Tenet Healthcare Raises 2025 Guidance Amid Policy Uncertainty

Tenet Healthcare, a major hospital operator, has raised its financial expectations for 2025 following strong second-quarter earnings. However, the company faces potential challenges from recent healthcare policy changes and market uncertainties.

Improved Financial Outlook

Tenet Healthcare has revised its 2025 financial guidance upward, now projecting revenue between $20.95 billion and $21.25 billion, with net income expected to range from $1.3 billion to $1.4 billion. This represents a significant increase from previous estimates of $20.6 billion to $21 billion in revenue and $1.1 billion to $1.2 billion in income.

The company's second-quarter results showed year-over-year growth in both revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Tenet attributed this performance to same-store revenue growth, operational efficiencies, and its focus on high-acuity service lines.

Ambulatory Surgery Growth and Hospital Performance

Tenet's ambulatory surgery business, United Surgical Partners International (USPI), demonstrated strong growth with a 7.7% increase in same-store net patient revenues, totaling $2.1 billion in systemwide patient revenues. The company plans to continue expanding USPI through acquisitions, anticipating to exceed its previously set target of $250 million for M&A spending in 2025.

In the acute hospital segment, Tenet reported a 25% year-over-year increase in adjusted EBITDA, reaching $623 million. Hospital revenues totaled $4 billion, including a $79 million pre-tax boost from Medicaid supplemental payment revenues in Tennessee related to a prior period.

Policy Impacts and Market Reaction

Despite the positive financial outlook, Tenet's stock declined approximately 15% following an earnings call where executives declined to address questions about potential impacts from recent healthcare policy changes. The "One Big Beautiful Bill," recently signed into law, includes $1 trillion in healthcare cuts and changes to provider taxes and payments, as well as modifications to Affordable Care Act (ACA) exchange subsidies.

Of particular concern are potential restrictions on Medicaid state-directed payments, which allow states to make supplemental payments for services covered in Medicaid managed care contracts. Tenet expects to record about $1.1 billion to $1.2 billion in supplemental payments in 2025, with $350 million recorded in the second quarter alone.

Additionally, the potential expiration of ACA exchange subsidies at the end of the year could impact Tenet, as exchange patients represent about 8% of the company's hospital admissions. In the second quarter, Tenet reported a 23% increase in exchange admissions and a 28% rise in revenues from exchanges year-over-year.

While Tenet executives remained cautious about discussing future policy impacts, CEO Saum Sutaria emphasized the importance of the exchanges for families and stated that work is ongoing to address these concerns.