Tenet to Sell Two Hospitals and Enter into a Revenue Cycle Services Partnership with Adventist Health

Rhea-AI Summary

Tenet Healthcare (THC) announces the sale of two hospitals in San Luis Obispo County to Adventist Health for $550 million, with expected after-tax proceeds of $450 million. The transaction includes revenue cycle services by Conifer Health Solutions for Adventist Health, with estimated pre-tax book gain of $275 million. The deal aims to enhance patient engagement and optimize cashflow performance.

Positive

• Tenet Healthcare selling two hospitals and related operations for $550 million
• Expected after-tax proceeds of approximately $450 million
• Revenue cycle services to be provided by Conifer Health Solutions
• Estimated pre-tax book gain of approximately $275 million
• Transaction expected to be completed in spring 2024
• Partnership to optimize patient experience and cashflow performance

Negative

• None.

Insights

Healthcare Financial Analyst

The sale of Tenet Healthcare's San Luis Obispo County hospitals to Adventist Health represents a strategic divestiture for Tenet, with significant financial implications. The stated after-tax proceeds of approximately $450 million suggest a robust valuation for the assets in question, given the reported pre-tax income of $25 million and Adjusted EBITDA of $38 million for the last year. The agreement's valuation multiples, when compared to industry standards, could be indicative of the hospitals' operational efficiency or a premium for the strategic fit they offer to the buyer.

From a financial perspective, the anticipated pre-tax book gain of approximately $275 million is noteworthy. This gain will positively impact Tenet's balance sheet and could be allocated for debt reduction, reinvestment in core operations, or returned to shareholders. It's essential to consider how this influx of capital will be used to drive future growth, especially in a healthcare industry that is increasingly competitive and subject to regulatory changes.

Healthcare Industry Analyst

The transaction between Tenet and Adventist Health underscores a continuing trend in the healthcare industry towards consolidation and strategic partnerships. The sale of the hospitals is not just a transfer of assets but also includes physician practices and other operations, which can enhance Adventist Health's integrated care delivery system in the region. The strategic partnership for revenue cycle services through Conifer Health Solutions is equally significant, as it aligns with the industry's focus on optimizing financial performance through advanced technologies and AI-driven workflows.

Conifer's role in managing over $3.5 billion in net revenue for Adventist Health will likely influence the latter's cash flow performance and patient engagement strategies. The collaboration aims to leverage Conifer's expertise to drive efficiency and innovation in revenue cycle management, a critical aspect of hospital operations that directly affects profitability and sustainability in the healthcare sector.

Healthcare Legal Expert

While the financial and strategic aspects of this agreement are clear, the transaction's completion is contingent upon customary regulatory approvals and clearances. In the healthcare sector, such transactions are closely scrutinized for compliance with antitrust laws and regulations to ensure that they do not adversely affect competition or patient care standards. The spring 2024 expected completion date provides a timeline but also indicates the extensive regulatory process that such deals must undergo.

The healthcare industry is heavily regulated and any transaction of this magnitude must navigate a complex landscape of legal and regulatory requirements. This includes obtaining clearances from entities like the Federal Trade Commission and state regulators. The due diligence in meeting these conditions is critical to avoid potential legal challenges that could delay or derail the transaction.

Tenet announces agreement to sell San Luis Obispo County hospitals and related operations as well as a new health system partnership for Conifer Health Solutions

DALLAS--(BUSINESS WIRE)-- Tenet Healthcare Corporation (NYSE: THC) has entered into a definitive agreement with Adventist Health for the sale of two Tenet hospitals and related operations in San Luis Obispo County. Tenet also announced its Conifer Health Solutions subsidiary will enter into an agreement to provide revenue cycle services for Adventist Health.

The transaction will include Sierra Vista Regional Medical Center and Twin Cities Community Hospital, as well as affiliated physician practices and other related operations. The agreement is for approximately $550 million (after-tax proceeds of approximately $450 million).

For the year ended December 31, 2023, the two hospitals and related operations included in the sale generated revenues of approximately $337 million, pre-tax income of approximately $25 million and Adjusted EBITDA of approximately $38 million, excluding depreciation and amortization expense of approximately $13 million. The company estimates recording a pre-tax book gain of approximately $275 million as a result of this anticipated transaction.

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

Additionally, Conifer Health Solutions will enter into a strategic partnership with Adventist Health to provide hospital and physician revenue cycle services. Conifer to provide services for over $3.5 billion in net revenue and deliver its best-in-class revenue cycle capabilities to enable Adventist Health to optimize cashflow performance and enhance patient engagement. Conifer looks forward to delivering its advanced technologies and AI-driven workflows to support Adventist Health’s revenue cycle strategies and performance.

“Adventist Health is a prominent healthcare system with a commitment to compassionate care and serving the communities of San Luis Obispo County,” said Saum Sutaria, M.D., Chairman and CEO, Tenet Healthcare. “Furthermore, our revenue cycle services partnership will enable our organizations to apply new innovations to optimize the patient experience.”

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 or has ownership interests in more than 480 ambulatory surgery centers and surgical hospitals. We also operate 58 acute care and specialty hospitals, approximately 160 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/20240228654980/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 deal between Tenet Healthcare and Adventist Health regarding San Luis Obispo County hospitals?

Tenet Healthcare has entered an agreement to sell two hospitals and related operations in San Luis Obispo County to Adventist Health for approximately $550 million.

How much are the after-tax proceeds expected from the sale?

The after-tax proceeds from the sale are estimated to be around $450 million.

What services will Conifer Health Solutions provide as part of the agreement?

Conifer Health Solutions will provide revenue cycle services for Adventist Health as part of the agreement.

What is the estimated pre-tax book gain from the anticipated transaction?

The estimated pre-tax book gain from the anticipated transaction is approximately $275 million.

When is the completion of the transaction expected?

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

What is the goal of the partnership between Conifer Health Solutions and Adventist Health?

The partnership aims to optimize cashflow performance and enhance patient engagement through revenue cycle services.