Tenet Healthcare’s strategic ASC expansion, hospital divestitures boost 2024 Q4 results

Editor's Note

Tenet Healthcare closed 2024 on a high note, reporting robust fourth-quarter results driven by strategic growth in ambulatory surgery centers (ASCs) and effective cost management, Healthcare Finance February 18 and Healthcare Dive February 13 report. Partnering with United Surgical Partners International (USPI), one of the largest ASC platforms in the US, played a pivotal role in this achievement.

Tenet concluded 2024 with a significant leap in net income, posting $3.2 billion compared to $611 million in 2023. This was driven by strong same-store revenue growth, high-acuity care, and effective cost management. However, the fourth quarter saw a slight dip in net operating revenues at $5.1 billion, approximately $300 million below the same period in 2023, attributed to the impact of hospital divestitures. USPI, meanwhile, saw a 17% growth in adjusted EBITDA for 2024, supported by a 7.8% rise in same-facility revenues and a 19% surge in high-acuity procedures, including total joint replacements. Tenet Chairman and CEO Saumya Sutaria highlighted the continued high patient satisfaction scores of 96.6% across USPI centers, reinforcing their value proposition.

Tenet aggressively expanded its ASC footprint in 2024, adding nearly 70 new centers. The system plans to invest $250 million annually in mergers and acquisitions within the ASC space, with projections to open 10 to 12 standalone facilities in 2025. This strategy aligns with Tenet's focus on shifting care to lower-cost, high-acuity outpatient settings, a move that positions it advantageously against potential regulatory changes in Medicaid and site neutrality rules.

The strategy to emphasize ASCs over traditional inpatient services from Tenet was underscored by the sale of 14 hospitals in 2024, generating $5 billion in gross proceeds. Despite the divestitures, the hospital segment still showed a 9% growth, with adjusted EBITDA reaching $2.185 billion. Same-store hospital admissions increased by 4.7%, reflecting strong utilization and capacity management.

For 2025, Tenet projects a net income between $1.04 billion and $1.12 billion and net operating revenues ranging from $20.6 billion to $21 billion. The system expects a 5.7% growth in adjusted EBITDA, supported by a 2% to 3% rise in adjusted hospital admissions and contributions from the newly opened Westover Hills Baptist Hospital in San Antonio.

Despite potential headwinds from regulatory changes, including Medicaid cuts and site-neutral payment policies, Tenet remains confident in its resilience. Sutaria emphasized that USPI's operational model, utilizing freestanding ASC rates, provides insulation from site neutrality risks. Additionally, Tenet's diversified approach, including expanded relationships through Conifer Health Solutions, further buffers the company against policy volatility.