Core Insights - Tenet Healthcare reported strong Q2 2025 earnings, with adjusted EPS of $4.02, significantly exceeding Wall Street expectations of $2.87, and revenue of $5.27 billion, surpassing GAAP forecasts of $5.16 billion [1][5][10] Financial Performance - Adjusted EPS increased by 74% year-over-year from $2.31 to $4.02 [2] - Revenue grew by 3.2% from $5.11 billion in Q2 2024 to $5.27 billion in Q2 2025 [2] - Adjusted EBITDA rose 18.6% to $1.12 billion compared to $945 million in Q2 2024 [2] - Free cash flow reached $743 million, a 23.4% increase from $602 million in Q2 2024 [2][8] Segment Performance - Ambulatory Care segment saw net operating revenue increase by 11.3% to $1.27 billion, with adjusted EBITDA rising 11.4% [6] - Hospital Operations revenue grew modestly by 0.9% to $4.00 billion, with adjusted EBITDA up 25% [7] - Same-hospital admissions increased by 1.6%, while outpatient visits and emergency room visits declined by 3.2% and 4.7%, respectively [7] Strategic Focus - Tenet Healthcare is focused on optimizing its portfolio for growth and profitability, emphasizing the expansion of its outpatient services through United Surgical Partners International (USPI) [3][4] - The company is divesting underperforming hospitals and shifting care to outpatient settings, which are seen as more cost-effective [4] Future Guidance - The company raised its full-year FY2025 guidance, projecting adjusted EBITDA between $4.40 and $4.54 billion and adjusted EPS between $15.55 and $16.21 [10] - Revenue is expected to reach between $20.95 and $21.25 billion, with ambulatory net operating revenues projected between $5.0 and $5.15 billion [10]

Financial Data and Key Metrics Changes - The company reported first quarter adjusted diluted EPS of $2.90, consistent with previous expectations, with full-year 2025 adjusted EPS expectations remaining unchanged at greater than $7.25 [5][24][37] - Premium and service revenue for Q1 was $42.5 billion, with an increase in full-year revenue guidance to a midpoint of $165 billion, up from $159 billion [26][38] - The adjusted SG&A expense ratio decreased to 7.9% from 8.7% year-over-year, driven by revenue growth and expense discipline [35] Business Line Data and Key Metrics Changes - Medicaid membership was stable at approximately 12.9 to 13 million members, with a Medicaid HBR of approximately 93%, showing slight improvement from 93.4% in Q4 2024 [27][28] - The Medicare segment performed in line with expectations, with Medicare Advantage membership contributing an additional $1 billion to the 2025 revenue outlook due to better-than-expected retention [16][31] - The commercial segment saw strong growth, with a Q1 HBR of 75.0%, up from 73.3% the previous year, driven by new marketplace members [34] Market Data and Key Metrics Changes - The company noted an increase in bipartisan support for extending health care premium tax credits, with 78% of swing voters supporting the extension [9] - The expiration of enhanced premium tax credits is anticipated to be addressed by Congress, with significant implications for the marketplace [10][23] - The company is preparing for potential impacts from proposed marketplace integrity and affordability rules, which could influence market dynamics starting in 2026 [22][42] Company Strategy and Development Direction - The company is focused on margin recovery and aligning rates with member acuity, with expectations that Medicaid will return to pre-pandemic margin levels [11][13] - Strategic initiatives include expanding Medicaid managed care into rural areas and enhancing the Medicare Advantage value proposition [14][16] - The company is committed to navigating the evolving policy landscape while advocating for sound health care policy [7][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to manage through a dynamic policy landscape, noting that broad support for Medicaid benefit cuts is lacking [7][8] - The company anticipates continued momentum in discussions with state partners regarding rate negotiations and acuity data [75] - Management remains optimistic about long-term growth prospects, emphasizing the attractiveness of end markets and the potential for market share capture [24][25] Other Important Information - The company experienced $130 million in incremental medical expenses due to an active flu season, which offset underlying improvements in medical loss ratio [12][28] - The company is actively engaging with CMS on proposed rules that could impact the marketplace and is preparing for various potential outcomes [22][23] Q&A Session Summary Question: Details on flu-related costs - Management clarified that the $130 million in flu-related costs was tracked using a consistent definition and was isolated to Medicaid, with some flu impact seen in Medicare but not at the same level [49][51] Question: Long-term earnings outlook - Management confirmed that the long-term earnings potential remains optimistic, with opportunities for margin expansion in Medicaid and Medicare segments [54][56] Question: Impact of public exchange subsidies - Management indicated that the estimate of a $1 impact per share from the potential loss of enhanced APTCs remains valid, with ongoing discussions about the implications of work requirements [57][61] Question: Risk adjustment and membership growth - Management noted that risk adjustment numbers are consistent with expectations, and the majority of new membership remains subsidized, aligning with the company's focus on low-income populations [99][96] Question: Specialty drug trends - Management highlighted that specialty drug utilization trends are being closely monitored, particularly in Medicaid, with high-cost drugs impacting overall costs [118][120]