Tenet's $259 million Q2 income flew in from a few key factors like increased ambulatory services.
As health systems close their second quarter of 2024 Tenet Healthcare watched its net income rise 111%, taking it from $123 million to $259 million. The Dallas-based health system’s financial gains follow a strong first quarter performance, where net income soared to $2.2 billion, according to financial reports.
So what drove Tenet’s financial success?
Tenet Health's positive financial outlook in 2023 set the health system up well in 2024. Tenet’s roadmap from its first to second quarter shifted from the selling of several hospitals towards purchasing facilities in better alignment with the health system’s long-term strategy towards profitability. After exiting a successful first quarter, Tenet saw mounting gains coming from the sale of three hospitals in South Carolina and six more in California.
Tenet’s earnings report also highlighted effective operational management, as well as volume growth in the ambulatory care and hospital segments. Notably, ambulatory services drove a large part of Tenet’s revenue in the second quarter, reeling in 21.1% more net operating revenue compared to the previous year.
On top of this, Tenet attributed its 2023 success to a favorable payor mix, and improved contract labor costs.
Fast forward to 2024 and all these factors are still playing a role, especially volume growth. Tenet was the only major for-profit health system to raise its full-year projection following first-quarter earnings.
"Our results through the second quarter, which have significantly exceeded our expectations, have been driven by volume and revenue growth as well as sustained fundamentally strong operating performance," said Saum Sutaria, M.D., Chairman and Chief Executive Officer of Tenet in the company’s earnings report.
"Our portfolio transformation and enhanced cash flow profile provide us with compelling opportunities for growth as we execute on our strategy and continue to broaden our service offerings for patient-centered care."
Tenet’s net operating revenue for the first three months of its second quarter was $5.1 billion, up from $5.08 billion at the same time last year.
Tenet Health’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for its second quarter was $945 million, which is up just over 12% compared to 2023. The company’s adjusted EBITDA outlook for 2024 is expected to be somewhere between $3.8 billion to $4 billion, which is up $300 million from the year before.
According to the report, Tenet's salaries, wages and benefits were $2.2 billion in the second quarter of 2024, a 5.1% decrease from $2.3 billion over the same period in 2023.
Tenet’s earnings stayed steady even though supply expenses increased, although not by much. Tenet’s supply expenses were $908 million, up 1.9% from $891 million in the second quarter of 2023.
Lastly, Tenet’s second quarter operating income was $761 million, a bump of 26% from $604 million compared to the same time last year.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
After a successful Q1Tenet health headed into a lucrative Q2.
Part of Tenet Health’s success came from successful hospital sales, and a growing ambulatory services sector.
Tenet was the only major for-profit health system to raise its full-year projection following its first quarter.