Dive Brief:

• Tenet Healthcare raised its full-year financial forecast on Tuesday after posting third quarter results that showed year-over-year growth in revenue and adjusted earnings.
• It’s the second consecutive quarter Tenet has raised its financial forecast due to outperforming company expectations. The hospital operator now expects between $21.2 billion and $21.4 billion in revenue for 2025.
• Tenet is also hiking its capital expenditure budget for the year by $150 million, to total between $875 million to $975 million. CEO Saum Sutaria told investors during a Tuesday morning call the funds would be used for organic growth in its hospital division and to fund investments in high-acuity service lines, like cardiac care, intensive care and high-end imaging.

Dive Insight:

Tenet reported $5.3 billion of net operating revenues for the third quarter, beating Wall Street’s expectations and the operator’s prior year performance by 3.2%.

The health system attributed its earnings results to broad same-store revenue growth, continued operational efficiency initiatives and dividends from its high-acuity service line strategy, which builds out offerings for complex patients requiring more specialized care. 

The operator’s acute hospital portfolio brought in $4 billion in net revenue during the quarter, benefitting from a $38 million boost from Medicaid supplemental payment revenues from prior years. Tenet’s ambulatory business, United Surgical Partners International, took in $1.3 billion. 

Both segments saw rising volumes during the quarter. Acute hospital volumes grew modestly, with same-store adjusted admissions rising 1.5% year over year. The CEO said he expects to see continued demand for Tenet’s high-acuity offerings, which motivated Tenet’s decision to increase its capital expenditure budget.

“We felt it was a good time, given the demand that we continued to see through the third quarter, to go ahead and make those investments and raise our guidance,” Sutaria said.

Surgical volumes in USPI facilities also rose 2.1% year over year.

Tenet’s guidance for 2025 predicts USPI will grow volumes by more than 8% year over year — a slowdown from prior years, when USPI was growing in the low- to mid-teens. Still, Sutaria said he still expects strong demand for services and hinted at potential acquisition opportunities in the fourth quarter

Executives did acknowledge they were grappling with uncertainty due to the government shutdown in Washington, though Sutaria appeared optimistic that lawmakers would reach an agreement on healthcare policy.

Sutaria said Tenet, like many of its peers, is waiting to hear more about how lawmakers will resolve negotiations about enhanced Affordable Care Act subsidies, which are set to expire without action from Congress. 

Democrats and Republicans have been locked in a weeks-long stalemate over the fate of the subsidies, which were first rolled out during the COVID-19 pandemic. Without an extension, millions are expected to become uninsured as premiums spike and providers are projected to lose billions in revenue. 

“Much of what we’re hearing is that it may take time, but a compromise will be achieved, from our intelligence coming from Washington,” Sutaria said. “We are just sort of patiently waiting to see what happens there.”

Tenet would be exposed to ACA pressures — during the third quarter, 8.4% of Tenet’s total hospital admissions and 7% of its total consolidated revenues came from exchange patients, according to CFO Sun Park.

However, USPI is generally less exposed to the exchanges and Medicaid — which is facing $1 trillion in cuts — than the acute hospital division, Sutaria said.