Tenet Healthcare Reports Strong 2024 Performance, Addresses Potential Policy Changes

Tenet Healthcare, a major player in the U.S. healthcare industry, has reported exceptional financial results for 2024, while also addressing concerns about potential policy changes in Washington. The company's focus on ambulatory surgical centers (ASCs) and strategic cost management has yielded significant profits, even as it navigates potential regulatory challenges.

Record Profits and Revenue Growth

Tenet Healthcare announced profits of $3.2 billion for 2024, a substantial increase from $611 million in 2023. The company's net operating revenues reached $20.7 billion, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $4 billion. CEO Saum Sutaria described these results as "outstanding" during an investor call.

The company's ambulatory surgery center division, United Surgical Partners International (USPI), performed particularly well, generating $1.8 billion in adjusted EBITDA, representing a 17% growth compared to 2023. Despite these strong annual results, Tenet faced challenges in the fourth quarter, with net operating revenues of $5.1 billion, approximately $300 million below the same period in 2023.

Strategic Shift and Expansion Plans

Tenet's strategy continues to focus on expanding its ambulatory surgery center footprint while deemphasizing its hospital business. In 2024, the company sold 14 hospitals and added 70 new ASCs. Looking ahead to 2025, Tenet plans to invest $250 million in mergers and acquisitions within the ambulatory space and aims to open 10 to 12 new facilities.

CFO Sun Park also mentioned the possibility of pursuing "key hospital growth opportunities," such as adding higher acuity services. This balanced approach suggests that while ASCs remain a priority, Tenet is not completely abandoning its hospital segment.

Addressing Potential Policy Changes

During the investor call, analysts raised concerns about possible changes to the Medicaid program, including potential cuts to reimbursement rates or eligibility requirements. CEO Sutaria reassured investors that such changes would have minimal impact on USPI, citing the division's focus on moving surgical care to lower-cost settings while increasing acuity.

Sutaria acknowledged that hospital service line revenue is more vulnerable to Medicaid changes but emphasized that the company is not ready to make significant strategic moves based on speculation about potential policy shifts. Instead, Tenet hopes to persuade politicians of the value of preserving Medicaid, noting its importance in providing healthcare access in politically significant states.

The company also addressed concerns about site-neutral payment policies, with Sutaria stating that Tenet's ASCs operate with freestanding ASC rates, which he believes insulates that part of the business from potential changes in site neutrality rules.