All eyes on how Tenet pursues reform

Now that Tenet Healthcare Corp. has completed its $1.8 billion acquisition of Vanguard Health Systems, investors and peers will watch how the company capitalizes on healthcare reform. Though it may have been coincidental that the deal closed on the first day of open enrollment for insurance exchanges, Vanguard has been unique among its for-profit peers in actively adopting new payment models and risk-based contracting. The deal, which closed earlier than expected, creates a system with 77 acute-care hospitals, five health plans and six accountable-care organizations. It also bolsters Tenet's strength in the key state of Texas and adds population health management capabilities.

“I believe that you have to have wider scale,” Tenet President and CEO Trevor Fetter said. “I think it's a dangerous thing for smaller hospitals and regional systems to do it alone.” Tenet also hopes to extract greater profitability from Vanguard's hospitals through the services of Conifer Health Solutions, its revenue-cycle management subsidiary. The company's hospitals are participating in insurance exchange products in all of Tenet's markets, and Fetter said Tenet has taken an active role in outreach efforts, particularly in states like Texas that haven't done much to promote the coverage. Tenet's shares closed Friday at $46.10, an 11.9% increase since Monday. Publicly traded hospital operators generally enjoyed a bump as investors grew optimistic that exchange enrollment will be strong.

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