Tenet Healthcare Corp.’s plan to spin off its revenue-cycle subsidiary could be good news for the future independent company, which will be free to spend money as it wishes.
“You’re liberating the spinoff company to redeploy capital in a way that is most aligned with the nature of that subsidiary as opposed to the nature of the parent,” said Brian Brownschidle, executive director with XMS Capital Partners.
The Dallas-based hospital chain was gunning to sell Conifer Health Solutions, but after 18 months of fielding underwhelming offers settled on a tax-free spinoff, after which Conifer will be a separate, publicly traded company. The transaction won’t be finalized until the end of the second quarter of 2021, pending regulatory approval and other logistical hurdles.
This could be a positive outcome for Conifer. A stand-alone business specializing in a higher-margin, growth area like healthcare information technology can more easily justify acquisitions that are additive to its core business than if it were part of a larger corporation, Brownschidle said.
Plus, shares in a tech-enabled company like Conifer will likely trade higher on the stock market than Tenet’s, which trade on par with other hospital companies, said John Ransom, a managing director of healthcare equity research with Raymond James & Associates.
In any case, Conifer’s CEO, Stephen Mooney, jumped ship. Tenet announced his departure in the same news release as the Conifer spinoff, although Tenet CEO Ron Rittenmeyer said in an interview the two events are unrelated. “It’s very positive; no negative,” Rittenmeyer said. “We’re not pushing him out the door.”