- Tenet and its subsidiary USPI have entered into a $1.2 billion deal to acquire ambulatory surgery center operator SurgCenter Development, expanding on a previous $1.1 billion cash deal inked with SCD last year.
- Under the new deal announced Monday, Tenet will acquire SCD's ownership interests in 92 ambulatory surgery centers and other support services in 21 states.
- In addition to the acquisition, USPI and SCD plan to enter into a five-year partnership and development agreement in which SCD will help facilitate "continuity and support for SCD's facilities and physician partners." USPI will also have exclusivity on developing new projects with SCD during the five-year agreement.
Despite being a legacy hospital operator, Tenet's outpatient surgery business is key to its long-term strategy.
After the latest deal closes, USPI will operate 440 surgery centers in 35 states, Tenet said Tuesday. The acquisition will boost USPI's footprint in existing markets, such as Florida where it already operates 47 centers and will gain an additional 15. USPI will also enter new markets, such as Michigan, with a sizable footprint at the outset, executives said Tuesday.
The deal includes 65 mature centers and 27 that have opened in the past year or will soon open and start performing their first cases. Tenet may also spend an additional $250 million to acquire equity interests from physician owners.
Tenet leaders touted SCD's service line mix, pointing out that a significant portion of the cases performed by these centers are for musculoskeletal care, which includes total joint and spine procedures.
The deal is expected to generate $175 million in EBITDA during the first year, executives said.
SVB Leerink analysts characterized the deal as savvy and said it will reshape the company's earnings towards a "faster growing, higher margin, and improved capital return profile."
Heading into 2021, Tenet had expected a greater share of its earnings power to come from its outpatient surgery business. This deal accelerates that aim over the long-term.
In 2014, Tenet's ambulatory surgery business accounted for just 5% of the company's overall earnings. Prior to this latest deal, Tenet expected the unit to account for 42% of its overall earnings in 2021.
This latest announcement follows Tenet's deal in October with Compass Surgical Partners to acquire its ownership and management interests in nine ambulatory surgery centers located in Florida, North Carolina and Texas for an undisclosed sum.