With new Conifer CEO, Tenet Healthcare says key element in place for spinoff

For the quarter, Dallas-based health giant Tenet Healthcare reported $2 million in profits, up from a loss of $5 million in the same quarter a year earlier. The company credited the quarterly gain on increased patient volumes as well as cost cutting. (Tenet Healthcare)

With the naming of a new chief for Conifer Health Solutions late last month, Tenet Healthcare officials say they are on track with key milestones needed to spin out the revenue cycle company by June 2021. 

That new president and CEO, Joseph Eazor, will be charged with leading the company through the spinoff and post-completion, said Ronald Rittenmeyer, executive chairman and CEO, during an earnings call.

"Hiring Joe was probably one of the most important things on the list to get done and it is done, now we have to let it play out accordingly," Rittenmeyer told analysts. 

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In July, Tenet announced its plan to spin off its $1.5 billion revenue cycle subsidiary Conifer as a separate, publicly traded company. At the same time, it was announced Conifer CEO Stephen Mooney stepped down from his position and Kyle Burtnett, who has been Conifer's chief operating officer, was appointed interim CEO. Burtnett will return to his previous role of COO, reporting to Eazor.

It will be the culmination of a yearslong process for Tenet to divest itself from Conifer.

"Joe has decades of experience working in customer-facing and leadership roles in public and private companies and he has a well-rounded skill set that spans strategy customer service and support, product development and global sales," Rittenmeyer said. "With Joe leading the company we remain steadfast in our efforts and continue to build on operational improvements that enhance product offerings which we believe will help with client acquisition initiatives."

Eazor was previously the executive vice president and chief customer officer for Oracle, where he was responsible for leading the development and execution of the company’s customer engagement programs. He also previously served as CEO of Rackspace and as CEO of EarthLink.

He also held executive roles at EMC, Hewlett-Packard and Electronic Data Systems. Eazor was also formerly a senior partner at both McKinsey & Company and A.T. Kearney. He serves on the board of Discover Financial Services. Eazor holds an MBA from the University of Chicago Booth School of Business and a bachelor's degree in petroleum engineering from the Colorado School of Mines.

A key operational initiative for Eazor is growth, Rittenmeyer said. As the company prepares for the spinoff, officials said they are making "certain investments" in the sales force to drive future revenue growth. 

That includes "trying to really evaluate if we’ve got all the right people in the right roles," Rittenmeyer said. "We’re going to go deep and long on that, which we’d expect a new leader to do."

Earnings

Tenet Healthcare posted losses of $243 million in 2019, down from a profit of $108 million the previous year.

The loss was blamed largely on a $227 million pretax loss, or $2.16 per diluted share, due to debt refinancing aimed at reducing future annual cash interest payments as well as costs associated with acquisitions. Tenet completed a $4.2 billion debt refinancing in the third quarter.

However, for the quarter, the Dallas-based health giant reported $2 million in profits, up from a loss of $5 million during the same quarter a year earlier.

The gain met previous guidance that officials credited, in part, to increased patient volumes as well as cost cutting. Across admissions, adjusted admissions and ambulatory surgical cases, Tenet reported increases between 2.5% to 3%. Tenet also hit financial metrics such as reporting adjusted EBIDTA by segment was up over 15% at hospitals, up over 24% in ambulatory centers and up over 8% at Conifer with over 490 basis point improvement in Conifers EBIDTA margin, Rittenmeyer said.

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"We were very aware of the skepticism of our guidance at the third-quarter call and we realize there was some concern about our ability to make the end of the year as we had projected," Rittenmeyer said. "This result represents the energy and dedication of our team demonstrating the sustainable changes we are making, the rigor of our discipline and the consistent follow through on our commitments."

Tenet's net operating revenues from operations reached $4 billion in the fourth quarter, up 3.6% from $3.8 billion in the fourth quarter of 2018. For the year, net operating revenues were $15.5 billion, up 1.6% compared to $15.3 billion in fiscal 2018. Revenues included $246 million from the California provider fee program in 2019 compared to $262 million in fiscal 2018.

The increase in revenue was credited largely to revenue growth on a same-hospital basis, partially offset by hospital divestitures. Admissions increased 2.3% on a same-hospital basis in 2019, adjusted admissions increased 1.9% and revenue per adjusted admission increased 2.7%. Hospital surgeries declined 0.7%.   

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Tenet’s fourth-quarter adjusted net income from operations increased to $105 million, up from $53 million in the same quarter of 2018. Tenet's adjusted net income from operations reached $281 million for the year compared to $193 million in fiscal 2018.

Those increases were driven by "operational improvements in each of the company's business segments," officials said. The full-year results were achieved despite lower-than-anticipated revenue, additional expenses related to Hurricane Dorian and an increase in contract labor costs associated with a strike by union nurses at certain hospitals in the third quarter.