Tenet Healthcare (NYSE: THC) is leaning further into ambulatory and outpatient growth strategies after a strong start to 2025, CEO Saum Sutaria said Tuesday during the company’s Q1 earnings call.
“We see significant opportunity for growth,” Sutaria said.
The Dallas-based company’s ambulatory platform, United Surgical Partners International (USPI), saw a 20% increase in net operating revenues compared to the previous year, at $1.19 billion, compared to $995 million the past year.
Sutaria attributed the revenue growth to a strategic push to shift away from lower-acuity cases.
“We continue to take strategic opportunities, in particular accelerating some of what we’ve been working on for the last year or two on higher-acuity work,” he said, adding that the company is particularly focused on total joints.
“We’re pleased with the continued, ongoing march forward in moving the joints into the outpatient setting,” Sutaria said. “We think that’s a big opportunity this decade.”
Capital deployment focused on ASC expansion
Tenet plans to deploy about $250 million annually toward ambulatory expansion, a goal Sutaria described as realistic given the company’s acquisition pipeline.
“The pipeline looks healthy,” Sutaria said. “$250 [million] is always kind of a goal range that we put [out there]. … Obviously, we have been spending, on average, a lot more than that – almost double that – because of some of the platforms over the past five, six years.”
Although acquisition multiples have remained steady, Tenet is increasingly focused on buying or developing centers where it can diversify service lines to include orthopedics and other more high-acuity specialties, Sutaria said.
The company added six new centers during the quarter, including a partnership with Choice Care Surgery Center in Midland, Texas. Choice Care is an advanced ambulatory surgical center offering urologic surgery, cardiology, gastroenterology, gynecologic surgery, pelvic reconstruction and plastic surgery.
“Our focus is a little bit more on some centers that have the potential for USPI to deploy its service line diversification capabilities and add things like ortho and whatnot,” Sutaria said.
And USPI’s growth environment remains strong, with limited exposure to Medicaid compared to Tenet’s hospital operations.
“We don’t have as much exposure in that environment to Medicaid, and while the exchanges are certainly relevant there, they’re less relevant than the hospital segment,” Sutaria said.
Outpatient strategy tied to higher revenue per case
Revenue growth per case in ASCs should continue over the next several years, driven by a mix of contracting advantages, a push toward higher-acuity procedures and payer incentives to move cases into lower-cost settings, Sutaria said.
“There is a desire by all stakeholders to move things into a lower-cost setting, including providing fair rates in the ASC environment,” he said. “We should see momentum on the net revenue per case in the ASC environment for some time to come.”
Tenet is also making an effort to re-syndicate ASCs to bring in new physician specialties aligned with higher-acuity procedures.
“Sometimes that’s a specialty shift,” Sutaria said. “You’re renewing, refreshing and re-syndicating with different specialists than were in the ASCs before. It takes a lot more work, but it’s driving earnings growth above our expectations.”
Strength across outpatient and acute care segments
Tenet reported total net operating revenues of $5.9 billion. Same-facility revenues across Tenet’s operations grew by 6.8%, with outpatient services playing a major role, Sun Park, Tenet’s chief financial officer, said.
“Our strong fundamentals, including same-store revenue growth, continued high patient acuity, favorable payer mix and effective cost controls drove the margin improvement,” Park said.
Addressing potential health care policy changes, including site-neutral payment proposals, Sutaria said Tenet is staying the course on its outpatient and ASC growth strategy.
“We are not altering our business strategy because of health care policy uncertainty,” Sutaria said. “We see significant opportunity for growth, which we believe translates into attractive free cash flow generation.”
When asked whether fear of a recession or job loss might be “front-loading” patient volumes early in the year, Sutaria said USPI has not seen clear evidence of that behavior yet.
“We don’t necessarily see significant changes in our physician practice offices or ASC cancellation rates,” he said. “I don’t know that there’s anything I could point to affirmatively to say that people are trying to utilize their coverage out of a fear of losing it.”
