Tenet Health(THC) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Tenet Healthcare reported net operating revenues of $5.1 billion for Q3 2024, with consolidated adjusted EBITDA of$978 million, reflecting a 15% increase compared to Q3 2023 [7][18] - The adjusted EBITDA margin improved to 19.1%, up 220 basis points from the previous year [19] - Free cash flow generated in Q3 was $829 million, with$4.1 billion in cash on hand and no borrowings under the credit facility [23][24] Business Line Data and Key Metrics Changes - USPI's adjusted EBITDA reached $439 million, a 19$539 million, representing an 11% growth over Q3 2023, with same-store hospital admissions up 5.2% [10][21] - Revenue per adjusted admission in the Hospital segment increased by 3.3% compared to the prior year [11][21] Market Data and Key Metrics Changes - USPI's same-facility system-wide net revenue per case increased by 7.6%, driven by high acuity and favorable payer mix [20] - The company noted strong demand in the hospital segment, particularly in cardiovascular and specialty surgical areas, contributing to inpatient admissions growth [68] Company Strategy and Development Direction - Tenet is focused on expanding its network and investing in growth opportunities, including the opening of new hospitals and partnerships [12][17] - The company is committed to a deleveraged balance sheet, with a leverage ratio of around 3 after accounting for tax payments due on asset sales [16] - Future capital deployment will prioritize growth in the ambulatory surgical business through M&A and de novo development, alongside returning excess capital to shareholders [17][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment and the ability to meet guidance despite challenges from hurricanes affecting operations [41][72] - The company anticipates continued growth in same-store volumes and effective pricing, with expectations to offset headwinds from divested facilities in 2025 [30][76] - Management highlighted the importance of maintaining operational efficiencies and cost controls to navigate the current healthcare landscape [39][66] Other Important Information - The company completed the sale of its Alabama hospitals, enhancing the return profile of its remaining portfolio [14][15] - Tenet expects consolidated net operating revenues for 2024 to be in the range of $20.6 billion to$20.8 billion, with adjusted EBITDA guidance raised to $3.9 billion to$4.0 billion [25][26] Q&A Session Summary Question: Clarification on USPI segment guidance and cash flow tax payments - Management clarified that USPI's Q4 EBITDA guidance implies a sequential increase, and tax payments for Q4 are expected to be around $700 million [34][36] Question: Details on 2025 growth expectations - Management indicated strong demand recovery in the hospital segment and does not foresee a decline in volumes moving into 2025 [43][45] Question: Impact of hurricanes on operations - Management confirmed that 148 facilities were impacted, but most are operational, and they expect to recover business in Q4 [41][72] Question: Hospital earnings cadence and unusual items in Q3 - Management noted that the earnings cadence is slightly different this year due to divestitures, but Q3 did not have any unusual items affecting results [55][57] Question: Supplemental payment amounts and Medicaid programs - Year-to-date supplemental Medicaid fees are approximately$900 million, with expectations to offset divestiture impacts through strong volume growth [61] Question: Future capital deployment and acquisitions - Management emphasized the focus on post-synergy multiples for acquisitions and has not seen significant changes in purchasing multiples recently [80] Question: Contribution from Conifer post-divestitures - Management expects ongoing benefits from long-term revenue cycle relationships with divested sites, contributing positively to EBITDA [86][88]