Dive Brief:
- Tenet Healthcare said Monday it is selling three acute care hospitals in Texas to HCA Holdings in a $725 million deal expected to close in the third quarter of this year.
- Tenet has also reached an agreement with Humana whereby all Tenet’s physicians will be phased back into Humana’s network by October. And it is increasing its ownership in ambulatory surgery center operator United Surgical Partners International to 80% by July 3.
- The company also reported a smaller than expected $52 million net loss in continuing operations for the first quarter of 2017. This compares to a $55 million loss in the first quarter of 2016.
Dive Insight:
The hospital sales aren’t a surprise as Tenet, one of the largest for-profit hospital operators in the country, has been among many for-profit health systems looking to improve financials by offloading assets and easing debt burdens. CHS also announced divestures Monday, including the completion of nine hospital sales.
Tenet CEO Trevor Fetter said in an earnings call Tuesday the company's focus is on reducing both complexity and leverage in order to "improve long-term economics of the company." Hospital divestitures beyond the sales just announced can be expected, but will be smaller and cannot yet be announced, he said.
The new contract with Humana runs through May 2020. Tenet noted in a press release that the hospitals being added to Humana's network "represent the majority of the revenue that Tenet previously generated from Human under its prior contractual relationship."
Fetter said the greater share of USPI ownership lowers the amount of future capital that is pre-committed to the buy-up, which is expected to complete in July 2019 with Tenet owning 95% and a subsidiary of Baylor Scott & White Health with the remainder.
The buyer for the Texas hospitals, HCA, recently announced 2017 first quarter revenues of $10.6 billion and net income for the quarter at $659 million. The preliminary results were worse than Wall Street analysts had predicted, and HCA blamed that primarily on changes in the payer mix.