SOURCE: Vanguard Health Systems, Inc.

May 11, 2006 16:05 ET

Vanguard Reports Third Quarter Results

NASHVILLE, TN -- (MARKET WIRE) -- May 11, 2006 --Vanguard Health Systems, Inc. ("Vanguard") today announced results for the third quarter ended March 31, 2006.

Total revenues for the quarter ended March 31, 2006 were $680.8 million, an increase of $37.8 million or 5.9% from the prior year quarter. Patient service revenues and health plan premium revenues increased $22.8 million and $15.0 million, respectively, from the prior year quarter. The increase in total revenues primarily resulted from an increase in patient acuity and improved reimbursement for services provided at our hospitals and pricing improvements at our health plans.

For the quarter ended March 31, 2006, Vanguard reported income before income taxes of $26.5 million compared to income before income taxes of $33.2 million during the prior year quarter. The decrease was primarily attributable to the $12.4 million increase in depreciation and amortization during the current year quarter. During the prior year quarter, Vanguard adjusted the carrying value of its property, plant and equipment based upon appraised values from the Blackstone transaction, which resulted in unusually low depreciation for that particular quarter. Net income was $15.6 million for the quarter ended March 31, 2006 compared to $19.6 million for the prior year quarter.

Adjusted EBITDA was $70.3 million for the quarter ended March 31, 2006, a decrease of $3.2 million or 4.4% 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, 2005 and 2006 is included in the attached supplemental financial information.

The consolidated operating results for the quarter ended March 31, 2006 reflect a 4.1% decrease in discharges and a 4.7% decrease in hospital adjusted discharges compared to the prior year quarter. Similar to others in the hospital industry, Vanguard experienced a softening in demand for inpatient services during the current year quarter. Quarter over quarter emergency room visits decreased by 4.8%. Quarter over quarter outpatient surgeries decreased by 4.2% primarily due to Vanguard's sale of a majority of its partnership interests in an outpatient surgery center in San Antonio to an independent third party in October 2005.

Total revenues for the nine months ended March 31, 2006 were $1,970.2 million, an increase of $333.7 million or 20.4% from the prior year period. Patient service revenues and health plan premium revenues increased $306.3 million and $27.4 million, respectively, from the prior year period. $240.1 million of the period over period increase was attributable to Vanguard's acquisition of three acute care hospitals in Massachusetts on December 31, 2004. Total revenues, on a same hospital basis, increased by $93.6 million or 6.2% during the current year period compared to the prior year period. The increase in same hospital total revenues primarily resulted from an increase in patient acuity and improved reimbursement for services provided at our hospitals and pricing improvements at our health plans.

For the nine months ended March 31, 2006, Vanguard reported income before income taxes of $45.1 million compared to a loss before income taxes of $120.7 million during the prior year period. The prior 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. Net income for the nine months ended March 31, 2006 was $26.5 million compared to a net loss of $85.9 million during the prior year period. Vanguard's prior year net loss resulted from the after tax effect of the Blackstone-related costs.

Adjusted EBITDA was $196.6 million for the nine months ended March 31, 2006, an increase of $16.9 million or 9.4% 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, 2005 and 2006 is included in the attached supplemental financial information.

The consolidated operating results for the nine months ended March 31, 2006 reflect a 9.5% increase in discharges and a 15.0% increase in hospital adjusted discharges compared to the prior year period. These volume improvements are attributable to Vanguard's acquisition of the Massachusetts hospitals on December 31, 2004. On a same hospital basis, period over period discharges and hospital adjusted discharges decreased by 3.2% and 1.7%, respectively. On a same hospital basis, period over period emergency room visits increased by 0.3%. Same hospital outpatient surgeries decreased by 4.3% during the nine months ended March 31, 2006 compared to the prior year period primarily due to Vanguard's sale of a majority of its partnership interests in an outpatient surgery center in San Antonio to an independent third party in October 2005.

Cash flows from operating activities were $89.5 million for the nine months ended March 31, 2006, a decrease of $52.0 million from the prior year period. The decrease was primarily due to a period over period increase in payments of liabilities including a decrease in accounts payable days from 54 days to 44 days, expedited medical claims payments at Vanguard's health plans during the current year period and a period over period increase in interest payments. These current year period increased cash outflows were offset by the Massachusetts working capital buildup during the prior year period. Cash used in investing activities decreased to $143.3 million during the current year period from $261.2 million during the prior year period. During the prior year period, Vanguard paid $50.9 million for Blackstone-related acquisition costs and $87.7 million to acquire the Massachusetts hospitals. Capital expenditures increased by $40.1 million or 29.2% during the current year period primarily as a result of a $63.8 million period over period increase in expenditures related to the significant expansion projects underway at certain of Vanguard's San Antonio and Phoenix facilities. Cash flows from financing activities increased by $12.6 million during the current year period. Prior year period cash flows from financing activities were significantly affected by the equity and debt transactions associated with the Blackstone transaction.

On March 8, 2006, certain subsidiaries of Vanguard sold medical office buildings in California to an independent third party for net sales proceeds of approximately $28.7 million. Vanguard recognized a gain on sale of approximately $11.1 million ($8.3 million net of taxes) that is included in other costs and expenses in its condensed consolidated statements of operations for the quarter and nine months ended March 31, 2006.

"Multiple industry pressures including softened demand for inpatient services and the nationwide nursing shortage adversely impacted our third quarter operating results," commented Charles N. Martin, Jr., Chairman and Chief Executive Officer. "Through improved patient acuity mix and managing certain costs and expenses, we were able to lessen the impact of these industry pressures. While we do not foresee an immediate recovery in the demand for inpatient services, we believe that our ongoing commitment to quality patient services and service expansion initiatives will benefit our competitive position in the long-term."

Vanguard will host a conference call for investors at 11:00 a.m. EDT on May 12, 2006. 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 Third Quarter Webcast or at http://visualwebcaster.com/event.asp?id=33447. 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 Third Quarter Webcast on Vanguard's home page or later on the Latest News link on the Investor Relations page of www.vanguardhealth.com.

Vanguard 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 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; Vanguard's ability to incur substantially more debt; operating and financial restrictions in Vanguard's debt agreements; Vanguard's ability to successfully implement its business strategies; Vanguard's ability to successfully integrate 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; 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; the impact of changes to Vanguard'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 Vanguard'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 Vanguard's filings from time to time with the Securities and Exchange Commission, including, among others, its 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.
                    Consolidated Statements of Operations (Unaudited)
                                  (In millions)

                                            Three months ended
                                                 March 31,
                                   ---------------------------------------
                                          2005                 2006
                                   --------  --------   --------  --------
Patient service revenues           $  559.3      87.0%  $  582.1      85.5%
Premium revenues                       83.7      13.0       98.7      14.5
                                   --------  --------   --------  --------
Total revenues                        643.0     100.0      680.8     100.0

Costs and Expenses:
  Salaries and benefits               271.6      42.2      285.5      41.9
  Supplies                            108.8      16.9      111.4      16.4
  Medical claims expense               62.2       9.7       74.3      10.9
  Provision for doubtful accounts      40.2       6.3       46.3       6.8
  Other operating expenses             86.9      13.5       93.5      13.7
  Depreciation and amortization        13.1       2.0       25.5       3.8
  Interest, net                        25.4       4.0       27.8       4.1
  Merger expenses                       0.1       0.0          -       0.0
  Other                                 1.5       0.2      (10.0)     (1.5)
                                   --------  --------   --------  --------
     Total costs and expenses         609.8      94.8      654.3      96.1
                                   --------  --------   --------  --------
Income before income taxes             33.2       5.2       26.5       3.9
Income tax expense                     13.6       2.1       10.9       1.6
                                   --------  --------   --------  --------
Net income                         $   19.6       3.1%  $   15.6       2.3%
                                   ========             ========


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

                                            Nine months ended
                                                March 31,
                               -------------------------------------------
                                           2005
                                     (combined basis)         2006
                               ---------  ---------   ---------  ---------
Patient service revenues       $ 1,389.7       84.9%  $ 1,696.0       86.1%
Premium revenues                   246.8       15.1       274.2       13.9
                               ---------  ---------   ---------  ---------
Total revenues                   1,636.5      100.0     1,970.2      100.0

Costs and Expenses:
  Salaries and benefits            764.6       46.7       831.6       42.2
  Supplies                         268.8       16.4       318.8       16.2
  Medical claims expense           179.1       11.0       196.7       10.0
  Provision for doubtful
   accounts                        110.2        6.8       135.7        6.9
  Other operating expenses         231.2       14.1       291.9       14.8
  Depreciation and amortization     53.0        3.3        74.5        3.8
  Interest, net                     62.3        3.8        82.4        4.2
  Debt extinguishment costs         62.2        3.8         0.1        0.0
  Merger expenses                   23.2        1.4           -        0.0
  Other                              2.6        0.1        (6.6)      (0.4)
                               ---------  ---------   ---------  ---------
     Total costs and expenses    1,757.2      107.4     1,925.1       97.7
                               ---------  ---------   ---------  ---------
Income (loss)
 before income taxes              (120.7)      (7.4)       45.1        2.3
Income tax expense (benefit)       (34.8)      (2.1)       18.6        0.9
                               ---------  ---------   ---------  ---------
Net income (loss)                  (85.9)      (5.3)       26.5        1.4
Preferred dividends                 (1.0)       0.0           -        0.0
                               ---------  ---------   ---------  ---------
Net income (loss) attributable
 to common stockholders        $   (86.9)      (5.3)%    $ 26.5        1.4%
                               =========              =========



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


                               Predecessor   (Unaudited)   (Unaudited)
                               July 1,       September 23,  Nine months
                               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          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      2006       2005       2006
                                                         (combined
                                                          basis)
                                   -------   -------    -------    -------
Net income (loss)                  $  19.6   $  15.6    $ (85.9)   $  26.5
Interest, net                         25.4      27.8       62.3       82.4
Income tax expense (benefit)          13.6      10.9      (34.8)      18.6
Depreciation and amortization         13.1      25.5       53.0       74.5
Minority interests                     0.3       0.7       (0.5)       2.3
Loss (gain) on sale of assets          0.2     (12.0)       1.0      (12.0)
Equity method income                  (0.3)        -       (0.6)      (0.8)
Stock compensation                     0.2       0.5       97.1        1.1
Debt extinguishment costs                -         -       62.2        0.1
Merger expenses                        0.1         -       23.2          -
Monitoring fees                        1.3       1.3        2.7        3.9
                                   -------   -------    -------    -------

Adjusted EBITDA (a)                $  73.5   $  70.3    $ 179.7    $ 196.6
                                   =======   =======    =======    =======

(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.  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)

                                                                (Unaudited)
                                                       June 30,  March 31,
                                                         2005      2006
                                                       --------  --------
                        ASSETS
Current assets:
  Cash and cash equivalents                            $   79.2  $  169.0
  Accounts receivable, net of allowance for
   uncollectible accounts of approximately $90.1 and
   $101.6 at June 30, 2005 and March 31, 2006,
   respectively                                           286.0     304.0
  Inventories                                              43.5      46.7
  Prepaid expenses and other current assets                36.1      55.3
                                                       --------  --------
     Total current assets                                 444.8     575.0

Property, plant and equipment, net                      1,072.8   1,131.4
Goodwill                                                  813.1     817.2
Intangible assets, net                                     74.3      70.3
Investments in unconsolidated subsidiaries                  9.0       8.8
Other assets                                               57.7      26.9
                                                       --------  --------
     Total assets                                      $2,471.7  $2,629.6
                                                       ========  ========

         LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
  Accounts payable                                     $  145.5  $  128.9
  Accrued salaries and benefits                            86.4      76.7
  Accrued health claims                                    51.2      41.1
  Accrued interest                                         14.5      26.2
  Other accrued expenses and current liabilities           61.9      56.3
  Current maturities of long-term debt                      7.6       8.4
                                                       --------  --------
     Total current liabilities                            367.1     337.6
Minority interests in equity of consolidated entities      10.4       9.9
Other liabilities                                          68.9      74.1
Long-term debt, less current maturities                 1,349.5   1,506.0
Commitments and contingencies

Stockholders’ equity:
Common Stock                                                  –         –
Additional paid-in capital                                643.2     642.9
Retained earnings                                          32.6      59.1
                                                       --------  --------
Total liabilities and stockholders’ equity             $2,471.7  $2,629.6
                                                       ========  ========




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

                                                       Nine months ended
                                                            March 31,
                                                       ------------------
                                                         2005
                                                      (combined
                                                        basis)     2006
                                                       --------  --------

Operating activities:
Net income (loss)                                      $  (85.9) $   26.5
Adjustments to reconcile net income (loss) to net
 cash provided by operating activities:
  Depreciation and amortization                            53.0      74.5
  Provision for doubtful accounts                         110.2     135.7
  Deferred income taxes                                   (34.8)     16.7
  Amortization of loan costs                                2.3       3.0
  Accretion of principal on senior discount notes           7.3      11.5
  Loss (gain) on sale of assets                             1.0     (12.0)
  Stock compensation                                       97.1       1.1
  Debt extinguishment costs                                62.2       0.1
  Merger expenses                                          23.2         –
  Changes in operating assets and liabilities, net
   of effects of acquisitions:
     Accounts receivable                                 (126.8)   (154.2)
     Buildup of accounts receivable for recent
      acquisitions                                        (53.2)        –
     Inventories                                           (1.5)     (3.3)
     Prepaid expenses and other current assets              7.8      10.1
     Accounts payable                                      34.0     (14.0)
     Accrued expenses and other liabilities                45.6      (6.2)
                                                       --------  --------
Net cash provided by operating activities                 141.5      89.5

Investing activities:
Acquisitions                                             (138.6)     (0.4)
Capital expenditures                                     (137.3)   (177.4)
Purchases of short-term investments                       (87.8)    (98.4)
Sales of short-term investments                           107.8      98.4
Proceeds from asset dispositions                            0.7      34.8
Other                                                      (6.0)     (0.3)
                                                       --------  --------
Net cash used in investing activities                    (261.2)   (143.3)

Financing activities:
Proceeds from long-term debt                            1,324.7     175.0
Payments of long-term debt and capital leases            (688.3)    (29.3)
Payments of loan costs and debt termination fees          (44.1)     (0.6)
Proceeds from issuance of common stock                    495.5         –
Payments to retire stock and stock options               (964.9)     (0.1)
Payments to repurchase equity incentive units                 –      (1.5)
Proceeds from joint venture partner contributions           8.0         –
Exercise of stock options                                   0.1       0.1
                                                       --------  --------
Net cash provided by financing activities                 131.0     143.6
                                                       --------  --------
Net increase in cash and cash equivalents                  11.3      89.8
Cash and cash equivalents, beginning of period             50.1      79.2
                                                       --------  --------
Cash and cash equivalents, end of period               $   61.4  $  169.0
                                                       ========  ========
Net cash paid for interest                             $   41.1  $   63.2
                                                       ========  ========
Net cash paid for income taxes                         $      –  $    1.5
                                                       ========  ========



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


                        Predecessor
                        ------------     (Unaudited)      (Unaudited)
                            July 1,       September       Nine months
                        2004 through      23, 2004        ended March
                          September     through March       31, 2005
                          22, 2004        31, 2005      (combined 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)
Purchases of short-term
 investments                       –            (87.8)             (87.8)
Sales of short-term
 investments                    30.0             77.8              107.8
Proceeds from asset
 dispositions                    0.5              0.2                0.7
Other                            0.1             (6.1)              (6.0)
                        ------------    -------------   ----------------
Net cash used in
 investing activities          (50.0)          (211.2)            (261.2)

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 in cash and
 cash equivalents                8.8              2.5               11.3
Cash and cash equivalents,
 beginning of period            50.1             58.9               50.1
                        ------------    -------------   ----------------
Cash and cash equivalents,
 end of period            $     58.9         $   61.4           $   61.4
                        ------------    -------------   ----------------
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,
                                    ------------------
                                    2005          2006     % Change
Actual:
                                    -------------------------------
Number of hospitals at end of
 period                               19            19
Licensed beds at end of period     4,518         4,587
Discharges                        48,363        46,378         (4.1)%
Adjusted discharges-hospitals     74,957        71,402         (4.7)%
Average length of stay              4.43          4.55          2.7%
Patient days                     214,373       211,088         (1.5)%
Adjusted patient days-hospitals  332,253       324,983         (2.2)%
Patient revenue per adjusted
 discharge-hospitals            $  6,990      $  7,715         10.4%
Outpatient surgeries              21,062        20,187         (4.2)%
Emergency room visits            167,605       159,549         (4.8)%

Charity care as a percent of
 patient service revenues
 (prior to charity deductions)       2.5%          3.4%

Provision for doubtful accounts
 as a percent  of patient
 service revenues                    7.2%          8.0%

Net patient revenue payer mix:
    Medicare                        30.6%         27.7%
    Medicaid                         6.5%          7.3%
    Managed care                    47.5%         51.9%
    Commercial                       5.0%          4.4%
    Self pay                        10.4%          8.7%
                                --------      --------
        Total                      100.0%        100.0%
                                ========      ========


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


                                     Nine months ended
                                         March 31,
                                     -----------------
                                        2005
                                     (combined)     2006     % Change
                                     --------------------------------

Actual:
Number of hospitals at end of period        19        19
Licensed beds at end of period           4,518     4,587
Discharges                             124,870   136,701          9.5%
Adjusted discharges-hospitals          188,371   216,691         15.0%
Average length of stay                    4.25      4.42          4.0%
Patient days                           531,159   604,249         13.8%
Adjusted patient days-hospitals        801,272   957,823         19.5%
Patient revenue per adjusted
 discharge-hospitals                 $   6,926  $  7,376          6.5%
Outpatient surgeries                    52,854    60,585         14.6%
Emergency room visits                  426,646   484,152         13.5%

Charity care as a percent of patient
  service revenues (prior to
  charity deductions)                      2.6%      3.3%

Provision for doubtful accounts as a
 percent of patient service revenues       7.9%      8.0%

Net patient revenue payer mix:
    Medicare                              30.6%     28.7%
    Medicaid                               6.6%      7.2%
    Managed care                          46.1%     49.7%
    Commercial                             5.0%      4.5%
    Self pay                              11.7%      9.9%
                                     ---------  --------

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


Same hospital:
Number of hospitals                         16        16
Total revenues (in millions)         $ 1,515.0  $1,608.6          6.2%
Discharges                             116,377   112,599         (3.2)%
Adjusted discharges-hospitals          172,105   169,238         (1.7)%
Average length of stay                    4.20      4.37          4.0%
Patient days                           488,943   492,082          0.6%
Adjusted patient days-hospitals        723,078   739,608          2.3%
Patient revenue per adjusted
 discharge-hospitals                 $   6,912  $  7,430          7.5%
Outpatient surgeries                    48,060    45,983         (4.3)%
Emergency room visits                  398,863   400,196          0.3%

Contact Information

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