Tenet Healthcare Reports Strong Q1 Performance, Maintains Aggressive Growth Strategy Amid Policy Uncertainties

Tenet Healthcare, a major player in the hospital and ambulatory surgical center (ASC) sector, has reported exceptional first-quarter results for 2025, demonstrating resilience and growth despite looming policy challenges. The company's performance reflects a strategic focus on high-margin assets and operational efficiency, setting the stage for continued expansion in the face of potential headwinds.

Financial Highlights and Operational Improvements

Tenet Healthcare posted a net income of $406 million ($4.27 per diluted share) for Q1 2025, with adjusted EBITDA reaching $1.16 billion, a 14% increase year-over-year. While net operating revenues decreased from $5.4 billion to $5.2 billion due to hospital divestitures, the company saw significant improvements in key metrics:

• Same-hospital inpatient admissions increased by 4.4%
• Revenue per adjusted admissions rose by 2.8%
• Affordable Care Act (ACA) exchange admissions grew by 35%
• Salary, wages, and benefits as a percentage of net revenues decreased from 43.2% to 40.6%

The hospital segment, excluding divested facilities, reported a 23% year-over-year increase in adjusted EBITDA. This growth was attributed to strong volumes, improved payer mix, and reduced reliance on contract labor.

Ambulatory Surgical Center Growth and Investment

Tenet's ASC business continued to be a key driver of growth, with net operating revenues increasing from $1 billion to $1.2 billion year-over-year. Notable developments in this segment include:

• Addition of 16 new centers
• 12% rise in total joint replacements
• Same-facility systemwide net patient service revenue per case growth of 6.8% to 9.1%
• Adjusted EBITDA increase of 15.7% to $456 million

CEO Saum Sutaria, M.D., emphasized the company's commitment to expanding its ASC portfolio, stating, "We continue to see significant opportunity for M&A in the ambulatory space." Tenet plans to invest a baseline of $250 million annually in dealmaking growth for this segment.

Strategic Outlook Amid Policy Uncertainties

Despite strong Q1 performance, Tenet maintained its annual guidance given in February, citing potential policy-related challenges:

• Increased expenses due to tariffs
• Expiring enhanced subsidies for the ACA marketplace
• Potential federal Medicaid funding cuts affecting state supplemental payments

Sutaria reassured investors that Tenet is actively engaging with policymakers in Washington, D.C., to influence upcoming decisions. The company remains committed to its growth strategy, with plans to continue capital deployment, including share repurchases. In Q1, Tenet bought back 2.6 million shares for $348 million.

"We are not altering our business strategy because of healthcare policy uncertainty that the industry is currently facing," Sutaria stated. "We will steadily execute on our growth strategies with consistent capital investments and continued demonstration of our strong operating capabilities."

As of April 29, 2025, Tenet's shares were trading 10% above open, outperforming other public for-profit health systems that recently released their Q1 results.