Dallas-based Tenet Healthcare is transforming its portfolio into a more value-based care enterprise with a leading specialty care platform and is rapidly selling hospitals while simultaneously adding ambulatory surgery centers.
The for-profit system significantly improved its leverage position in the first quarter after selling nine hospitals in California and South Carolina for a total of $3.9 billion. It also plans to sell its majority stake in five more Alabama hospitals for $910 million this fall.
Tenet now operates 52 acute-care hospitals, according to its website.
"Tenet is entering a new era with a greater proportion of our performance coming from our highly efficient ambulatory surgical business and a reduced debt profile," CEO Saum Sutaria, MD, said during the company's fourth-quarter earnings call. "We will have significant financial and capital flexibility to increase shareholder value over the long-term."
Tenet is selling hospitals in certain high-growth markets at attractive EBITDA levels and is investing $450 million into its ambulatory business, United Surgical International Partners, which acquired 45 ASCs in the first quarter.
USPI is the largest ASC chain in the country with 520 ASCs and 24 surgical hospitals across 38 states. It is also showing no signs of slowing down, with plans to have 575 to 600 facilities by the end of 2025.
"Our USPI and hospital segments continue to deliver outstanding performance in the second quarter, reflecting strong fundamental same-store revenue growth and disciplined expense management," CFO Sun Park said during the company's fourth-quarter earnings call. "At USPI, we are now expecting 2024 adjusted EBITDA of $1.75 billion to $1.81 billion — a $100 million increase over prior expectations."
While Tenet has increased its projected earnings for 2024, executives said that the health system's capital deployment priorities have not changed.
"We will continue to prioritize capital investments to grow USPI through M&A. Second, we expect to invest in key hospital growth opportunities, including our focus on higher acuity service offerings," Mr. Park said. "Third, we will evaluate opportunities to retire and/or refinance debt. And finally, we'll have a balanced approach to share repurchases depending on market conditions and other investment opportunities."
Tenet reported $259 million in net income on revenues of $5.1 billion in the second quarter, compared to $123 million on revenues of $5.08 billion for the same quarter in 2023. Operating income was $761 million for the second quarter, a 26% increase from $604 million during the same period last year.