Tenet Healthcare (THC) Barclays 27th Annual Global Healthcare Conference summary

Policy and regulatory environment

• Medicaid reform discussions are politically sensitive, with strong public opposition to cuts, especially among Trump voters, and significant implications for veterans and children’s health programs.

• Legislative outcomes may focus on work requirements and tighter enrollment verification rather than broad cuts.

• Site-neutral payment reform poses less risk due to a business model focused on freestanding rates and limited physician employment.

• Tariff risks are mitigated by fixed pricing contracts and supply chain management, with 70% of supplies contracted for 2024.

Business strategy and operational focus

• Expense management and capacity expansion are key pivots in response to policy changes, with potential curtailment of select programs if Medicaid reforms materialize.

• USPI’s high margins are driven by high-throughput, low-fixed-cost ASC operations, focus on high-acuity procedures, and minimal Medicaid exposure.

• Guidance now emphasizes same-store revenue growth (3%-6%) over volume or pricing metrics, reflecting a shift toward higher-acuity procedures.

• Capital deployment prioritizes USPI growth, M&A, and high-acuity hospital investments, with increased share repurchases due to strong free cash flow.

Portfolio management and growth

• Recent hospital divestitures have reduced the portfolio to under 50, with focus on running attractive, high-quality facilities rather than targeting a specific number.

• USPI’s growth is fueled by expanding orthopedics and multi-specialty partnerships, with total joint procedures up nearly 20% in 2024.

• Lower-acuity procedures are being shifted out of ASCs to focus on higher-acuity, sustainable service lines.