Tenet Targeting $200M in ’22 ASC M&A

Jan. 14, 2022

CEO Saum Sutaria and his team want surgery centers to generate half of the company’s adjusted EBITDA by the end of 2023.

Geert De Lombaerde

Tenet Healthcare Corporation plans to put to work at least $200 million in 2022 to further expand its network of ambulatory surgery centers, which recently grew to more than 400 thanks to the Dallas-headquartered company’s purchase of SurgCenter Development.

Speaking at the 40th annual JPMorgan Healthcare Conference, CEO Saum Sutaria said his team’s M&A pipeline is “robust and growing” and that acquisitions will play a key role in Tenet’s goal of growing its ASC footprint from 438 on Dec. 31 to between roughly 600 by the end of 2025. Tenet and its United Surgical Partners International subsidiary late last month wrapped up their $1.1 billion acquisition of SurgCenter’s stakes in 86 surgery centers and other support services. (USPI also is looking to buy from physicians various minority interests in those centers for another roughly $250 million.) At that valuations, Tenet’s $200 million M&A budget for this year would equate to adding about 15 facilities.

De novo development also remains a key element of Tenet’s ASCS growth strategy. Sutaria said his team’s goal is to launch between 15 and 20 projects this year and to maintain that pace through 2025, either alone or via a development partnership with SurgCenter’s principals.

“We have proven this works,” Sutaria told the JPMorgan audience.

Tenet’s ambulatory care business is notably more profitable than its far larger hospital operations: Through the first nine months of year, ambulatory work generated adjusted EBITDA of $826 million on net operating revenues of nearly $2 billion – a margin of 42 percent the hospital group’s roughly 11 percent on more than $12 billion in revenues. The newly acquired SurgCenter centers produce similar margins and will add about $675 million in annual net revenue.

USPI last year accounted for a little more than 40 percent of Tenet’s adjusted EBITDA, a notable increase from 28 percent in 2017 and 33 percent in 2019. The big goal for Sutaria et al. is to grow that number to 50 percent by the end of 2023.

Shares of Tenet (Ticker: THC) were up about 1.5 percent Friday afternoon. Over the past six months, they have climbed nearly 20 percent, growing the company’s market capitalization to about $8.5 billion.