Vanguard Reports Third Quarter Results

Market Wire, May, 2008

Vanguard Health Systems, Inc. ("Vanguard") today announced results for the third quarter ended March 31, 2008.

Total revenues for the quarter ended March 31, 2008 were $725.6 million, an increase of $52.6 million or 7.8% from the prior year quarter. Patient service revenues and health plan premium revenues increased $33.1 million and $19.5 million, respectively, from the prior year quarter. The quarter over quarter increase in patient service revenues was primarily attributable to a 2.7% increase in hospital adjusted discharges from continuing operations and a 1.9% increase in patient revenue per adjusted hospital discharge from continuing operations during the current year quarter compared to the prior year quarter. Revenues during the prior year quarter were positively impacted by Texas upper payment limit ("UPL") revenues of $15.6 million that related to services provided during fiscal quarters prior to March 31, 2007. Patient revenue per adjusted hospital discharge from continuing operations would have increased 4.9% quarter over quarter absent the $15.6 million Texas UPL revenues recorded during the prior year quarter, which were not recorded during the current year quarter. The quarter over quarter increase in health plan premium revenues was primarily attributable to an increase in average membership and reimbursement rates for our managed Medicaid health plan in Phoenix, Arizona during the current year quarter compared to the prior year quarter.

For the quarter ended March 31, 2008, Vanguard's income from continuing operations decreased to $7.5 million from $10.1 million during the prior year quarter. Salaries and benefits as a percentage of total revenues increased from 40.3% during the prior year quarter to 41.1% during the current year quarter. The prior year quarter ratio was unusually low primarily due to the impact of the $15.6 million of Texas UPL revenues described above. In addition, our physician employment initiatives, including related corporate overhead resources, contributed to the quarter over quarter increase in salaries and benefits as a percentage of total revenues. Supplies as a percentage of total revenues decreased to 15.5% during the current year quarter compared to 16.0% during the prior year quarter primarily as a result of certain of our corporate supply chain initiatives. The combined provision for doubtful accounts and charity care as a percentage of patient service revenues was 12.6% during the current year quarter compared to 11.6% during the prior year quarter. We attribute this increase primarily to the continued growth of underinsured patients, utilization shifts from the traditional Medicare program to managed Medicare plans and the increasing difficulties in collecting outstanding receivables from uninsured patients. Net income for the quarter ended March 31, 2008 was $6.5 million compared to $3.3 million during the prior year quarter.

Adjusted EBITDA was $75.1 million for the quarter ended March 31, 2008, an increase of $0.9 million or 1.2% from the prior year quarter. Adjusted EBITDA during the prior year quarter was positively impacted by $12.8 million related to the Texas UPL program ($9.8 million of which related to services provided in fiscal quarters prior to March 31, 2007). The Texas UPL program did not significantly impact Adjusted EBITDA during the current 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, 2007 and 2008 is included in the attached supplemental financial information.

The consolidated operating results for the quarter ended March 31, 2008 reflect a 2.7% increase in both discharges from continuing operations and hospital adjusted discharges from continuing operations compared to the prior year quarter. We continue to experience increased admissions through our hospital emergency rooms, while elective admissions remain weak due to multiple factors. Emergency room visits from continuing operations increased 3.3% quarter over quarter. Outpatient surgeries and inpatient surgeries from continuing operations decreased 5.5% and 1.2%, respectively, quarter over quarter primarily due to the elimination of certain unprofitable service lines and intense competition from outpatient facilities and other hospitals.

Total revenues for the nine months ended March 31, 2008 were $2,074.1 million, an increase of $144.5 million or 7.5% from the prior year period. Patient service revenues and health plan premium revenues increased $106.9 million and $37.6 million, respectively, from the prior year period. Patient service revenues for the nine months ended March 31, 2008 were positively impacted by a 1.8% increase in hospital adjusted discharges from continuing operations and a 4.0% increase in patient revenue per adjusted hospital discharge from continuing operations compared to the prior year period. Patient revenue per adjusted hospital discharge from continuing operations would have increased 4.8% period over period absent the $11.8 million Texas UPL revenues recorded during the prior year period that related to services provided in previous fiscal years. Health plan premium revenues increased 12.7% period over period primarily due to an increase in average membership and reimbursement rates for our managed Medicaid health plan in Phoenix, Arizona.