Tenet selling five Birmingham hospitals to Orlando Health
Tenet's top priority for capital deployment is the expansion of low-cost, high-quality ambulatory surgical centers, says CEO.
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Tenet Healthcare Corp. is selling its 70% majority ownership interest in Brookwood Baptist Health in Birmingham, Alabama, for approximately $910 million to Orlando Health in Florida.
The after-tax proceeds of the transaction are approximately $790 million.
The definitive agreement with Orlando Health in Florida includes five hospitals: Brookwood Baptist Medical Center, Princeton Baptist Medical Center, Walker Baptist Medical Center, Shelby Baptist Medical Center and Citizens Baptist Medical Center. It also includes affiliated physician practices and other related operations.
Brookwood Baptist Health will remain a joint venture with Baptist Health System.
Under the agreement, Tenet's Conifer Health Solutions subsidiary will enter into a new and expanded 10-year contract to provide revenue cycle management services for the Birmingham hospitals and related operations, Tenet said.
The transaction is expected to be completed in the fall.
WHY THIS MATTERS
Tenet, a for-profit system based in Dallas, has been focused on the growth of its ambulatory surgery business.
"In terms of capital deployment going forward, our top capital priority remains the expansion of low-cost, high-quality ambulatory surgical centers for the communities around the country," Tenet Chairman and CEO Dr. Saum Sutaria said during the company's Q2 earnings call on July 24.
During the second quarter, Tenet added 11 new centers, which included a new partnership with the Florida Orthopedic Institute for three surgery centers. This is after acquiring a large number of centers during the first quarter of the year.
"The integration of those centers is on track, and the operating performance of the acquired centers has been in line with our expectations," Sutaria said during the earnings call. "We continue to be pleased with USPI's [United Surgical Partners International] de novo development activity with nearly 25 centers currently in syndication stages or under construction."
Tenet is also expected to soon open a new hospital in Westover Hills, near San Antonio, Texas.
THE LARGER TREND
Tenet's adjusted earnings before interest, taxes, depreciation and amortization (EBITA) in the second quarter was $945 million compared to $843 million during the second quarter of 2023. This reflects strong same-hospital admission growth, strong ambulatory net revenue per case growth, favorable payer mix and improved contract labor costs, partially offset by higher medical fees as well as the impact of hospital divestitures, Tenet said.
Through its brands, subsidiaries, joint ventures and partnerships, including United Surgical Partners International, the company operates 65 hospitals and over 450 healthcare facilities.
ON THE RECORD
"As we fully emerge from the pandemic, our repositioned portfolio of businesses is generating stronger results with attractive margins and strong free cash flow generation," Sutaria said. "The mix of businesses can thrive in any variety of political and regulatory environments as the fundamental tailwinds in the ambulatory demand for USPI, the high acuity program needs for our hospitals in growing markets and the need for efficient, effective healthcare services like those from Conifer are strong in the marketplace."
Email the writer: SMorse@himss.org
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