Tenet Healthcare to Sell Five Birmingham Hospitals to Orlando Health

Rhea-AI Summary

Tenet Healthcare (NYSE: THC) has announced a definitive agreement to sell its 70% majority ownership in Brookwood Baptist Health in Birmingham to Orlando Health for $910 million in cash. The deal includes five hospitals and related operations, with after-tax proceeds of approximately $790 million. Tenet's Conifer Health Solutions will enter a new 10-year contract for revenue cycle management services. The transaction is expected to complete in fall 2024, subject to regulatory approvals. Tenet estimates a pre-tax book gain of $375 million from this deal. For the twelve months ended June 30, 2024, Tenet's equity interest in Brookwood Baptist Health generated $12 million in pre-tax income and $60 million in Adjusted EBITDA less non-controlling interest. Tenet has reaffirmed its FY24 Adjusted EBITDA Outlook.

Positive

• Sale of 70% ownership in Brookwood Baptist Health for $910 million in cash
• After-tax proceeds of approximately $790 million
• New 10-year contract for Conifer Health Solutions
• Estimated pre-tax book gain of $375 million
• Reaffirmation of FY24 Adjusted EBITDA Outlook

Negative

• Divestiture of five hospitals and related operations in Birmingham
• Loss of $12 million in annual pre-tax income from the sold assets
• Reduction of $60 million in annual Adjusted EBITDA less non-controlling interest

Insights

Financial Analyst

This $910 million sale of Tenet's Birmingham hospitals is a significant divestiture, potentially reshaping Tenet's portfolio. The $790 million after-tax proceeds could strengthen Tenet's balance sheet or fund strategic initiatives. However, the loss of $60 million in annual Adjusted EBITDA might impact future earnings. The new 10-year contract with Conifer Health Solutions for revenue cycle management services partially offsets this, providing a stable revenue stream. The estimated pre-tax book gain of $375 million will likely boost Tenet's financial results in the quarter of the sale's completion. Importantly, Tenet's reaffirmation of its FY24 Adjusted EBITDA outlook suggests this divestiture aligns with their financial strategy, potentially indicating more focus on higher-margin operations.

Healthcare Management Expert

This divestiture reflects a strategic shift in Tenet's portfolio management. By selling majority ownership in these Birmingham hospitals, Tenet is likely streamlining operations and focusing on more profitable markets. The deal with Orlando Health, a reputable non-profit system, ensures continuity of care for the Birmingham community. The retention of the joint venture structure with Baptist Health System demonstrates Tenet's commitment to partnership models. This move could allow Tenet to reallocate resources to higher-growth areas or emerging healthcare trends. The expanded contract for Conifer Health Solutions highlights Tenet's strategy to grow its high-margin services segment, potentially offsetting the loss of direct hospital revenues.

Market Research Analyst

This transaction signals a broader trend in the healthcare industry towards regional consolidation and specialization. Orlando Health's expansion into Alabama indicates their growth strategy and could reshape the competitive landscape in the Southeast. For Tenet, this move might be part of a larger portfolio optimization strategy, potentially leading to similar divestitures in other markets. The deal's structure, maintaining a joint venture and securing a long-term service contract, reflects a nuanced approach to market exit. Investors should watch for potential follow-on effects in the regional healthcare market, including possible responses from competitors or further consolidation moves. This transaction could also signal Tenet's increased focus on its Conifer Health Solutions subsidiary as a growth driver.

Tenet announces agreement to sell Birmingham hospitals and related operations; reaffirms latest FY24 Adjusted EBITDA Outlook

DALLAS--(BUSINESS WIRE)-- Tenet Healthcare Corporation (NYSE: THC) has entered into a definitive agreement with Orlando Health for the sale of Tenet’s 70% majority ownership interest in Brookwood Baptist Health in Birmingham for approximately $910 million in cash (after-tax proceeds of approximately $790 million).

The transaction will include five hospitals – Brookwood Baptist Medical Center, Princeton Baptist Medical Center, Walker Baptist Medical Center, Shelby Baptist Medical Center, Citizens Baptist Medical Center – as well as affiliated physician practices and other related operations. Brookwood Baptist Health will remain a joint venture with Baptist Health System.

Additionally, under the agreement, Tenet’s Conifer Health Solutions subsidiary will enter into a new and expanded ten-year contract to provide revenue cycle management services for the Birmingham hospitals and related operations.

“We are grateful for the partnership with Baptist Health System, which has enabled us to collectively enhance the high-quality, compassionate care that Brookwood Baptist Health offers,” said Saum Sutaria, M.D., Chairman and CEO, Tenet Healthcare. “Orlando Health is an esteemed, high-performing healthcare organization with an over century-long commitment to improving the health and wellness of the communities they serve. Integration of these hospitals into their network will advance healthcare for the greater Birmingham communities.”

For the twelve months ended June 30, 2024, Tenet’s equity interest in the Brookwood Baptist Health joint venture generated pre-tax income of approximately $12 million and an Adjusted EBITDA less non-controlling interest of approximately $60 million, excluding interest expense of approximately $2 million and depreciation and amortization expense of approximately $46 million. The company estimates recording a pre-tax book gain of approximately $375 million as a result of this anticipated transaction.

The transaction is expected to be completed in the fall of 2024, subject to customary regulatory approvals, clearances, and closing conditions.

Tenet also reaffirmed its latest FY24 Adjusted EBITDA Outlook range included in its second quarter 2024 earnings release.

About Tenet Healthcare

Tenet Healthcare Corporation (NYSE: THC) is a diversified healthcare services company headquartered in Dallas. Our care delivery network includes United Surgical Partners International, the largest ambulatory platform in the country, which operates ambulatory surgery centers and surgical hospitals. We also operate a national portfolio of acute care and specialty hospitals, other outpatient facilities, a network of leading employed physicians and a global business center in Manila, Philippines. Our Conifer Health Solutions subsidiary provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients. Across the Tenet enterprise, we are united by our mission to deliver quality, compassionate care in the communities we serve. For more information, please visit www.tenethealth.com.

Cautionary Statement

This release contains “forward-looking statements” - that is, statements that relate to future, not past, events. In this context, forward-looking statements often address the Company’s expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “assume,” “believe,” “budget,” “estimate,” “forecast,” “intend,” “plan,” “predict,” “project,” “seek,” “see,” “target,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Particular uncertainties that could cause the Company’s actual results to be materially different than those expressed in the Company’s forward-looking statements include but are not limited to the factors disclosed under “Forward-Looking Statements” and “Risk Factors” in our Form 10-K for the year ended December 31, 2023, and other filings with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805345316/en/

Investor Contact

Will McDowell

469-893-2387

William.McDowell@tenethealth.com

Media Contact

Robert Dyer

469-893-2640

mediarelations@tenethealth.com

Source: Tenet Healthcare Corporation

FAQ

What is the value of Tenet Healthcare's sale of Birmingham hospitals to Orlando Health?

Tenet Healthcare (THC) is selling its 70% majority ownership in Brookwood Baptist Health in Birmingham to Orlando Health for $910 million in cash, with after-tax proceeds of approximately $790 million.

How many hospitals is Tenet Healthcare (THC) selling in Birmingham?

Tenet Healthcare is selling five hospitals in Birmingham as part of the Brookwood Baptist Health deal with Orlando Health.

When is the Tenet Healthcare (THC) Birmingham hospital sale expected to close?

The transaction between Tenet Healthcare and Orlando Health is expected to be completed in the fall of 2024, subject to customary regulatory approvals and closing conditions.

What is the estimated financial impact of the Birmingham hospital sale on Tenet Healthcare (THC)?

Tenet Healthcare estimates recording a pre-tax book gain of approximately $375 million as a result of this transaction. The sold assets generated $12 million in pre-tax income and $60 million in Adjusted EBITDA less non-controlling interest for the twelve months ended June 30, 2024.