Dive Brief:
- Tenet Healthcare posted $5.1 billion in revenue for the third quarter, exceeding analysts’ expectations as the provider’s hospital and ambulatory segments fielded higher-than-expected patient volumes.
- Business in Tenet’s ambulatory care service line was particularly strong, executives said during a Tuesday morning call with investors. Adjusted earnings before interest, taxes, depreciation and amortization for Tenet’s ambulatory surgery centers and surgical hospitals sat nearly 19% higher than this time last year at $439 million.
- Still, the company lowered the upper end of its 2024 revenue guidance to $20.6 billion to $20.8 billion, compared to prior guidance of $20.6 billion to $21 billion. Analysts from Leerink Partners said the revision was likely due to the performance of Tenet’s hospital portfolio and the timing of several hospital divestitures.
Dive Insight:
Discussion of hospital divestitures dominated much of Tuesday’s earnings call, part of a restructuring to focus on its ambulatory services offerings.
Both Tenet’s ambulatory and hospital segments generated increased year-over-year revenue for the Dallas-based provider during the third quarter. Ambulatory services delivered an 8.7% increase in same-facility system-wide revenues compared to the prior year, while net revenue per case increased 7.6%. Revenue per adjusted admission grew 3.3% at Tenet’s acute care facilities.
The operator has sold 14 hospitals so far this year as it seeks to deleverage its portfolio.
In the first quarter, Tent sold nine hospitals in California and South Carolina to Novant Health, UCI Health and Adventist Health for a combined $3.9 billion. The operator also completed the sale of a five-hospital system in Alabama at the beginning of this month.
Still, executives said the timing of the Alabama divestiture could drag revenue growth for the rest of the year, causing the health system to lower the upper end of its revenue outlook. It’s the first time Tenet has revised its guidance down this year. In each previous quarter, the health system raised its guidance.
Although Tenet is reducing its hospital footprint slightly, the health system retains a ten-year contract agreement between its revenue cycle management subsidiary, Conifer, and the Alabama hospitals. It’s a model Tenet has employed before, including in its March sale of four hospitals to UCI Health.
Executives said the Conifer contracts should provide an earnings boost in 2025, and analysts from Leerink called Conifer’s spread underappreciated, adding it could be boosting Tenet’s performance “nearly a year ahead of Street models for 2025.”
As Tenet divests hospitals, executives said they plan to focus on growing United Surgical Partners International, Tenet’s ambulatory care arm, through acquisitions.
During Tuesday’s call, CFO Sun Park said the company would “continue to prioritize capital investments to grow USPI for M&A” as well as new development projects.
The division currently has 520 ambulatory surgery centers and 24 surgical centers across 37 states.
