Tenet CEO: ‘You’ve Got to Figure Out How to Manage Through’ Rising Labor Costs

Oct. 25, 2021
The hospital and surgery center operator has been looking to sign longer-term contracts for traveling nurses.

The new CEO of the Dallas-based Tenet Healthcare Corporation said the tight labor market for nurses and other providers will push the owner of hospitals and surgery centers to continue to look for cost savings in its operations, including by locking in traveling nurses to longer contracts.

Speaking to analysts and investors late last week after his team reported Tenet’s third-quarter results, Saum Sutaria said staffing remains the most difficult challenge Tenet faces and that labor costs will go up late this year and early next. But he added that the company also is managing the situation by better matching its services and capacity to patient demand.

“The labor market really hasn’t improved that much. It has forced us to go even further in our approach to trying to manage the operation and identify offsets, look at other sources for nursing, think about some longer-term contracts at better rates that we would be able to put in for traveling nurses into certain markets,” said Sutaria, who took over the helm at Tenet last month after being its president and COO. “You have to diversify the approach and tighten up the operations.”

Case in point: Tenet’s use of contract labor in the third quarter was stable from prior quarters that had surges similar to that of the COVID-19 delta variant. That helped limit year-over-year growth in the company’s salaries, wages and benefits spending to 3.1 percent, even though net operating revenues rose more than 7% to nearly $4.9 billion. As a share of the top line, labor costs fell two points to 45.1 percent, helping operating income more than triple from the same period in 2020 to $1.0 billion.

Asked about his outlook for wage inflation, Sutaria said Tenet’s plan “is that you’ve just got to accept that and figure out how to manage through it.” His team, he added, last year began trimming its roster of suppliers of traveling nurses and other personnel as part of that strategy.

Shares of Tenet (Ticker: THC) were changing hands around $70 Monday morning. They have risen about 25 percent over the past six months.

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