Dallas-based Tenet Healthcare is not interested in taking on "risky" or "turnaround" hospitals and is focusing on "acquiring high-quality assets that have good margins," CEO and Chair Saum Sutaria, MD, said during the Wells Fargo Healthcare Conference.
Tenet's M&A position echoes a wider trend in the hospital sector, with many health systems hesitant about taking on assets that would dilute already weakened financial profiles — unless there is a particularly strong strategic purpose and clear path to turnaround.
S&P Global said in an Aug. 7 report that this trend "could result in heightened entity distress, as challenged hospitals might have limited options for financial improvement." However, other affiliations tied to service lines and physician-aligned relationships with larger systems could be supportive for smaller or financially strained hospitals.
Turnaround hospital assets can require significant capital investment for restructuring and operational improvement, which poses a financial risk. Acquiring underperforming assets also increases the likelihood of operational challenges, regulatory hurdles and reputational risks.
Instead, Tenet is concentrating on developing surgical, high-acuity, acute care hospitals in high-growth markets, including San Antonio, Palm Beach, Fla., and Charlotte, N.C., according to Dr. Sutaria.
"We are confident that as those markets extend, we can extend our footprint profitably," Dr. Sutaria said.
Tenet reported an operating income of $2.5 billion in 2023, up 12.2% from 2022, with revenues increasing 7.2% to $20.5 billion. The company recently reorganized its portfolio and expects to see its ambulatory surgery center business drive a greater portion of its performance in the future.