Tenet looks to sell 3 South Carolina hospitals as FTC blocks deal in California
FTC has blocked Tenet's planned $142.5M sale of San Ramon Regional Medical Center to John Muir Health.
Photo: John Fedele/Getty Images
Tenet Healthcare Corporation wants to sell three South Carolina hospitals to Novant Health for approximately $2.4 billion in cash, or after-tax proceeds of $1.75 billion.
On the same day that Tenet announced the proposed sale to Novant, the Federal Trade Commission voted to block the for-profit health system's planned $142.5 million sale of its San Ramon Regional Medical Center in California to John Muir Health, saying it would drive up healthcare costs.
On Friday, the FTC announced it had filed an administrative complaint and authorized a lawsuit in federal court that alleges the proposed acquisition would eliminate head-to-head competition between John Muir Health and nearby San Ramon Regional Medical Center. Both operate in California's I-680 corridor, which spans Contra Costa and Alameda Counties in the San Francisco Bay Area, the FTC said.
WHY THIS MATTERS
Tenet said of the Novant deal that it is looking to use the proceeds for debt retirement.
The company estimates a pre-tax book gain of approximately $1.6 billion from the sale. The deal is expected to be completed in the first quarter of 2024.
The transaction would include Coastal Carolina Hospital in Jasper County, Hilton Head Hospital in Beaufort County, East Cooper Medical Center in Charleston County and affiliated physician practices, and other related hospital operations.
Tenet's ambulatory facilities operated by United Surgical Partners International in these markets would remain with Tenet.
Under the purchase agreement, Tenet's Conifer Health Solutions subsidiary would enter into a new and expanded 15-year contract to provide revenue cycle management services for the South Carolina hospitals and related operations, Tenet said.
Furthermore, Novant Health and USPI would be enhancing their ambulatory surgery partnership to increase access to ambulatory surgical services for communities across the Carolinas.
For the last 12 months ended September 30, the three hospitals and related operations included in the sale generated revenues of approximately $552 million, pre-tax income of approximately $126 million and adjusted EBITDA of approximately $150 million, excluding interest expense of approximately $1 million, litigation and investigation costs of approximately $3 million, and depreciation and amortization expense of approximately $20 million, according to Tenet.
THE LARGER TREND
In October, Seeking Alpha analysis said Tenet Healthcare was a compelling opportunity despite lofty debt, since revenue increased by 7.7% in the past year.
Tenet, headquartered in Dallas, operates 61 acute care and specialty hospitals and approximately 110 other outpatient facilities. Its network includes United Surgical Partners International, which operates or has ownership interests in more than 480 ambulatory surgery centers and surgical hospitals.
Tenet's subsidiary, Conifer Health Solutions, provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers, and other clients.
ON THE RECORD
"Our three hospitals on the coast in South Carolina are well regarded by the communities they serve for the high-quality specialty services they deliver," said Dr. Saum Sutaria, chairman and CEO of Tenet Healthcare. "Novant is an innovative healthcare organization with a deep commitment to patient-centric care. Integration of these three hospitals into their network will bring benefits for generations to come. Our new partnership in revenue cycle management and expanded collaboration in ambulatory surgical services will support consumer-centric healthcare."
Twitter: @SusanJMorse
Email the writer: SMorse@himss.org
