Tenet profit plummets in 2022 due to outpatient care delays

Tenet Health is still betting big on outpatient surgery despite last year’s setbacks.

The commercial healthcare system in Dallas is about a year behind a planned ramp-up tied to a $1.2 billion deal with SurgCenter Development announced in 2021, CEO Dr. Saum Sutaria told investors during a call Thursday. As part of the deal, Tenet and its subsidiary United Surgical Partners International acquired a stake in 92 outpatient surgery centers. Tenet also signed a $1.1 billion deal with SurgCenter to acquire stakes in 45 centers in 2020.

Sutaria attributed the delay in the company’s plans to expand with a “wide range of assets”, including many early stage centers, compared to more mature operations acquired in an earlier deal with SurgCenter.

“The agenda for progress is moving forward. Starting from the third quarter, we have made six more buys at multiples that have not changed compared to previous buys. We have opened most of the centers de novo, and the remaining seven are due to open this year,” Sutaria said.

According to Sutaria, outpatient surgery represents a “steady and far-reaching tailwind” for Tenet. The company plans to invest about $250 million annually in the space, he said. Tenet recently entered into an agreement with longtime partner Providence in Ranton, Washington, which will add 15 to 20 sites over the next two years.

Tenet reported mixed financial results for 2022 on Thursday. The company reported net income attributable to shareholders of $102 million for the fourth quarter, down nearly 60% from the same period in 2021. Operating revenue rose 2.8% to $4.99 billion, while expenses increased 5.1% to $4.56 billion.

For the full year, Tenet recorded a net income of $411M, which is sharply down from $914M in 2021. Operating revenue decreased 1.6% to $19.17 billion, while expenses decreased 1.2% to $17.25 billion.

Labor costs continue to burden health care systems. Tenet CFO Daniel Canzelmi said contract labor costs peaked in September, began to decline in the fourth quarter and will continue to decline.

“What we’re really focused on is replacing contract labor as much as possible,” Cancelmi said. “We have obviously considered additional investment in our employees when we think about reducing contract labor. This will obviously be replaced by some form of employee cost.”

Canselmi announced last month that he would retire at the end of the year; Tenet did not name a successor.