Tenet sells its remaining Chicago hospitals to Pipeline Health

Tenet Healthcare Corp. sold its remaining three hospitals in the Chicago area to Pipeline Health, the health systems announced Tuesday.

Dallas-based Tenet sold West Suburban Medical Center in Oak Park, Ill., Louis A. Weiss Memorial Hospital in the Uptown neighborhood, and Westlake Hospital in Melrose Park, Ill. This is Los Angeles-based Pipeline's first acquisition in the Chicago area, bringing its hospital footprint to eight. Tenet still has four ambulatory surgery centers in the area.

These types of community hospitals will play an increasingly important role in the care continuum, Jim Edwards, CEO of Pipeline Health, told Modern Healthcare. Pipeline's format lends itself to quick decisionmaking and a more affordable cost structure, he said.

"We looked at quality first and foremost, in which these hospitals have the potential to be very high quality, but what can also differentiate us is being a low-cost provider," said Edwards, who has been in Chicago talking with physicians and staff. "Some of these larger networks and tertiary or quaternary centers aren't geared for that."

Pipeline is primed to revitalize struggling community hospitals that allow residents to access care closer to home, said Dr. Eric Whitaker, who is joining Pipeline as a principal and vice chair in Chicago.

Also on Tuesday, Pipeline announced a joint venture in Dallas-Fort Worth with Adeptus Health. Twenty-two free-standing emergency rooms will become licensed outpatient departments of City Hospital at White Rock and will be renamed City Hospital Emergency Care.

Tenet has been divesting hospitals in markets that it doesn't lead as it looks to pay down about $14 billion in debt.

Fitch Ratings calculated Tenet's debt at 6.1 times its earnings before interest, taxes, depreciation and amortization, or EBITDA, as of Sept. 30, 2018, but said in a news release that could fall below six times by the end of 2019.

Tenet is also shopping its revenue-cycle management business, Conifer, as it doubles down on its ambulatory surgery center chain, United Surgical Partners, in which the hospital chain has an ownership interest in about 5% of all surgery centers and aims to grow aggressively. Conifer has 10% market share in an expanding $15 billion market, serving nearly 750 clients in more than 40 states, Tenet said in an investor presentation at the J.P. Morgan Healthcare Conference this month.

Conifer's adjusted EBITDA growth on a normalized basis reached 33% in 2018. Tenet's hospitals, by comparison, grew their adjusted EBITDA by 2% while Tenet's ambulatory segment grew 11%.

The hospital chain also said in the presentation that it was looking to outsource some of its 115,000 employees, likely more than 1,000 of them. Tenet is restructuring its corporate ranks, resulting in transitioning 20% of its corporate leaders and 35% of its hospital executives. It's also narrowing its supply chain spend. The company reduced its expenses by $250 million last year.

Tenet reported a net income of $364 million on revenue of $13.69 billion for the nine months ended Sept. 30, up from a $221 million net loss on $14.2 billion of revenue over the same period the prior year.