The health system has sold several hospitals of late to improve its finances.
Tenet Healthcare’s selling spree has shown little sign of slowing down.
After recently divesting several assets, the for-profit health system continued its strategy by agreeing to sell two California hospitals to Adventist Health for approximately $550 million to further reduce its debt and improve its leverage position.
The transaction, which is expected to close in the spring, will send Sierra Vista Regional Medical Center and Twin Cities Community Hospital to Adventist and net Tenet after-tax proceeds of about $450 million and a pre-tax book gain of about $275 million. The operators also announced that they reached an agreement for Tenet’s subsidiary, Conifer Health Solutions, to provide revenue cycler services for Adventist.
Tenet has had a busy stretch as a seller. The system completed the sale of three hospitals in South Carolina to Novant Health for approximately $2.4 billion last month, while also agreeing to offload four hospitals in Southern California to UCI Health for about $975 million.
Tenet had agreed to sell San Ramon Regional Medical Center to John Muir Health as well, but that sale was tripped up by the Federal Trade Commission blocking the deal for eliminating competition in the area.
Speaking on the fourth-quarter earnings call last month, Tenet CEO Saum Sutaria said the system has “demonstrated thoughtful divestiture activity in a way that remains consistent with our strategy and enhances not just our leverage position, but our belief in our ability to generate free cash flow going forward.”
The sales were part of the reason for Tenet’s performance in the fourth quarter of 2023, which saw it beat Wall Street expectations and report net income of $244 million.
Selling off hospitals is allowing Tenet to turn its attention to its ambulatory care business. That segment experienced a 15.4% increase in net operating revenues in the fourth quarter compared to the same period in 2022.
As Tenet continues to reshape its business, more divestures could be in the works to create greater financial flexibility.
“Tenet is entering a new era, with a greater proportion of our performance coming from our highly efficient ambulatory surgical business and a reduced debt profile, we are well positioned to continue to expand free cash flow further over time,” Sutaria said.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
Tenet Healthcare reached an agreement to sell two California hospitals to Adventist Health, coming on the heels of sales sending three hospitals to Novant Health and four hospitals to UCI Health.
The moves allow the operator, which reported $244 million of net income for the fourth quarter, to lighten its debt and bring in additional funds as it focuses more on ambulatory care.