Tenet Health(THC) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Tenet Healthcare reported net operating revenues of $20.5 billion for 2023, with consolidated adjusted EBITDA of$3.54 billion, resulting in a 17.2% adjusted EBITDA margin [5][39] - In Q4 2023, total net operating revenues were $5.4 billion, and consolidated adjusted EBITDA was$1.012 billion [39] - The company achieved a free cash flow of $1.6 billion for the year, ending with over$1.2 billion in cash and no borrowings under its $1.5 billion line of credit [42][43] Business Line Data and Key Metrics Changes - The USPI segment generated$1.54 billion in EBITDA for 2023, reflecting a 16.4% growth over 2022, with margins at 40% [8] - USPI experienced a 9.2% growth in same facility revenues in 2023, significantly exceeding the long-term goal of 4% to 6% [14] - The hospital segment generated $2 billion of adjusted EBITDA in 2023, representing a 12$200 million to $250 million annually in USPI, with a robust pipeline for new center openings [30][73] - The company aims to strategically open capacity in hospitals to meet growing demand while maintaining operational discipline [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth rates of the ambulatory surgery business, anticipating continued strength in demand and pricing [19][20] - The guidance for 2024 projects adjusted EBITDA of$3.285 billion to $3.485 billion, reflecting a 7% growth rate at the midpoint [34][68] - Management acknowledged potential headwinds from the termination of COVID-related funding programs and new regulations affecting reimbursement [69] Other Important Information - The company has combined Conifer and hospital operations into one reportable segment, which does not impact consolidated revenues or EBITDA [12] - Recent divestitures, including the sale of hospitals, are expected to lower leverage ratios and improve financial flexibility [37][67] Q&A Session All Questions and Answers Question: Insights on 1% to 3% case growth for USPI - Management indicated that the strong growth in 2023 sets a high comp for 2024, but they remain optimistic about sustaining volume growth across service lines [49][50] Question: Thoughts on recent divestitures and market dynamics - Management noted that the high valuations for divested assets reflect their quality and the rarity of such opportunities in the market [51][53] Question: Expectations for labor costs and contract labor savings - Management expects continued savings from contract labor in 2024, with base wage inflation modeled at 2% to 3% [129] Question: Payer mix expectations for 2024 - The payer mix is expected to remain steady, with managed care around 70%, and potential tailwinds from exchange volume growth not assumed to be material in guidance [140]