Dallas-based Tenet Healthcare is focused on continuing to grow its hospital business while simultaneously expanding its outpatient surgery center portfolio by acquiring and developing more ASCs through its subsidiary United Surgical International Partners, executives said Feb. 9 during the company's fourth-quarter earnings call, according to Seeking Alpha.
"USPI's M&A engine under the Tenet umbrella continues to be an industry-leading differentiator," according to CEO Saum Sutaria, MD. "In 2022, we added 45 centers to the portfolio through M&A and de novo development, in addition to the [SurgCenter Development] centers. This was highlighted by our acquisition of 22 facilities in our partnership with the United Urology Group."
USPI plans to inject about $250 million in ASC mergers and acquisitions a year and maintain a robust pipeline to support that level of investment. Simultaneously, it is continuing to build new surgery centers through its USPI development team and from its partnership with Towson, Maryland SurgCenter.
"We currently have 22 centers that are in active syndication or under construction. Adding centers with strong margins, and attractive post-synergy multiples, remains the best use of our cash for investments, to enhance tenants free cash flow," Dr. Sutaria said. "For many years we have consistently acquired centers at attractive valuations and driven post-synergy multiples for our acquisitions to below 5 times. And our latest 2022 vintage is estimated to do the same by the end of year two."
USPI has also inked a deal with Renton, Wash.-based Providence, a 52-hospital system, to expand its ASC network into new markets. The partnership is expected to lead to 15 to 20 centers in the next two years.
Last year, USPI reported $1.3 billion in EBITDA, with strong margins at 40.9 percent, according to the company’s financial report. USPI's same-facility revenues grew 4.6 percent in 2022, which is in the range of the company's long-term top-line growth goal of between 4 and 6 percent.
"USPI's services are generally 30 percent to 50 percent more affordable than similar services delivered in a hospital setting," Dr. Sutaria said. "The linkage to our hospital business creates an unquestionably superior platform, from which to draw talent, operating expertise and scale benefits."
USPI's net operating revenue totaled $933 million for the quarter and $3.2 billion for the year, while Tenet's hospital sector reported net operating revenue of $3.8 billion for the fourth quarter and $15 billion for the year. Overall in 2022, Tenet reported net operating revenues of $19.2 billion and consolidated adjusted EBITDA of $3.5 billion, which translates into an 18.1 percent adjusted EBITDA margin.
Tenet is projecting adjusted EBITDA growth of 4.6 percent on a normalized basis at the midpoint of 2023.
"We anticipate this will be driven by 2 percent to 4 percent adjusted admissions growth, continued operating discipline and the expectation for further moderation in contract labor costs, partially offset by increases in employed labor costs," Dr. Sutaria said.