Tenet Dissolves Plan to Spin Off Rev Cycle Management Subsidiary Conifer

The health system said it will officially disband the process of turning Conifer into a standalone business following a turnaround in financial prospects.

Tenet Healthcare announced it will reverse course on its plans to spin off its revenue cycle management subsidiary Conifer Health Solutions citing the division's renewed financial profile and growth potential.

Following a review with independent legal and financial advisors, Tenet's board of directors decided that retaining Conifer was in the best interests of the company and its shareholders.

"We have achieved significant operational and financial progress within Conifer in the last few years and dramatically improved Tenet's profile across key financial metrics like adjusted EBITDA, free cash flow, and net debt leverage," Ron Rittenmeyer, executive chairperson of Tenet Healthcare, stated in a press release. "We believe that continuing to build on our progress with Conifer will provide greater returns for Tenet's shareholders."

The resolution of Conifer's fate closes the book on plans Tenet first put in motion more than four years ago to either sell the unit or spin it off into a standalone business. With cost-cutting in mind, Tenet announced in December 2017 it would begin exploring a potential sale of Conifer. Then, in July 2019, the company said it would officially pivot to a tax-free spinoff of the subsidiary to maximize Conifer's value.

Now, the health system, which operates 60 hospitals and approximately 550 outpatient centers, will keep Conifer in-house after an improvement in outlook. In their announcement, Tenet said Conifer's adjusted EBITDA margin has increased by more than 1,000 basis points since 2017 with expectations that the subsidiary will deliver revenue growth in the mid to high-single digits in the fiscal year 2022.

In addition to a strong margin and cash flow profile, Conifer should see benefits from revamped commercialization, new sales talent and technology, and new clients, according to Tenet.

"Conifer is primed with a robust pipeline and recent client wins with value that is not yet fully realized," said Saum Sutaria, MD, chief executive officer of Tenet Healthcare. "When coupled with ongoing efficiency opportunities from offshoring and automation, we have a compelling runway for the business."

Last month, Tenet reported a quarterly profit of $250 million—a drop-off from the $414 million in the fourth quarter of the previous year but an increase from $89 million to $153 million when removing COVID-19-related stimulus grant income. For the fiscal year 2021, net income was reportedly $915 million compared to $399 million for 2020.