Tenet Health is still betting big on ambulatory surgery despite setbacks last year.
The Dallas-based for-profit health system is about a year behind on its planned ramp-up stemming from a $1.2 billion deal with SurgCenter Development announced in 2021, CEO Dr. Saum Sutaria told investors during an earnings call Thursday. Under the deal, Tenet and its subsidiary United Surgical Partners International took an ownership stake in 92 ambulatory surgery centers. Tenet also signed a $1.1 billion agreement with SurgCenter to acquire stakes in up to 45 centers in 2020.
Sutaria attributed the delay in the company's expansion plans to a “broad range of assets,” including many centers early in development, compared with the more mature operations acquired in the earlier SurgCenter deal.
“The agenda to make progress has not stalled. Since Q3, we have completed six more buy-ups at multiples unchanged from prior buy-ups. We have opened the majority of the de novo centers with the remaining seven on track to open this year,” Sutaria said.
Ambulatory surgery represents a "sustained and far-reaching tailwind" for Tenet, Sutaria said. The company plans to invest about $250 million in this space each year, he said. Tenet recently struck an agreement with Renton, Washington-based Providence, a longtime partner, that 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 common shareholders of $102 million for the fourth quarter, a nearly 60% drop from the same period in 2021. Operating revenue rose 2.8% to $4.99 billion and expenses increased 5.1% to $4.56 billion.
For the full year, Tenet recorded $411 million in net income, a steep decline from $914 million in 2021. Operating revenue decreased 1.6% to $19.17 billion while expenses dipped 1.2% to $17.25 billion.
Labor costs continue to burden health systems. Tenet Chief Financial Officer Daniel Cancelmi said contract labor expenses peaked in September, began abating during the fourth quarter and will continue to do so.
“What we’re really focused on is replacing contract labor to the greatest extent possible,” Cancelmi said. “We’ve obviously taken into consideration the incremental investment with our employees when we think about reduction in contract labor. It obviously will be replaced by some form of employee cost.”
Last month, Cancelmi announced he would retire at the end of the year; Tenet has not named a successor.