Tenet makes 2014 turnaround, plans more joint ventures in future

Image of Tenet Healthcare's headquarters from Google.

Tenet Healthcare, the country’s third largest for-profit hospital system, said it posted a profit in 2014 after losing $134 million in 2013, and intends to find new sources of revenue in joint ventures.

After posting a $134 million loss 2013, Tenet Healthcare posted $12 million in profit for 2014. For the fourth quarter of 2014, the Dallas-based company posted $61 million in net income and earnings of $1.03 per share.

With full-year revenue increasing 48 percent to $16.6 billion, it was Tenet’s strongest year in a decade, said president and CEO Trevor Fetter. “Our strategies to capture incremental market share, combined with an improving economy and expanded health coverage, generated admissions growth that was among the highest in the industry.”

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Inpatient admissions increased 2.4 percent year-over-year across Tenet’s 80 hospitals and 200 outpatient sites, while total admissions including outpatients grew 3.5 percent. Last quarter, Fetter said, the company saw one of the strongest increases in same-hospital commercial volumes in more than a decade, with paying admissions increasing 6.1 percent.

Also, charity-related and uninsured admissions fell 18 percent from 2013 to 2014. In five of the 14 states where Tenet operates, Medicaid eligibility has been expanded under the Affordable Care Act and uninsured and charity admissions have dropped 62 percent. Across all of Tenet’s states, Medicaid has also grown as a percentage of net patient revenue, from 9 percent in 2013 to 9.4 percent last year.

Another driver of revenue growth was Tenet’s Conifer Health Solutions subsidiary, selling revenue cycle and value-based care management services. Conifer, a provider-agnostic service at use in Tenet and other facilities, saw revenue grow nearly 20 percent to $1.1 billion.

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Conifer is being positioned as a service to help providers manage value-based initiatives, information technology problems like ICD-10 and quality reporting. Catholic Health Initiatives is one of the largest Conifer clients, with more than 90 of its hospitals using the company’s patient access and financial services in a deal that runs through 2032.

But Tenet is also putting a major focus on partnerships, currently managing a dozen joint venture deals.

Late last year, Tenet inked a joint-venture with Baptist Health System, in Birmingham, Alabama, with the company’s Brookwood Medical Center and Baptist facilities.

As Fetter said  in a conference call with investors, this kind of joint venture strategy could be a good alternative to simply acquiring more hospitals, which can bring regulatory and debt uncertainty.

“If you want to end up owning, either a piece or the majority of really high quality assets that are going to be transformative in a market, that’s going to increasingly require a JV approach,” said Fetter, now in his 12th year as Tenet CEO. The Baptist hospitals “were not available for purchase.”

In fact, one of Tenet’s full acquisition plans recently went bust. The company was in talks to acquire the five hospital Eastern Connecticut Health Network, but ultimately decided not to move forward after concluding that state regulators conditions for the takeover were too strict -- including continuing all jobs, pay levels and services for five years.

The “turnaround acquisition business market is still very much there,” Fetter said, but “the ability to get into high-quality successful assets really requires a more creative approach.”

Among other deals, Tenet is expanding its presence in Arizona through a joint-venture with Dignity Health and Ascension Health, the latter being the largest Catholic and nonprofit health system in the country. 

In this joint venture, Fetter said, Tenet will be the “majority partner of management responsibility for all operations” for the three hospitals in the Carondelet Health Network in Tucson. The deal connects the company to a larger state-wide health system in Arizona, including an accountable care organization that’s already in the works with Dignity. 

“From our perspective, this is a unique opportunity to extend our presence beyond Phoenix into the attractive Tucson market, and it’s consistent with our strategy to create new, innovative models for patient care,” Fetter said.

Twitter: @AnthonyBrino