Dallas-based Tenet Healthcare on Tuesday announced it is taking additional steps to improve its financial performance, including expanding the company's cost reduction initiative and exploring a potential sale of Conifer Health Solutions, its healthcare business services subsidiary.
In October, Tenet launched a $150 million enterprisewide cost reduction initiative, which involves renegotiation of contracts with suppliers and vendors, as well as the elimination of about 1,300 jobs. Tenet has now expanded the cost-cutting plan and expects to achieve $250 million in savings by the end of 2018. The company did not disclose whether additional jobs would be cut under the expanded plan.
Tenet has also enlisted financial and legal advisers to explore a potential sale of Conifer, which provides technology and financial services to hospitals and physician practices. Tenet expects to decide whether to sell Conifer during the first half of 2018.
"We remain open to all options that can enhance shareholder value, and given that we have adequate liquidity to operate our business and no near-term debt obligations, we have the flexibility we need to achieve the best alternative for shareholders," said Ronald A. Rittenmeyer, executive chairman and CEO of Tenet.
Not including any impact from the potential sale of Conifer, Tenet said it expects net operating revenues of $17.8 billion to $18.2 billion and net income from continuing operations of $65 million to $70 million in 2018. The company expects to divest several hospitals next year, and its outlook includes $300 million to $350 million of revenue from eight U.S. hospitals and nine facilities in the United Kingdom, which the company is planning to divest.
In addition to improving its finances, Tenet is also taking steps to improve quality of care and patient experience. The company said it will add a Quality and Patient Experience Gatekeeper to its Annual Incentive Plan next year. "The gatekeeper will require certain levels of improvement and performance across all key quality and patient experience measures in order for participants to be eligible to participate in the AIP," Tenet said.
Tenet also provided an update on its board refreshment process and its shareholder rights plan.
In August, Tenet's board approved a short-term shareholder rights plan, which was designed to protect $1.7 billion in net operating loss carryforwards — operating expenses on Tenet's tax return that exceeded revenues and can be used for the following 20 years as an offset of taxable income — and ensure the board could protect all shareholder interests as it executed CEO and board changes. Tenet projects the net operating loss carryforwards will be approximately $1.6 billion at the end of this year.
The company's shareholder rights plan is scheduled to expire after Tenet's 2018 annual shareholders meeting in May. On Tuesday, Tenet said it does not plan to extend the shareholder rights plan, but the board will continue to evaluate the need for the plan based on the status of the risk of the company's net operating loss carryforwards.
Tenet also began a board refreshment process in August, which has resulted in the appointment of three new independent directors. "The board will continue to search for additional independent directors who can further enhance the board's expertise in areas directly relevant to the company's business with a goal of further refreshing the composition of the board by the time of the company's 2018 annual meeting of shareholders," Tenet said Tuesday. The company's board currently consists of 12 directors, 11 of whom are independent.
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