Tenet in exclusive talks over potential Conifer deal
(Updated at 1 p.m. ET)
Tenet Healthcare Corp. is in exclusive talks over a potential deal for its revenue cycle subsidiary, Conifer Health Solutions, the hospital chain's CEO said on the company's earnings call Tuesday morning.
Dallas-based Tenet has been shopping around Conifer for more than a year now, and executives have acknowledged the process is taking longer than expected. In announcing the exclusivity talks, Tenet CEO Ron Rittenmeyer said there is no assurance the development will result in a transaction. He said a confidentiality agreement precludes him from sharing further detail on the potential deal, including whether it's shaping up to be a sale, joint venture or another type of transaction.
"It is really, really good progress on what has been a very thorough and active process," he said, "and we will provide an update at the appropriate time."
Conifer's revenue slid 5.6% in the fourth quarter of 2018 year-over-year. On the call, Rittenmeyer admitted sales growth has lagged and the company is hiring a new head of commercial sales and rebuilding its sales team.
Rittenmeyer also announced Tenet has set a new goal of achieving $200 million in new run-rate cost savings by the end of this year after exiting 2018 with $250 million in run-rate cost savings, bringing Tenet to $450 million in cost savings in a little over two years.
"I'm really proud of the progress the team has made here, and believe that our teams have adopted a mindset that we can always do things more efficiently and effectively without compromising the quality of our work and service to our patients," he said.
Rittenmeyer said the details haven't been completely worked out as to how those cost savings will break down across business lines, but strategies will include further integration and consolidation—including within Conifer and its hospitals—in its technology operations and through offshoring.
"I'd be kidding if I said I have it totally defined down to the number because we're not that good," he said.
Tenet's net revenue of $4.6 billion in the fourth quarter of 2018 was down 7.2% from the prior-year period, when it was nearly $5 billion, but still surpassed Zacks Investment Research's prediction that revenue would fall 9.8% to $4.49 billion in the quarter.
Tenet's full-year 2018 revenue also beat expectations, coming in at $18.3 billion, down 4.5% from $19.2 billion in 2017. Zacks predicted Tenet's full-year revenue would be $18.18 billion.
Tenet's operating income fell to $404 million in the fourth quarter of 2018, down from $485 million in the prior-year period. In the full year, however, operating income was $1.6 billion, compared with $1.1 billion in 2017.
Tenet reported a $5 million net loss attributable to its shareholders in the fourth quarter of 2018, significantly narrowed from the prior-year period, when the company's net loss to shareholders was $229 million. In the full year, net income to available to shareholders was $111 million, compared with a $704 million net loss in 2017.
Rittenmeyer announced at the J.P. Morgan Healthcare Conference last month that Tenet had transitioned 20% of its corporate leaders and 35% of its hospital leaders last year. He told Modern Healthcare most of the departures were involuntary and based on performance.
Tenet's adjusted EBITDA came out to nearly $2.6 billion in 2018, up 4.7% from 2017, when it was $2.4 billion.
With four fewer hospitals in 2018, Tenet's total admissions were down 9.2% year-over-year to about 690,000. Patient days were down nearly 10% year-over-year, to roughly 3.2 million. Inpatient surgeries were also down nearly 10% to 185,000. On a same-store basis, total admissions fell 1.7%, patient days fell 2.2% and inpatient surgeries fell 2.8%.
Total outpatient visits fell 9.5% year-over-year to 7 million, and emergency room visits fell 8% to 2.6 million. On a same-store basis, outpatient visits fell 0.9% and emergency room visits increased 1.1%.
Net operating revenue in Tenet's hospital segment declined 8.4% year-over-year primarily because of divestitures. On a same-hospital basis, net patient revenue declined by 1.3% year-over-year. Net operating revenue grew 1.7% year-over-year in Tenet's ambulatory care segment, and revenue in Tenet's Conifer segment declined 5.6% in that time.
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