With the potential for regulatory changes on the horizon, particularly regarding antitrust policies, Tenet Healthcare Corporation (NYSE: THC) CEO Saum Sutaria said that a more favorable environment for mergers and acquisitions in the coming years could support further healthcare consolidation.
Such a change would support ambulatory surgery center (ASC) dealmaking, although Sutaria noted that ASC merger and acquisition activity is unlikely to trigger antitrust concerns under any circumstances given the significant fragmentation in the sector.
“Largely speaking, the FTC and the antitrust environment will probably change and be more favorable for business in the coming four years,” he said during a Nov. 12 presentation at the UBS Global Healthcare Conference.
The Federal Trade Commission (FTC) recently implemented new rules to make the pre-deal notification and regulatory review process for mergers and acquisitions more rigorous, especially for “blockbuster” transactions.
While the ASC market has traditionally avoided intense scrutiny due to its fragmentation, this could change as larger health systems and private equity firms accelerate ASC acquisitions, consolidating control over outpatient care services and potentially reducing competition.
Yet under the incoming Trump administration, these rules could change again.
“I don’t know how to interpret some of what’s happened in this election; there’s a degree of populism that is also relevant to anti-competitive agendas that may exist in other industries,” Sutaria said.
Tenet Healthcare Corporation is experiencing a surge in its ASC business, United Surgical Partners International (USPI), which operates over 544 facilities in its network across the United States.
The fragmented nature of the healthcare industry, particularly the ambulatory surgery sector, means regulatory changes are unlikely to significantly impact USPI, Sutaria said.
“While we’re a small fraction of ASCs, we’re an even smaller fraction of the medical loss ratio, if you want to look at it that way, in terms of where the expenditures go,” he said. “I think [on the acute-care side], on the margin, there are probably opportunities that would receive less scrutiny going forward.”
On the ASC demand front, Sutaria said Tenet anticipates an ongoing increase in healthcare service utilization, partially as a result of the ongoing fallout from the pandemic.
Tenet’s view is that the healthcare demand lost due to COVID-19 excess mortality is gradually returning, which has been the company’s projection since 2021, Sutaria said. While the recovery rate varies by business unit, the ambulatory surgical unit rebounded swiftly.
“[In our ambulatory business] there is a lot of that pent-up demand, making it come back pretty quickly,” he said. “What’s driving the growth there is our acuity strategy, but also some expansion of indications, particularly in GI.”
Looking ahead, Sutaria is optimistic about Tenet’s positioning, particularly in the ASC market.
“Our ambulatory surgery business has grown tremendously,” he said.
This year, Tenet expanded capacity while reducing reliance on contract labor, which has helped improve core business margins, he added. This has enabled the company to deleverage and build financial stability for future investments.
Sutaria suggested that the company will continue to invest in the ambulatory surgery center market.
“In the ambulatory surgery space, we follow the entire market all the time,” Sutaria said. “And if you really look at our history over the last five or six years, we’ve obviously deployed, on average, more than twice what we say we’re going to deploy because of the larger transactions.”
