Tenet Healthcare Raises 2025 Guidance Amid Policy Uncertainty

Tenet Healthcare, a major hospital operator, has increased its financial guidance for 2025 following strong second-quarter earnings. However, the company faces potential challenges from recent healthcare policy changes and upcoming legislative decisions.

Revised Financial Outlook

Tenet now projects revenue between $20.95 billion and $21.25 billion for 2025, up from its previous estimate of $20.6 billion to $21 billion. The company also raised its net income expectations to $1.3 billion to $1.4 billion, compared to the earlier forecast of $1.1 billion to $1.2 billion.

This upward revision comes after Tenet reported year-over-year growth in revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter. The company attributed these results to same-store revenue growth, operating efficiencies, and its focus on high-acuity service lines.

Mixed Performance Across Segments

Tenet's ambulatory surgery business, United Surgical Partners International (USPI), demonstrated strong performance 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, expecting to exceed its previously set target of $250 million for M&A spending in 2025.

The acute hospital portfolio also showed improvement, with adjusted EBITDA growing by 25% year-over-year to $623 million. Hospital revenues reached $4 billion, including a $79 million pre-tax boost from Medicaid supplemental payment revenues in Tennessee related to a prior period.

However, Tenet has lowered its expectations for adjusted admissions in its hospital segment due to softer volumes in the second quarter. While adjusted admissions grew by 0.4%, outpatient visits, emergency room visits, and hospital surgeries all declined.

Policy Uncertainties and Market Reaction

Despite the positive financial outlook, Tenet's stock declined by approximately 15% following the earnings call. This drop may be attributed to investor concerns about potential impacts from recent healthcare policy changes and the company's reluctance to provide insight into 2026 projections.

The recently enacted "One Big Beautiful Bill" includes $1 trillion in healthcare cuts, reductions in provider taxes and payments, and changes to enrollment and subsidies for Affordable Care Act (ACA) exchanges. Tenet executives declined to comment on how these policy changes might affect the company's future financial performance.

One area of particular concern is the restriction on Medicaid state-directed payments, which allow states to make supplemental payments for services covered in Medicaid managed care contracts. In 2025, Tenet expects to record about $1.1 billion to $1.2 billion in supplemental payments, with approximately $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's patient volumes. Currently, exchange patients represent about 8% of Tenet's hospital admissions, with a 23% increase in exchange admissions and a 28% rise in revenues from exchanges reported in the second quarter.

As the healthcare landscape continues to evolve, Tenet Healthcare faces both opportunities for growth and challenges from policy uncertainties. The company's ability to navigate these complexities will be crucial in maintaining its positive financial trajectory in the coming years.