                                   4.7%         4.8%
                                      ----------   ----------

    Total                                  100.0%       100.0%
                                      ==========   ==========

Same hospital:
Number of hospitals                           16           16
Total revenues (in millions)          $  1,313.6   $  1,515.0         15.3%
Discharges                               110,449      116,377          5.4%
Adjusted discharges-hospitals            160,810      172,105          7.0%
Average length of stay                      4.21         4.20          0.0%
Patient days                             464,699      488,943          5.2%
Adjusted patient days-hospitals          676,588      723,078          6.9%
Patient revenue per adjusted
 discharge-hospitals                  $    6,439   $    6,912          7.3%
Outpatient surgeries                      44,747       48,060          7.4%
Emergency room visits                    383,753      398,863          3.9%

Contact Information

  • Contact:

    Vanguard Health Systems, Inc.
    Aaron Broad
    Director Investor Relations
    (615) 665-6131