Major for-profit hospital chain Tenet Healthcare is projecting growth in 2023 thanks to less reliance on contract labor and growth in its surgery subsidiary.
The chain announced in its earnings release that it generated $102 million in profits with $4.9 billion in net revenue for the fourth quarter of 2022. It also released the full year financial guidance for 2023, projecting adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be $3.16 to $3.36 billion.
“Our momentum going into 2023 positions us for continued growth as we remain focused on expanding our industry-leading ambulatory business and investing in technology, innovation and talent,” said CEO Saum Sutaria in a statement.
Tenet’s financial outlook is projecting a 7.2 percent increase for this year and four to six percent growth in same facility revenues. A major factor in the outlook for 2023 is Tenet is expecting 11% growth from its surgical facility subsidiary United Surgical Partners International (USPI).
The chain has been buying up ambulatory surgery centers in a bid to restructure the business. Sutaria has previously projected that by the end of this year USPI will make up 50% of Tenet's overall business.
"For many years, we have consistently acquired centers at attractive valuations," Sutaria said on Thursday. "We intend to invest approximately $250 milion in ambulatory [mergers and acquistiions] every year and have a robust pipeline to support that level of investment."
It also expects same facility business to continue to recover for the chain’s hospitals.
“The continued migration of procedural services into an ambulatory setting acts as a sustained and far-reaching tailwind for our business,” Sautaria said. “Looking back from 2019 to 2022, the same facility business has recovered to pre-pandemic volumes and at the same time our net revenue per case has risen by 12.8 percent as a testament to our ongoing addition of higher acuity cases.”
The chain is projecting an expected adjusted EBITDA growth of 4.6 percent in 2023 for its hospital segment, which is higher than prior forecasts of two to three percent annually.
One of the biggest drivers of hospital growth for Tenet is lower reliance on pricey contract labor, which has strained finances at many hospitals over the past few years with the pandemic causing shortages.
“We saw our peak in contract labor expense in September and by December we had reduced that by almost 23%, exiting the year with contract labor below 6.5% of our consolidated … expense,” Sautaria said. “We are confident in our labor management system, and we will continue to adjust as needed for critical patient needs.”
He said that nurse retention and higher salaries as well as new recruitment efforts helped to shore up staff.
“In the fourth quarter, nurse turnover improved by 22% compared to the average of the prior four quarters,” Sautaria said.
Tenet reported that its hospital business had $3.8 billion in net operating revenues and a slight 0.5% increase in admissions compared to the same period last year. That was an improvement compared to the fourth quarter in 2021, which saw a nearly 4% drop in admissions compared to the prior year.
Revenues from Tenet’s Conifer business, which offers revenue cycle management and other services, was relatively stable at $326 million for the quarter, compared with $324 million in the fourth quarter of 2021.
Overall Conifer had a strong year thanks to third-party customer revenue growth of 10 percent.
Tenet’s adjusted EBITDA, excluding any grant income, in the quarter was at $857 million, slightly down compared to $877 million in the last quarter of 2021.
The hospital chain attributed the EBITDA growth to “lower COVID-related volume and acuity, elevated contract labor costs, partially offset by growth in our ambulatory care segment,” according to a release on the earnings.