Greetings, and welcome to the Tenet Healthcare Corporation Second Quarter Earnings Conference Call. Today's call is being recorded. It's now my pleasure to introduce your host, Regina Nethery, Vice President of Investor Relations. Please go ahead.

Thank you. We're pleased to have you join us for a discussion of Tenet's second quarter 2020 results, including an update on the impact of the COVID-19 pandemic. Tenet's senior management participating in today's call will be Ron Rittenmeyer, Executive Chairman and Chief Executive Officer; Saum Sutaria, President and Chief Operating Officer; and Dan Cancelmi, Executive Vice President and Chief Financial Officer. Our webcast this morning includes an accompanying slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent Tenet management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K, subsequent Form 10-Q filings and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Ron.

Thank you, Regina, and thank you all for joining us today. April, May, and June presented three distinct challenges, each with unique characteristics to address. The pandemic quickly compelled us to reassess every facet of our business rapidly. It was essential for us to adapt our response at every step to care for our patients, protect our teams, and maintain our service to public health needs. In April, we faced an unprecedented moment that generated an immediate urgency across our operations. We discussed April in detail during our June update, so I won't comment further beyond what is shown in our slides regarding volume and monthly EBITDA. April had a significantly negative financial impact on the company, driven by the mandate to eliminate elective surgeries and stay-at-home orders, pushing our revenue down over 80%, particularly affecting our most profitable segment, USPI. Additionally, we incurred costs to restructure the business to respond to the pandemic, relocating teams, implementing new tracking systems, and ensuring updated information flow, which made April quite a challenge. However, we proved our ability to act swiftly and decisively, focusing on patients without being overwhelmed. As we moved into May, we initiated a staged reopening across our network, establishing separate care pathways for COVID patients to minimize transmission risks. We continued to actively screen patients for COVID via virtual visits and off-site locations. Our intensified engagement with physicians and focused patient education on safety at the local level was vital. We ensured patient procedures were scheduled based on demand, which was crucial for our recovery. Our USPI facilities ramped up quickly, aided by improved coordination across departments and partners, implementing rigorous screening protocols to identify at-risk patients and redesign patient flow. May volumes indicated a recovery start, although our core metrics remained below pre-COVID levels, especially in markets experiencing COVID surges. June marked a turning point, as we regained operational cadence through data-driven decisions that improved performance. As executive orders eased in many areas, our June volumes continued to rise, with admissions and surgeries reaching 90% of pre-COVID levels. We're encouraged by the mix and complexity of hospital admissions. Even after excluding grant income, we achieved double-digit growth in net revenue per case for June, largely due to higher case complexities and better payer mixes. Although this may moderate throughout the rest of 2020, it highlights the significance of our Ambulatory division to our overall performance. Unlike others in our sector, the impact of our Ambulatory business is particularly pronounced on our bottom line, both when shut down and when reopened, as seen in June. In hospitals and outpatient settings, we're seeing positive trends as patients regain comfort in accessing care. Our marketing efforts highlighted the safety of our hospitals with designated COVID-safe areas. We emphasized that delaying care could lead to serious health issues, and we're beginning to see a return of consumer confidence. Our quarterly results, especially in June, demonstrate our ability to adapt and perform effectively, even during crises. In June, we generated EBITDA of $218 million on a non-CARES Act basis, barely below last year's results for the month. While we're managing ongoing COVID surges, we believe it’s not feasible to set guidance at this time, but June's performance is indicative of our recovery. The changes made during the quarter are permanent and sustainable. June was indeed pivotal for us, and we believe we've established the right framework to advance our performance. Turning to the second quarter, the CARES Act played a crucial role in mitigating the financial crisis caused by the revenue shutdown in April. We maintained operations staffed around the clock, absorbing considerable costs without revenue. The CARES Act was vital in preventing a financial downturn while we focused on uninterrupted patient care. To maximize transparency around the CARES Act's financial implications, we prepared a slide showing adjusted EBITDA with and without grant income, illustrating the essential support for care provisions. Given the uncertainty, we proactively addressed cash flow, benefiting from the CARES Act, which provided significant advances to our hospitals and ambulatory centers, helping avoid cash shortfalls. Repayment of these advances starts this month and is set for completion by April, which could be challenging considering the ongoing COVID surge, but we anticipate managing the repayment timeline. We also improved our liquidity by increasing our credit line and issuing secured notes during this quarter, actions we wouldn't take in normal conditions but which secured our financial position moving forward. Targeted cost actions were implemented in Q2 to redirect more resources to our pandemic response, building on our efficiency initiatives from the past two years. The pandemic pushed us to operate more decisively and ensure sustainability in our environment. All decisions were guided by data and insights gained beforehand and refined during the crisis. Our operations are now stronger and leaner from the changes we made. Regarding increased costs associated with COVID care, we assessed factors like longer stays, expensive contract labor, and higher supply use. We developed strategies for managing these costs effectively, including enhanced cohort care and optimized use of PPE. Our labor management has adapted as well, balancing staffing according to demand during both ramp-down and ramp-up phases. Real-time data dashboards created during the pandemic help us monitor staffing and inventory levels, enabling timely adjustments. In USPI, we resumed operations gradually, focusing on effectiveness by reopening services on an OR-by-OR basis. This method has ensured cohesive alignment across the system. Our Global Business Center in Manila also provided essential support, and we continue to leverage this skilled team effectively, even during the pandemic. Conifer has shown strong revenue cycle performance by improving cash collections amidst industry-wide revenue reductions. Our actions to minimize expenditures helped maintain liquidity, ensuring we did not deplete cash reserves significantly during the quarter. Conifer's focus on operational discipline and customer service, coupled with leadership's swift execution, has improved performance. Over the first half of the year, Conifer has enhanced quality and efficiency, and further training has equipped team members to ensure patient satisfaction during the pandemic. Additionally, we've added strong new leadership, including a Chief Operating Officer and a Chief Commercial Operation Officer, both of whom are quickly adapting due to their extensive healthcare experience. Despite the pandemic, we still believe we can meet our timeline for the Conifer spin, although there are no updates on the schedule at this moment. In closing, the pandemic posed significant challenges but also offered learning opportunities as we rapidly reassessed our business. Our two years of transformative change laid a solid foundation to build on these adjustments. We entered March with strong operational and financial momentum and exited June with a firm understanding of our non-CARES Act performance and a better-informed team. We're aligning our Ambulatory and Hospital portfolios for sustained success. We've fundamentally reduced our expenses and demonstrated that our organization has the leadership and skills necessary to maintain momentum amidst ongoing challenges. Guidance will come when we secure greater visibility. We are focused on an effective response while controlling the variables we can manage. We remain committed to transparency and regular updates. Lastly, I want to sincerely thank our caregivers and support teams for their unwavering dedication to our patients and the community, significantly contributing to our results. With that, I'll turn it over to Dan.

Thanks, Ron, and good morning, everyone. I also want to thank our caregivers and employees across the entire company. We're very proud of their incredible capabilities and continued dedication to exceptional patient care as well as a team-oriented approach that is allowing us to adapt quickly without impacting the quality of care for our patients. I'll begin my remarks with Slide 4. Our patient volumes, cost management and earnings significantly improved as the quarter unfolded. For the entire quarter, we generated net income from continuing operations of $88 million compared to $24 million last year, and our adjusted EBITDA in the quarter was $732 million, which was significantly better than our expectations and analyst expectations even excluding stimulus grant income we received. As we moved through the quarter and restrictions were eased, we carefully ramped up our facilities to provide essential health care services for the communities we serve. We were also diligent in adding back resources to meet the care demand as it grew through the quarter, rather than simply adding back costs at pre-COVID levels and assuming the volumes would return. We certainly appreciate the stimulus relief aid received quickly from the government, and we were able to recognize in the P&L $523 million of grant income, which partially offset the significant amount of expenses required to keep our hospitals open and our lost revenues as a result of the pandemic. As you can see in our release, our operating revenues declined $912 million compared to the second quarter of last year. Let's turn to Slide 5 and review how our volumes evolved over the past several months. We've been pleased with the volume improvement since the low point in April. As a reminder, through mid-March before the pandemic took hold, we were off to a good start of the year, building on our momentum from strategies we have been working on through 2019 and the early part of this year. As restrictions were eased by state and local officials, volumes in May began to recover and continued to build in June as we worked closely with physicians and patients to assure them of the safety of our facilities into scheduled procedures. As a result, in June, we recovered to about 90% of pre-COVID levels for hospital admissions and surgeries, and our USPI team grew its surgical cases back to about 90% of pre-COVID levels. As we mentioned before, hospital ER and outpatient volumes continue to rebound as well, but at a somewhat more moderate pace. Another encouraging trend is that our volumes in July have generally held steady or improved compared to June despite the spike of COVID cases in July in many of our markets in Arizona, California, Florida and Texas. Let's now move to Slide 6, which reflects our EBITDA improved substantially as we move through the quarter, even when the stimulus grant income is excluded. We are sharing this monthly information externally in the interest of full transparency, given the unprecedented nature of the pandemic. Reporting monthly financial results is unusual, and we are not committing to do this long-term, but we thought this information would be helpful for you to understand our trends in this difficult environment. The top section of this slide shows our monthly EBITDA in the quarter without the grant income. The middle section of the slide highlights the grant income relief we were able to recognize. And the bottom section of the slide summarizes our EBITDA, including the grant income. As you can see in the top section of the slide, our monthly EBITDA, excluding grants, improved from a loss of $123 million in April to positive EBITDA of $218 million in June. There are a couple of important points that I want to mention. First, our EBITDA in the quarter, excluding grants, was $209 million, which came in much stronger than we anticipated when we were modeling various scenarios at the outset of the pandemic. Another important point is that our June EBITDA of $218 million, excluding grants, was better than our original budget developed at the beginning of the year before COVID, despite the fact that our June volumes were 10% to 20% lower than our budget and last year, depending on the metric you look at. This demonstrates that our necessary cost actions were effective, and how we diligently ramped back up our facilities helped to offset the impact of the lost volumes in June. Next, on Slide 7. I want to discuss our cost performance during the quarter. We can always do better, but our operators did an exceptional job managing costs given all the pressures they faced. Our continuing focus on cost management, together with the necessary reductions as a result of the significantly lower volumes due to COVID, drove a dramatic year-over-year decline in our operating expenses. As you can see on the slide, consolidated expenses declined by $475 million or 12%, and our Hospital segment operating expenses declined by $377 million or 11%. We believe our cost management in the quarter was very strong, especially since our Detroit and Massachusetts markets encountered elevated levels of COVID patients in Q2 which constrained our ability to reduce costs in those 2 markets to the same degree as our other markets. As Ron mentioned, our adoption of the use of additional real-time data over the past several years allowed our operators to respond quickly to the pandemic and make the necessary adjustments to cost levels as volumes decline and as volumes begin to ramp back up. Over the past several years, we've been effective at identifying and executing on cost efficiencies and managing our costs. But when this crisis began, our teams across the company dug even deeper and stepped to the plate and realized more profound actions were necessary to manage through this pandemic, and they delivered. Although these type of cost actions are never easy, they were necessary and make us stronger as we continue to recover. Let's go to Slide 8 and review our cash flow during the quarter, and how our cash balance increased $2.9 billion in the quarter. In recent updates we've provided, I've talked about our expectation to not have a material cash burn in the second quarter. As we anticipated, based on the actions we took to reduce spend and Conifer's strong cash collection performance, you can see we did not burn through a material amount of cash in the quarter, even if the benefit from Medicare advances, the grants, the payroll tax match deferral and the net proceeds from debt transactions are excluded. As a result of our improved liquidity, we were able to fund $79 million for the company's 401(k) match to employees that was deferred from the first quarter due to uncertainties as a result of the pandemic. Before I wrap up my remarks, let's turn to Slide 9 to discuss our liquidity. We currently have sufficient cash resources and available liquidity under our $1.9 billion line of credit facility. As of yesterday, we had approximately $3.1 billion of available cash on hand, and no borrowings outstanding under our line of credit. We took various important actions during the quarter to enhance our liquidity position and appreciate the support we received from our investors and banks to accomplish this, along with the critical pandemic relief aid from the government. I also want to mention that we received additional stimulus grant proceeds in July of about $150 million, which will help to partially offset lost revenues and costs we've been absorbing as a result of the pandemic, which are greater than the total funding we've received to date. With respect to capital expenditures, I want to emphasize again that our planned reduction this year of about 40% was based on a very specific project-by-project analysis. This is the target approach with individual projects evaluated at the senior level of our company. We want to ensure you that we reduce spend in the right places to allow for continued investments that position us for growth as we recover and get past the pandemic. We also continue to evaluate other opportunities to enhance our liquidity, including our expectation that the sale of our Memphis facilities will close by the end of the year as well as pursuing the potential sale-leaseback of certain medical office buildings if the economics make sense. From a debt perspective, we do not have any significant maturities until April 2022. However, we are very mindful of the unsecured notes scheduled to mature in April of 2022. As a result, in June and July, we repurchased $239 million of the '22 notes and we will continue to evaluate further repurchases depending on market conditions. We remain committed to improving our cash flow generation and lowering the total amount of our debt and leverage. We realize many of you may have questions about our projected cash flows in Q3 and for the remainder of the year. Due to the uncertainties of this environment, we have not provided earnings or cash flow guidance for the rest of the year. Although I do want to remind everyone that we will begin to repay the Medicare advances in August that have to be repaid in full by next April unless Congress acts to extend the repayment terms. However, I can assure you that we're very focused on cash flows and executing on other liquidity opportunities. Fortunately, we continue to believe we are well positioned from a liquidity perspective to confront these challenges. Once again, I want to thank all our caregivers and employees for their remarkable efforts over the past several months. It is a reminder of how inspiring health care is. With that, I'll now turn the call back over to Ron.

Thanks, Dan. I have nothing else to add. So why don't we just move right to the questions.

Our first question today is from Ralph Giacobbe from Citi.

So the July trends, obviously, were helpful. Can you maybe just give us a little bit more sense of trends by either state or major markets since your footprint, obviously, covers areas currently in hotspots and other areas that sort of hit peak earlier? Just trying to get a sense of variance there.

Ralph, it's Saum. I want to share a couple of points about July. As you may know, the COVID hotspot activity that is impacting our markets most on the Hospital side includes Arizona, Texas, and Florida. This situation is quite different from what we experienced during the initial surge of the pandemic in April and May. The changes in the markets are evident. The volumes in July show our capability to manage COVID cases effectively during the first wave, allowing us to provide proper COVID care while also responsibly conducting elective procedures in hospitals despite the surges. Additionally, the markets mentioned earlier, such as Massachusetts, Michigan, and some parts of California that experienced early COVID surges, have successfully recovered to normal levels as their COVID cases decreased. We are pleased to see that markets that faced significant surges have been able to return to a normal range swiftly. On the USPI side, the overall market strength is widespread. We continue to observe robust performance even in areas with COVID hotspots, as these centers, especially the ASCs, provide a relief option compared to hospitals. We are increasingly noticing that physicians are opting to use ASCs to deliver necessary care, which is evident in the ongoing volume recovery seen on the USPI side.

Okay. That's helpful. And if I could squeeze in just one follow-up. When I look at the monthly EBITDA, the $218 million in June, I guess, why wouldn't that be sort of a fair baseline or run rate as we think about the back half, especially if most of the volume metrics will seemingly get better as we move through the year? Or maybe you can help us with factors like seasonality or pent-up demand or maybe cost coming back up as to reasons why that wouldn't be fair.

Ralph, it's Dan. We were definitely pleased with June. We managed to meet our original budget for June, even though volumes were significantly lower than we had anticipated. If someone had asked me at the beginning of the year whether we could hit our June budget with hospital and surgical volumes down by 10% to 20%, I would have found that hard to believe. I see this as a strong indicator of the effectiveness of our actions, as Ron mentioned, which should last. As we continue through the year, our outlook will depend on various markets and the trajectory of COVID. We believe this provides a reasonable foundation to move forward, depending on how COVID evolves.

Our next question is coming from Pito Chickering from Deutsche Bank.

To follow up on the June EBITDA, very impressive considering the impact to volumes. So a few questions there. What was the pricing mix in June? Just trying to understand what the revenue impact was in June. Can you give us just some more hard details exactly what the cost containment was during June and the sustainability of that as you roll into the recovering back half of the year? And then I have a follow-up.

Pito, it's Dan. Let me frame the mix of various payers: Medicare, commercial, Medicaid, and uninsured. The commercial mix was in line with our overall volume trends, and it even improved in July. Medicare volume was slightly softer than our overall metrics during the quarter, which was expected. On both the Hospital and Ambulatory sides, we saw a similar trend. While it wasn't a dramatic decline, it was somewhat softer than overall volumes. Medicaid remained consistent with the overall trends, perhaps showing slight improvement. The uninsured numbers were smaller, and while uninsured volumes were a bit lower, the decline was less pronounced than overall. Overall, the mix looks good, and July is encouraging in this regard. From a pricing standpoint, we experienced strong pricing on both the Hospital side and the USPI side, driven by the retention and performance of a higher volume of acuity procedures in our facilities. Due to the absence of lower acuity business in the quarter, which generates lower revenue per unit, we observed an effect on our overall metrics. However, pricing remained strong across the mix of payers. As we work on rebuilding lower acuity services for the remainder of the year, we expect the overall net revenue growth per adjusted admission or per case to moderate as those services return. That said, we are well-positioned with our commercial managed care contracts and have good visibility into future pricing. We are satisfied with the revenue yield we have achieved.

And then sort of a follow-up there. August is typically a slow month and surgeons take vacations. Any color from hospitals about how they see surgeon demand in August? And do you think that the docs are motivated to work through the backlog and provide good growth on easy comps?

It's Saum. Reflecting on the past few years, August hasn't shown much decline. We usually have a good rotation through the summer and scheduling around physician vacations. This year, due to the COVID surge we experienced in July, many specialists are actively scheduling cases for August, which is encouraging. Specifically, in the Ambulatory sector, the Ambulatory surgery division is conducting nearly 100,000 procedures each month, with most being newly booked procedures instead of old cases from a backlog. This indicates that physicians are working to fully recommence their practices in response to sustained demand. Overall, we're optimistic about the positive trends from upstream activities to what is ultimately chosen for our facilities in August. Looking ahead, if the COVID surge, which peaked in the second or third week of July in areas like Arizona and Texas, continues to decrease, we anticipate a similar positive impact on the Hospital sector as well.

Our next question today is coming from Whit Mayo from UBS.

Maybe for Brett or Saum, I'm not sure Brett's on or not, but I wanted to hear more about some of the changes that you guys made with scheduling and block time in the quarter. Are you making any modifications to that going forward? Not sure if you're giving block time yet, just wondering what the response was from your physician partners.

Whit, it's Brett. Yes, I think we did a good job flexing down quickly to match the sharp drop-off in demand in a short period of time obviously when COVID hit. We flexed down by about 65%. Similarly, our governing boards and our operators have done a very good job as we've ramped back up our volume. Related to ramping up our capacity and staffing, it's obviously very demand-driven, but we've put in place an algorithm to continue to ramp up our capacity and staffing in a very thoughtful and data-driven manner. Our goal for our utilization and staffing is built off our most efficient and high-margin month, which is December. So if we can continue to ramp capacity with this high bar for efficiency, we'll ensure we don't kind of over-rotate in terms of opening up too much capacity for the level of demand at any one point in time. So generally speaking, I think we did a good job ramping down capacity quickly, and obviously, with the opposite intent of ramping up capacity slowly as demand came back.

And maybe just my follow-up for Ron, just any updated perspectives on some of the offshoring initiatives, how that's tracking versus plan. I don't know if there are any productivity metrics that you can share. Just any surprises that may have developed in the quarter.

We currently have over 900 associates in Manila, and they are performing very well. Due to a shelter-in-place order from the government, we managed to transition them to remote work within about a week. From day one, we established a strong business continuity plan, which is essential given the region's occasional typhoons and storms. Our prior experience guided this approach, and we achieved a quick setup with excellent support, maintaining performance at a high 90% level. Throughout this period, we have continued to hire more people in Manila, albeit in smaller numbers. Looking ahead, we anticipate further growth, potentially even doubling our presence there. We have a detailed plan for the next six months that we adhere to closely. We began this initiative last February, and the progress has been impressive. We've been successful in attracting exceptionally talented individuals. From a financial perspective, which Dan would likely confirm, we've brought on some remarkable talent, and our support has been strong. We're pleased with our growth, which we are pursuing methodically. I have no concerns at this time, particularly since we've closely monitored the situation during the pandemic, and our team in Manila has navigated it well. We'll see how things evolve, but I feel very confident about our current status and future direction.

Our next question is coming from Kevin Fischbeck from Bank of America.

Great. I wanted to ask about that, again, the June kind of run rate number. You've said a few times that the CARES money isn't really enough to fully offset what the impact has been so far. But I guess you didn't book the full CARES money that you received so far. Should we expect the rest of the $850 million to be booked at some point in the back half of the year kind of on top of that June run rate?

Kevin, it's Dan. We will be able to recognize a considerable portion of it, although I can't specify the exact amount yet. This will depend on how much revenue we lose and the additional costs we incur for the rest of the year. If we return to normal and reach or exceed pre-COVID levels, that would be an excellent scenario, and we might not recognize as much. However, as we've noted, COVID cases have increased in certain markets this July. Therefore, we expect to recognize a significant amount of the funding in the latter half of the year.

And that's by hospital.

Yes. Thanks, Ron. But it really is a good point. You need to look at it on a hospital by hospital basis.

So some hospitals, they were way short. Other hospitals were over. So we can only recognize based on need. And again, it's allocated by hospitals. So it's not allocated for the system. And therefore, we have to work through that yet to figure out how that's going to work.

All right. Great. And then as far as the volume ramp that you guys are talking about, I guess you mentioned that a lot of the volume seems to be new volume coming in rather than working up in inventory. But your volumes were down 20% in Q2. So where is that 20% of volume, I guess, as far as in this process to returning back to the system? Is there some percentage that you expect won't come back? And any early thoughts based upon the markets that aren't seeing COVID as to how that will play out in the COVID hotspots today?

Kevin, it's Saum. Let me explain the differences between the Ambulatory business and surgery centers compared to hospitals. Firstly, we believe that the volume deferred in the Ambulatory sector will eventually return. We are actively rescheduling cases, and currently, most of the cases being scheduled are new ones rather than those that were specifically postponed. Some higher acuity cases are returning more quickly, while lower acuity cases and certain preventative procedures may be delayed for four to six months. However, based on our relationships with patients and physicians, we expect these deferred cases to come back; it’s just a matter of timing. Not everything is being rebooked right away. On the hospital side, the situation is different. There are two kinds of deferred care. The first is related to the decrease in emergency department visits and elective outpatient visits, which were likely influenced by patients' concerns about visiting hospitals. Patients will eventually return for these emergency visits when necessary, but there may not be a way to recover, since they are visits triggered by urgent needs. The positive news is that in July, we are witnessing a strong recovery trend in both outpatient and emergency department sectors, with a solid performance in the commercial segment compared to the overall mix. Regarding deferred elective surgeries in hospitals, we have made significant progress in addressing this backlog in June and July, but it varies based on COVID-19 hotspots. Facilities that did not experience COVID surges in early April managed to work down a lot of those deferred cases in May and June, while those markets are now experiencing an increase in cases. Therefore, we are preparing a second deferred list to address in August and September. Meanwhile, areas like Detroit and Massachusetts, which were hotspots earlier, are now seeing strong results and volumes in June and July, as we continue to address deferred cases and book new ones. The recovery process will not be uniform across all markets; it will depend on the timing of COVID surges and how we manage the situation before resuming normal operations.

Your next question is coming from Sarah James from Piper Sandler.

I was hoping to get a better understanding of how much of the pressure you're experiencing right now is related to demand versus capacity. So maybe you could tell us what percent of capacity is your OR schedule operating at currently? And are you able to flex locations across your systems, suggesting alternate locations for a surgery that may have an open slot?

Sarah, it's Saum. Let me just make a few general comments on that rather than getting into specific OR utilization. First of all, in our hospital markets, we have, where possible, cohorted our COVID care in order to have scale of expertise, care processes and other things available so that we're providing the best possible care to those patients. That has also been important to creating some capacity in space in order to allow people with needs, whether emergent or related to their chronic conditions, to have ongoing access to surgical and procedure-based care or even medical admissions that are necessary for those patients. And that's been an important part of how we've managed, especially in our multi-hospital markets. From an ambulatory perspective, I would say that the ability to manage our operating room capacity effectively the way Dan described and Brett described, has been critical to creating capacity without necessarily bringing back all of the costs related to having the centers fully opened all at once. So we are not short capacity in the ambulatory environment. We are managing the OR utilization to high levels. In fact, better than we managed it last year. And then we're bringing operating rooms back online as the demand continues to grow, consistently grow in the ambulatory surgery environment. So we feel very good about that. It also means that on a prospective basis, as the volume comes back, we are very confident about the ability to perform that business at consistent margins.

Great. And just a follow-up there. It sounds like you're able to see the timing of the initial surgical referrals for your ASC business. So are you able to see how much of the previously referred surgeries you've already rebooked? Are you able to calculate that?

Yes. So let me, again, emphasize a couple of different things. One is, if you think about USPI on an ongoing basis in the surgical business, it's about 100,000 cases a month roughly. It's a rough number that are performed there. And again, the vast, vast majority of those in July and going into August as we look out at the schedule are new cases and not deferred. The cases that were deferred that have been rebooked, which supported the demand that USPI saw in May and June and also into July, dropped off pretty quickly from the standpoint of what percentage were deferred and rebooked versus new cases. Again, that is not to say that certain types of procedures, GI, aerosolizing procedures and things like ENT and others have not been deferred for a longer period of time. So we continue to maintain those lists. Some of those may end up being deferred for 4 or 6 months, but we continue to maintain those lists, and I'm sure those cases will, over time, trickle back into USPI based upon the relationships we maintain with those patients and physicians.

My next question is coming from Frank Morgan from RBC Capital Markets.

I was hoping you could maybe bifurcate between the markets that are actually back above 100% pre-COVID levels. I know that the averages are very impressive that things are improving. But is there still an opportunity on a lot of the markets where you're still below 100% of the pre-COVID levels? And then the second question was just in terms of, you think about your ability to adjust your staffing with these ebbs and flows that you had with demand. Is this just part of the new normal going forward? I mean is this a model of staffing that's sustainable over the long term?

Yes. I have two comments to address. Firstly, regarding your first question, we exited mid-March and entered the pandemic with significant momentum in our volumes, growth, and development of our services across the Hospital and USPI portfolio. Our intent this year was not just to return to 2019 volumes. We set a goal to exceed those levels, and we remain focused on that as we move forward. Achieving 2019 levels will not satisfy us, which is crucial to recognize in both the Hospital and Ambulatory business sectors. Markets severely impacted by COVID early on are on the rebound and have further room for recovery. Some USPI centers in regions hard-hit by COVID, like New Jersey and Southern California, are also making progress and have more potential to improve. The positive news is that facilities that did not experience a COVID surge returned to operations effectively in June. Now that Texas, Arizona, and Florida have faced significant COVID surges, we have strategies in place to manage the cycle. We understand that these cycles will fluctuate, and we are prepared to ramp up operations again like we have in other facilities. In summary, we aim to maintain our goals above the 2019 levels. For your second question, as Ron mentioned, the pandemic has provided us with a chance to reassess our operating teams' cost structures within the hospital, physician, and USPI areas. We are actively engaged in this process. We have created a sustainable, analytically driven labor management process, which is monitored daily on the hospital side. On the USPI side, they're managing operating rooms, capacity, and labor demand daily. This marks a new, more efficient way of doing business. We are aware that there are employees not involved in frontline care, and as we adapt our cost structure, some furlough reductions may become permanent. Lastly, we are actively reviewing and executing cost management strategies in our purchase services and supply categories to adjust our previously fixed cost structure for the current situation. I anticipate that these savings will continue to grow and accumulate through the latter half of this year, positioning us as a more efficient company as we enter 2021.

We've really also, I think, as part of that, been taking the basis that there are no fixed costs. I mean we really do believe that the concept of fixed cost and variable cost is real, and we're not denying that. But we cannot excuse some of the overhead and stuff on the basis that it's fixed. So we are really pushing harder to variabilize everything we look at. And therefore, it makes us more aware of where we spend money, where we spend capital, how we spend capital. It's changed the whole approach, I would say, to our cost management. So...

Our next question is coming from A.J. Rice from Crédit Suisse.

Maybe just to follow up in discussion a little bit about your employee base. To what extent, either looking back at some of the hotspots you had early or some of the new hotspots are you having to pay hero pay to any of your workers? And then as you think about Massachusetts, then Detroit, some of the markets that have come out the other end a little bit, we've been hearing anecdotally, at least, some talk about people being burned out and maybe a little bit of a pickup in turnover. Are you seeing that in any way? And just comment on your use of temporary labor throughout all this. How has that trended? And are you having to use that to deal with hotspots now?

This is Ron. We haven't made any changes regarding pay. We compensate our employees fairly and ensure they are paid promptly and correctly. We do pay for overtime, and while we have had a significant amount of it along with premium pay, we manage this carefully to help reduce burnout. However, we have seen that in areas where there are pressure points, employees are working longer hours. This situation affects not just frontline workers but also support staff and everyone else involved. Since April, our team has been fully engaged with minimal downtime, especially during the summer. Fortunately, we haven't experienced significant turnover anywhere. Saum, would you like to provide additional insights? I'm speaking from the company’s perspective, but please go ahead.

Yes. I want to add a little bit of color to that because I think the caregivers across the industry and certainly all of our facilities have been working extraordinarily hard with a great degree of commitment to patient care. I think, and I'll emphasize it again because I think it's among the most meaningful things we've done during this COVID crisis is, we committed early on to a COVID care framework and set of processes that would minimize the exposure to our staff related to COVID. And a lot of the workflows, the PPE processes, the choices we made around purchasing those supplies was built around that principle. And the reason we did that from day 1 was we knew that this pandemic, once we began to understand it, could last for a very long time, and we wanted to do everything we could in the Ambulatory business and the Hospital business to minimize those risks to our caregivers because we knew they would be putting in long hours for an extended and potentially multi-surge type of pandemic, and that's what we've seen. And so I think that's actually serving us well. And look, we're grateful for the support that we've gotten from nurses that have traveled around the country, nurses within our own system, from USPI that have traveled to support other hospital markets and, in select cases, support that we've received from the federal government and the Department of Defense in terms of both nursing and physician capacity in markets where it was necessary. All of those things come together to hopefully create a more sustainable environment for the workforce. But look, I will acknowledge it is hard work. I'm sure there are caregivers that are tired, and we're very committed to continuing to have rotations in order to make this sustainable for them because they've done a great job so far.

Okay. And maybe my follow-up...

No, I'm just saying, we try to be very, very aware of that, market by market, location by location.

Our next question is coming from Conifer's timing from Retained Health.

As I mentioned earlier, regarding the spin-off, we believe that even without the pandemic, we are on track and making progress according to our schedule. So that is advancing. In terms of performance, I will let Dan discuss it shortly, but from my perspective, they had an excellent quarter. They managed everything effectively, particularly with collections for us and their other clients. They were very organized in that regard. Communication was strong, and the management structure proved to be very effective. We've added two outstanding individuals to the team, and the organization has shown great resilience and performed well. So Dan, would you like to highlight some specific points?

Yes. A.J., listen, Conifer had a really, really strong quarter from a cash collection performance perspective, getting bills out the door, following up with payers. And I would put a good word out for the payers, too, they've been very cooperative through all those as well. So Conifer's performance was very, very strong in the quarter. And obviously, you can see it in our cash flows. So we're very pleased with how they responded during this crisis. Their overall numbers from revenue and EBITDA and expenses, Conifer continued to do a good job managing costs and finding additional efficiencies. And they're obviously a big part of our Global Business Center initiative as well. So all that continued. I mean the biggest pressure Conifer had on their numbers was the top line, predominantly due to their clients and their hospital clients or physician clients with their revenues tail off. And so as their customers' revenues go down, in many cases, under the contracts that Conifer has, that includes Tenet, there's an impact on their client fee income, so to speak. So rebounded, obviously, it will continue to rebound as hospital customer has continued to recover as well. But we're overall, very, very pleased with Conifer's performance in the quarter.

Our next question today is coming from Josh Raskin from Nephron Research.

Just one question here. I guess what changes permanently externally to Tenet as an organization that you're reacting to? And maybe within that answer, specifically how you're integrating telehealth into your workflow, how that's impacting downstream procedures?

Josh, it's Saum. I just want to make sure I understand the first part of your question. When you ask about permanent changes, are you talking about in our cost structure? Or are you referring to external market changes that may become more permanent?

Yes. No, I meant more external market changes that are becoming more permanent, site of care, things like that.

We have made significant strides in telemedicine, including both consumer and hospital-based specialty services. In the last quarter, our physician business saw over 190,000 telemedicine visits, along with tens of thousands of hospital-to-hospital consultations for transfers. Our capabilities have grown rapidly. In our COVID care environment, we are also experiencing high volumes of visits, with tools like a care algorithm chatbot on our website helping patients determine if they need immediate care or testing. The shift towards virtual care appears to be lasting, especially after recent executive orders supporting telemedicine. We are well-prepared to continue offering primary and specialty care in this manner. It's also essential to ensure patients feel safe in the emergency department. I believe we will see recovery in this area, particularly as pediatric visits decline during periods when schools and sports are not in session. As these activities resume, I expect emergency visits to normalize. Sustained communication about the safety of our emergency rooms will be crucial in achieving this. In the upcoming year, maintaining high safety standards in our Ambulatory Surgery Centers, where there is no COVID transmission, will attract doctors for low-acuity procedures. We are capable of increasing capacity in this setting without the need for additional infrastructure. Over time, this could lead to lasting changes in how these resources are utilized, which is beneficial given our fixed cost structure.

Operator, we have time for one more question.

Our final question today will come from Gary Taylor from JPMorgan Chase & Co.

Given how well you guys have done on expenses over the years, finding new staffing models and expenses is pretty impressive. Commended for that. I want to make sure I understand what you're saying. It sounds like you're saying the end result of this, as we get back to a normalized operating environment, is really a permanent increase in your expectation for consolidated margins. I want to make sure I'm just understanding that.

Gary, it's Dan. Yes, the various actions that we have taken are permanent and will be sustainable. So as we recover from a volume perspective and get back to growing the business, the cost actions that we've taken will help support driving margin growth.

Got it. And do you have a June '19 EBITDA number that we could compare that $218 million to?

Yes, we didn't do monthly reporting last year. However, I would like to mention that June this year, when excluding the grants from this June, was relatively consistent compared to last year.

Got it. For the last question, regarding cash flow, you’ve pointed out that excluding all the Medicare-accelerated payment cash or CARES Act stimulus funds, there is no significant cash burn. The quarter has benefited from revenue declines and a reduction in working capital, mainly due to a decrease in accounts receivable. As revenue starts to recover, we can expect accounts receivable and working capital to grow again, which could impact cash flow. Are there any clear offsets to this if we anticipate higher quarterly revenue in the coming quarters?

Yes. So when you think about our cash flows in the back half of the year, without providing any specific numbers, assuming we have to repay the Medicare advances based on the current terms, that would obviously be a use of cash in the quarter. As revenues grow, sure, your receivables are going to start increasing. But one thing I would tell you that's very encouraging about Conifer's performance that we've really been encouraged by is the time from bill to collection has improved significantly over the quarter which will help to mitigate the natural growth in receivables as the business ramps back up. Unfortunately, we're not providing specific cash flow numbers for Q3 or for the back half of the year in total, but we're very satisfied with where we're at from a liquidity perspective. And we feel comfortable that we'll be able to manage through the ups and downs as working capital changes based on how the business recovers. Thanks, everyone. We appreciate it.

Thank you.

Thank you, Operator.

You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.