Hospital divestitures also shaped the for-profit health system’s finances, which included $5.1 billion in revenue.
Tenet Healthcare’s restructuring strategy is paying dividends on the bottom line.
The health system delivered a strong third quarter, driven by increased patient volume in its hospital and ambulatory businesses, while feeling the effects of a shifting portfolio after completing hospital divestitures.
For the quarter, Tenet reported a net profit of $472 million and revenue of $5.12 billion, which were both up from the respective figures of $101 million and $5.06 billion for the same period in 2023.
Tenet has sold several of its hospitals in recent years to place more focus on its ambulatory segment, made up of United Surgical Partners International (USPI) and its 520 ambulatory surgery centers and 24 surgical hospitals across 37 states.
Ambulatory revenue in the quarter grew by 21% year over year to $1.14 billion, with surgical business same-facility system-wide net patient revenues jumping 8.7% and net revenue per case increasing 7.6%.
Speaking to investors on an earnings call, Tenet chairman and CEO Saum Sutaria said: “Our transformed portfolio provides us with a high degree of capital and financial flexibility. We will continue to deploy capital to enhance growth in our industry-leading ambulatory surgical business through M&A and de novo development, increased capital spending to fuel organic growth and return excess capital to shareholders via share repurchase given that we believe our equity continues to trade at attractive multiples relative to the market.”
In its hospital segment, same-hospital net patient service revenue per adjusted admission increased 3.3% year over year, contributing to revenue of $3.98 billion. Revenue declined 3.4% from the third quarter in 2023 mainly due to hospital divestitures in the first quarter of this year.
Those first-quarter sales included nine hospitals: three South Carolina hospitals to Novant Health for $2.4 billion, four South California hospitals to UCI Health for $975 million, and two other California hospitals to Adventist Health for $550 million.
In October, Tenet also completed its sale of its 70% majority ownership interest in Brookwood Baptist Health, a five-hospital system based in Birmingham, Alabama.
“All of the sales that we have executed on have been at high multiples to reflect the operational improvements that we have made to each of these facilities over the last several years,” Sutaria said. “More importantly, as a result of these sales, our current hospital portfolio has an enhanced return profile, more attractive geographies for us and our business model, higher expected returns on invested capital that should result.”
Even after its divestitures, Tenet continues to benefit from many of its sold hospitals through the retention of its revenue cycle management subsidiary, Conifer.
However, the completed transaction of the Alabama hospitals caused Tenet to revise its 2024 revenue guidance to $20.6 billion to $20.8 billion, “$100 million lower at the midpoint versus our prior expectations,” Sutaria said.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Tenet Healthcare’s focus on growing its ambulatory business is yielding positive results, with the segment generating $1.14 billion in revenue in the third quarter for a 21% gain year over year.
Meanwhile, revenue per adjusted admission increased 3.3% in acute care facilities to help offset the impact of Tent offloading hospitals this year.
Tenet leadership told investors on an earnings call that the system will continue to seek out transactions to expand its ambulatory services offering.