Dallas-based Tenet Healthcare has been intentional over the last year about reducing contracted labor to lower costs, and the 58-hospital system is seeing results.
Tenet reported fourth-quarter contract labor accounted for 2.8% of consolidated salaries, wages and benefits, down 62% over the same period in 2022. Salary, wages and benefits were also 160 basis points lower in the fourth quarter year over year.
"Our investments in nurse recruitment and retention have paid dividends as we have strengthened our workforce and effectively reduced contract labor spend throughout the year," said Saum Sutaria, MD, CEO of Tenet, during the quarterly earnings call, as transcribed by Seeking Alpha. He added, "This best-in-class contract labor cost management performance helped drive strong results in 2023 and we expect to continue to benefit from our operational discipline in the future."
Tenet reported $1.3 billion in net income for the full year and revenue jumped 7.2% year over year to $20.5 billion. The system's leaders expect similar trends over the next 12 months.
"We took a lot of benefit from contract labor reduction in 2023," Dr. Sutaria said. "Now don't get me wrong, there's an annualization effect that will improve in the coming year. The volume strength was also very good during the year, and so I think that we believe that we'll continue to see acute care recovery in 2024, like we saw in 2023."
In 2024, Tenet projected adjusted EBITDA growth of around 5% by the midpoint of 2024, on a normalized basis, due to small admissions bump and "continued operating discipline," according to Dr. Sutaria.
"Having captured much of the value from contact labor rationalization last year, in 2024 we plan to continue to strategically open up capacity to meet growing demand in a number of our markets, leveraging our previous capital investments," he said.
Sun Park, executive vice president and CFO of Tenet, said during the earnings call that salary, wages and benefits were still elevated compared to historical rates, and his team projects more normalized rates in 2024 fiscal year guidance.
"We're continuing to make investments into our workforce in the right areas on our base wages, and then on contract labor," he said. "… We do still expect some savings from contract labor going into fiscal 2024 guidance."