Tenet ditches plan to spin off Conifer
- Tenet Healthcare will no longer spin off Conifer Health Solutions, its revenue cycle management unit, into a separate standalone business, the company announced Tuesday.
- After previously considering a sale of Conifer, Tenet ultimately decided in 2019 to spin off the unit but officials have now abandoned those plans as Conifer's financial performance and growth expectations have improved.
- The decision follows a review by the board of directors after consulting with independent legal and financial advisers, according to a statement released Tuesday.
Tenet's decision to retain Conifer in-house closes the chapter on a process that has spanned more than four years in which the Dallas-based hospital operator was either looking to sell Conifer or preparing the unit to be a standalone operation.
In December 2017, amid plans to drastically cut costs, Tenet announced it was exploring a potential sale of Conifer.
The cost-cutting initiative and potential sale were among the first big moves for then-CEO Ron Rittenmeyer, who was installed just months prior following the departure of longtime CEO Trevor Fetter amid activist investor pressure, according to reports at the time.
UnitedHealth was reportedly interested in Conifer when it was on the selling block, according to a previous report from The Wall Street Journal. The deal never came to fruition, but UnitedHealth did ink plans to buy another technology services firm, Change Healthcare, which also specializes in revenue cycle management and ferrying claims between payers and providers. The Department of Justice is challenging the blockbuster deal in court.
However, for Tenet, sale plans for Conifer changed in 2019. The company said it planned to spin off the unit into a publicly traded company. At the time, the company expected the spinoff to be complete by the second quarter of 2021, but the COVID-19 pandemic delayed those plans.
While it has been a drawn out process, Rittenmeyer, now executive chairman, said it was not "time wasted."
"We've spent a lot of time improving the performance, the results and the margin … to be able to bring these things to market," CEO Saum Sutaria said during a call with investors Tuesday, explaining the change of plans.
The move should not come as a surprise; it's been "well-telegraphed," Brian Tanquilut, an analyst with Jefferies, said in a recent note pointing to executives' comments during investor conferences earlier this year as proof.
Tanquilut called it a "reasonable" move. "Conifer has shown significant operating and financial improvement that will be accretive to [Tenet's] growth going forward," Tanquilut said.
Conifer is expected to generate revenue growth in the mid- to high-single digits, Tenet said Tuesday, and the unit has snagged new client wins and has "compelling growth prospects" in the pipeline.