Tenet Healthcare Corp. will spin off its $1.5 billion revenue cycle subsidiary Conifer Health Solutions as a separate, publicly traded company, it announced Wednesday .
At the same time, it was announced Conifer CEO Stephen M. Mooney stepped down from his position and Kyle Burtnett, who has been Conifer's chief operating officer, was appointed interim CEO. Tenet is conducting a national search for a permanent CEO of Conifer.
The announcement is the culmination of a yearslong process for the Dallas-based health system giant to divest itself from Conifer.
Tenet had been courting buyers while still assuring investors of a long-term relationship with Conifer. Suitors for the business services group have included health giants like UnitedHealth Group and at one time, officials expected the company to fetch up to $2 billion as part of Tenet's divestiture strategy.
Now, Tenet said they will pursue a tax-free spinoff of Conifer, which is expected to be completed by the second quarter of 2021.
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In a statement, Executive Chairman and CEO Ronald A. Rittenmeyer said the decision came after Tenet evaluated multiple options for the business while simultaneously driving significant and sustainable improvements in performance. "This decision supports our longstanding objectives to maximize the value of Conifer, build on its strong growth potential and deliver the best outcome for Conifer and for Tenet shareholders," Rittenmeyer said.
Conifer is a technology-enabled healthcare services company that provides outsourced revenue cycle management and population health management services to health systems, physicians and employer groups. Conifer manages more than 17 million unique patient interactions and approximately $25 billion in net patient revenue annually. In 2018, Conifer saw profits of $357 million on $1.5 billion in revenue, up 26% over 2017.
Goldman Sachs & Co. LLC is acting as financial adviser and Willkie Farr & Gallagher LLP is acting as legal counsel to Tenet.
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What's next
What's next? Officials said the separation process will include a review of the necessary executive leadership changes, including board membership needs, and key commercial milestones that Conifer must achieve to become a successful public company. The company did not yet disclose specific details about what those actions and milestones will be.
The spinoff will also be subject to the creation of a final entity structure of the spun-off business, with assurances that the separation will be tax-free to Tenet's shareholders, officials said. The spinoff will not require a vote by Tenet shareholders. Officials said the move is supported by CommonSpirit Health which owns a minority interest in Conifer.
