HCA may be eyeing Tenet Healthcare portfolio, analysts say

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As Tenet Healthcare seeks options for divesting its hospital portfolio, some analysts see HCA lurking in the wings to snap the assets up.

Analysts say Tenet Healthcare’s decision to divest its hospital business may have attracted the attention of HCA, one of the nation’s largest for-profit healthcare companies. Even with the prospect of a successful spin, however, some investors still see storm clouds on the horizon.

Tenet has not offered any official word on potential suitors for the hospital, home health and hospice businesses, according to an article in Dallas News. The buzz among analysts, however, indicates HCA is a likely frontrunner.

Tenet currently owns 460 outpatient facilities and 77 acute care hospitals, making it the third-largest for-profit healthcare company in the United States. As one of the two larger for-profit companies in the field, any move by HCA would contribute to ongoing industry narratives around heightened consolidation.

The article points out that HCA has been siphoning up competitor-owned facilities recently, including acquisitions in Houston and San Antonio. HCA currently owns approximately 17 facilities in North Texas. Other analysts point to issues with the size of the portfolio and Tenet’s debt load. Those potential problems, along with the possibility of antitrust complications, suggest the portfolio will more likely get split up among multiple buyers.

Legal troubles and related financial issues have dogged Tenet since it paid out $514 million in a settlement over a whistleblower lawsuit involving kickback allegations in 2016. A half-year later, the Department of Justice indicted John Holland, the company’s former senior vice president of operations in the Southern States Region, for his involvement in the scheme.

RELATED: DOJ charges ex-Tenet Healthcare exec with role in $400M fraud scheme

RELATED: Tenet CEO Trevor Fetter to step down in early 2018; board changes also expected in wake of financial losses

Lackluster earnings reports and a rise in the provision for doubtful accounts to $371 million in the second quarter already had investors nervous before Tenet’s CEO, Trevor Fetter, announced plans to resign in August. The abrupt resignation of two board members, who represented a New York-based hedge fund controlling 18% of Tenet’s shares, may also signal a coming proxy fight, according to Dallas News.