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F500-2021-167-Tenet Healthcare

The health care services company operates 65 hospitals and approximately 450 other facilities in addition to providing health care support services to clients. In April, Tenet announced it completed the sale of its urgent care platform to FastMed for $80 million.

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F500-2020-174-Tenet-Healthcare

The Dallas-based health care company and its subsidiaries operate acute care and specialty hospitals, as well as ambulatory surgery centers and other health care facilities around the U.S.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Tenet Healthcare operates a network of hospitals, acute care centers, emergency departments, imaging centers, and ambulatory surgery centers through its subsidiaries and joint ventures, comprising one of the largest for-profit hospital chains in the U.S. Its Conifer Health Solutions subsidiary provides revenue cycle management to hospitals and health systems nationwide.

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Tenet Healthcare (THC): Company Profile, Stock Price, News, Rankings

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Tenet Healthcare

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Good morning. Welcome to Tenet Healthcare's third quarter 2025 earnings conference call. After the speaker remarks, there will be a question and answer session for industry analysts. If you'd like to ask a question, the command is star one to enter the queue. Tenet respectfully asks that analysts limit themselves to one question each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's third quarter 2025 results, as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com. Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information.

Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum.

All right. Thank you, Will, and good morning, everyone. We had another quarter of strong performance where we exceeded our expectations for revenue, adjusted EBITDA, and margins. Third quarter 2025 net operating revenues were $5.3 billion, and consolidated adjusted EBITDA grew 12% over the third quarter 2024 to $1.1 billion. This represents an adjusted EBITDA margin of 20.8%, which is a 170 basis points improvement over the prior year, driven by our strong same-store growth and continued operating efficiency. USPI continues to excel, and we generated $492 million in adjusted EBITDA, which represents 12% growth year-over-year. Same-facility revenues grew by 8.3% in the third quarter, highlighted by 11% growth in total joint replacements in the ASCs over the prior year.

Our M&A and de novo activity remains robust, as we acquired 11 centers and opened two de novo centers in the quarter, including facilities specializing in high-acuity procedures such as spine and orthopedics. We have already spent nearly $300 million on M&A in this space year to date and expect to continue adding additional centers in the fourth quarter. The M&A and de novo pipelines remain strong. Turning to our hospital segment, adjusted EBITDA grew 13% to $607 million in the third quarter of 2025. Same-store hospital admissions, adjusted admissions, were up 1.4% in the quarter, and third quarter 2025 revenue per adjusted admission was up 5.9% over the prior year, as payer mix and acuity remained strong. In September, we opened our newest hospital facility in Port St. Lucie, Florida. This facility expands capacity in one of the fastest growing areas in the country.

The hospital will provide comprehensive emergency and specialty care and is focused on leveraging state-of-the-art technology, including robotics and advanced cardiac catheterization techniques. Turning to our full-year guidance, at this point in the year, we are once again raising our full-year 2025 adjusted EBITDA guidance to a range of $4.47 billion-$4.57 billion. Building upon our substantial post-second quarter guidance increase, indicating the confidence we have in our business this year, we have now increased our adjusted EBITDA guidance by $445 million, or 11% at the midpoint of the range from our initial guidance. Additionally, we are increasing our investments in capital expenditures in 2025 and now expect to invest $875 milliom-$975 million to fuel organic growth in the future, a $150 million increase at the midpoint over our prior expectations.

In addition to this increased investment, we are also raising our expectations for full-year 2025 free cash flow minus NCI to a range of $1.495 billion-$1.695 billion, an increase of $250 million at the midpoint from our previous guidance range. This increase is driven not only by the fundamental growth in adjusted EBITDA, but also by the strong cash collection performance of Conifer. Let me turn to 2026 with a few points. Uncertainty about the enhanced premium tax subsidies and the impact on reimbursement and enrollment in the exchanges still exists. Approvals for various increases in state-directed payment programs for 2026 are still pending. Currently, in our hospital segment planning process, we see healthy patient demand that would support same-store volume growth and a stable operating environment supported by disciplined cost controls in 2026.

Our strategy, which is more focused on higher acuity services, has delivered a track record of improved margins and strong earnings growth over the past few years. The return on invested capital for this improved portfolio of hospital assets is such that we have confidently increased our CapEx per bed from prior levels to higher levels in both 2024 and 2025, and we should continue to see the benefits of that into 2026. At USPI, we expect same-store revenue growth in line with our long-term expectations, a continued focus on high-acuity cases, operational efficiencies, and disciplined cost controls. Additionally, we expect further contributions from M&A and de novo development. I would note that USPI is less exposed to Medicaid and the exchanges, and our ASCs are on freestanding rates. We will continue to operate and invest in this attractive segment.

In summary, we continue to deliver our commitments for sustained growth, expanding margins, a delevered balance sheet, and improved free cash flow generation. Our strong execution is driving attractive EBITDA growth that we are converting into significant free cash flow, and our transformed portfolio of businesses are well positioned to drive sustained performance in the future. With that, Sun will provide us a more detailed review of our financial results. Sun, over to you.

Thank you, Saum, and good morning, everyone. We delivered strong results in third quarter 2025 with adjusted EBITDA above the high end of our guidance range, once again driven by strong same-store revenue growth, continued high patient acuity, favorable payer mix, and effective cost controls. We generated total net operating revenues of $5.3 billion and consolidated adjusted EBITDA of $1.1 billion, a 12.4% increase year-over-year. Our adjusted EBITDA margin in the quarter was 20.8%, a continuation of our improved margin performance over multiple quarters. I would now like to highlight some key items for both of our segments, beginning with USPI, which again delivered strong operating results. In the third quarter, USPI's adjusted EBITDA grew 12% over last year, with adjusted EBITDA margins at 38.6%. USPI delivered an 8.3% increase in same-facility system-wide revenues, with net revenue per case up 6.1% and same-facility case volumes up 2.1%.

Turning to our hospital segment, third quarter 2025 adjusted EBITDA was $607 million, with margins up 160 basis points over last year at 15.1%. Same-hospital, inpatient adjusted admissions increased 1.4%, and revenue per adjusted admissions grew 5.9%. Our consolidated salary, wages, and benefits was 41.7% of net revenues, a 160 basis point improvement from the prior year, and our contract labor expense was 1.9% of consolidated SWV expenses. These improvements continue to be driven by our data-driven approach to capacity and labor management and disciplined operating expense controls. Finally, we recognized a $38 million pre-tax impact for Medicaid supplemental revenues related to prior years in the third quarter of 2025. As a reminder, in total year to date, we have recorded $148 million of favorable pre-tax impacts associated with Medicaid supplemental revenues related to prior years. Next, we will discuss our cash flow, balance sheet, and capital structure.

We generated $778 million of free cash flow in the third quarter, amounting to $2.16 billion of free cash flow year to date, which is up 22% over the same nine-month period in the prior year. As of September 30, 2025, we had $2.98 billion of cash on hand, with no borrowings outstanding under our line of credit facility. Additionally, we have no significant debt maturities until 2027. During the third quarter, we repurchased 598,000 shares of our stock for $93 million. Year to date, through September 30, we have repurchased 7.8 million shares for $1.2 billion. Our leverage ratio as of September 30 was 2.3x EBITDA, or 2.93x EBITDA less NCI, driven by our outstanding operational performance and continued focus on financial discipline.

We believe we have significant financial flexibility to support our capital allocation priorities and drive shareholder value, and are very pleased with our ongoing cash flow generation capabilities. We remain committed to a deleveraged balance sheet. Let me now turn to our outlook for 2025. For 2025, we now expect consolidated net operating revenues in the range of $21.15 billion-$21.35 billion, an increase of $150 million over prior expectations. As Saum mentioned, we are raising our 2025 adjusted EBITDA outlook range by $50 million at the midpoint to $4.47 billion-$4.57 billion, reflecting our outperformance in the hospital business. This is in addition to the substantial $395 million guidance raise that we announced in the second quarter. At the midpoint of our range, we now expect our full-year 2025 adjusted EBITDA to grow 13% over 2024.

Turning to our cash flows for 2025, we now expect free cash flows in the range of $2.275 billion-$2.525 billion, distributions to non-controlling interest in the range of $780 million-$830 million, resulting in free cash flow after NCI in the range of $1.495 billion-$1.695 billion, an increase of $250 million at the midpoint from our previous guidance range. This reflects our focus on strong free cash flow conversion from our EBITDA growth, the continued outstanding cash collection performance of Conifer, and continued investment into high-priority areas of our business. Now, turning to our capital deployment priorities, we are well positioned to create value for shareholders through the effective deployment of free cash flow, and our priorities have not changed. First, we will continue to prioritize capital investments to grow USPI through M&A.

Second, we expect to continue investing in key hospital growth opportunities to fuel organic growth, including our focus on higher acuity service offerings. Third, we will evaluate opportunities to retire and/or refinance debt. Finally, we'll continue to have a balanced approach to share repurchases depending on market conditions and other investment opportunities. We continue to deliver consistent growth and have disciplined operations, which has translated into outstanding financial results. We are confident in our ability to deliver on our increased outlook for 2025 as we continue to provide high-quality care for our patients. With that, we're ready to begin the Q&A. Operator.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to one question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the STAR keys. One moment, please, while we poll for questions. Our first question comes from Kevin Fischbeck with Bank of America. Please proceed with your question.

Great. Thanks. I wanted to ask you about the Q4 guidance and the expectations for utilization. Are you guys building anything in there for higher utilization before these subsidies expire? How do you think about the capacity, particularly within USPI, to accommodate utilization there? Secondly, you mentioned that USPI is insulated from the headwinds for next year, but just trying to understand a little bit where you do see that pressure. Can you talk a little bit about exchange exposure within USPI? Thanks.

All right. There's a lot of questions in there, Kevin. Let me just tackle one by one, and Sun, you know, we can kind of complement here. First of all, we haven't built in anything, nor are we seeing any kind of rush to the office, if you will, with respect to the exchange subsidies. We're not planning, nor are we saying that we expect them to expire at this stage. I think much of what we're hearing is that it may take time, but a compromise will be achieved from our intelligence coming from Washington. We are just sort of patiently waiting to see what happens there. From a capacity utilization standpoint at USPI, we typically have, as you know, a busier late November and certainly December and have planned for staffing and capacity stretch that happens in that time period every year.

The simplest way to look at it is we're not worried about our capacity to take on the demand that we would see in the typical end of the fourth quarter at USPI. We begin planning for that every year, months in advance, with a very well-established protocol of how we do things. There should be no reason that's different this year, including if there happened to be more demand that came because of any kind of change in the exchanges or whatever that may be ahead of us from that perspective. What we have said about exchange business at USPI is a couple of things. One is there's a lot less exposure there on a per case or revenue basis than in the hospital segment.

The reason for that, we have said, is that we typically see the exchange business, especially newer exchange members, behaving with consumption patterns that are more similar to, for example, Medicaid. That explains some of the difference. Sun, I don't know if there's anything you want to add here.

Yeah, just a couple metrics, Saum. Thank you. Hey, Kevin. I would also just note for USPI, our implied Q4 guidance is about an increase of $80 million, roughly from Q3 into Q4, which is fairly standard if you look at our historical pacing and change into Q4. I think we remain confident in both our capacity as well as our ability to take care of those patients. Exchange, I would just note for Q3, exchange was 8.4% of our total admissions and 7% of our total consolidated revenues. A slight increase in total as a percent of admissions from Q2 and, you know, relatively flat in terms of total percent of consolidated revenues. We do see continued strong exchange performance, but at this point, no significant, you know, increase in Q3. We'll see in Q4. Thanks for your question.

Our next question comes from Scott Fidel with Goldman Sachs. Please proceed with your question.

Oh, hi. Thanks. Wanted to hopefully just drill a little bit more to the CapEx inputs for the year, including the increase in the CapEx guidance. Maybe if you can talk about specific allocation of capital related to the increase, and then maybe bucket some of the key larger investments that you're making within the CapEx for the full year. Thanks.

Yeah. Hey, Scott. Appreciate the question. I would just characterize the increased capital expenditure as more investment in both program or clinical program infrastructure, service line support, and various other growth strategies in the hospitals. Obviously, our CapEx plan for the year included the residual capital that was required to open up the Port St. Lucie Hospital. This is capital expenditure that has extended above and beyond that where we see opportunities for growth. As I indicated, the demand environment continues to be very healthy, and we see opportunities. The efficiency with which we operate, our focus on service levels to the physician community, you know, we see the opportunity for them to choose our sites as a location of care for their patients more and more.

Obviously, the way in which we tend to deploy this capital is focused more on our high-acuity strategy, things that are relevant to the cardiac care unit, intensive care unit, cath labs, high-end imaging, etc., surgical programs. That's really how we're making the investments around the country. As we reviewed them through this business planning cycle, we felt it was a good time, given the demand that we continued to see through the third quarter, to go ahead and make those investments and raise our guidance.

Our next question comes from Craig Hettenbach with Morgan Stanley. Please proceed with your question.

Yes. Want to just extend that, just focused on free cash flow here, the increase to guidance. You mentioned kind of improved cash collections at Conifer. You also have margins coming up. Any other context around kind of free cash flow and, importantly, just the sustainability of those trends as you see it?

Yeah. Hey, Craig. Thanks. As mentioned, this has been a long-term focus of ours, making sure not only EBITDA growth and EBITDA margins come through through strong operational performance, but also making sure that converts through free cash flow. We listed some of the key drivers there. Obviously, the continued improving and fantastic performance by Conifer on cash collections. Obviously, growth in EBITDA comes through. Probably a couple other things that I would point out. More broadly, in terms of working capital management, we have spent a lot of time and focus on making sure we're optimizing all components of there. Obviously, one of the additional benefits of our continued deleveraging is improvement in interest expenses, which also helps our free cash flow generation.

We believe these operational efficiencies that we've implemented, similar to our margin performance, whether it's Conifer or working capital management or continued EBITDA generation, we obviously will work hard to make these sustainable over a long period of time.

Our next question comes from Jason Cassorla with Guggenheim Securities. Please proceed with your question.

Great. Thanks. Good morning. I just wanted, Sun, to go back to your commentary around the implied 4Q guidance on USPI. At the midpoint, it would imply year-over-year growth a little over 8%, which is still strong, marks a little bit of a deceleration from like the low to mid-teens you've done this year. Just any thoughts around that as a conservatism, anything from a timing perspective, like the pace of development and coming online that's impacting that? Just any further detail around the implied fourth quarter guidance for USPI would be helpful. Thank you.

Sun, let me start. I don't think anything we're saying about the business demand, organic performance really changes. Obviously, we have certain assets at a larger scale and various other pricing elements that begin to lap year-over-year from that perspective. If anything, it's just math, basically. There's really no, I mean, we don't, there's no implication. We're not looking at this fourth quarter at USPI really any differently than in prior fourth quarters. As I said, we're intensely just focused on the ramp-up of business that we typically would see. Sun?

Yeah, I don't think I have anything further to add, Saum. Thanks.

Our next question comes from Ann Hynes with Mizuho. Please proceed with your question.

Great. Thank you. Just looking at the, obviously, margins and cash flow have been very strong. Costs have been very good. Going into 2026, especially the labor environment, I think that's better than expectations in 2025. Do you expect that to continue into 2026 on the labor side? Any other inflationary pressure you would call out as we do our models, that would be great. Thank you.

Sure. Hey, Ann. While we're not, you know, commenting specifically on 2026 yet, we'll note a couple of things. You're right. Our labor environment has generally been very strong and conducive to our operations. You know, whether it's full-time labor expenses, whether it's our management of contract labor and other premium labor, whether it's pro fees, I think they've all been to our expectations. In the current environment, as we sit here today, don't see any meaningful changes coming. In terms of other inflationary pressures, again, not commenting specifically on 2026, but obviously the other topic that we've talked about is tariffs. We've said that for 2025, we've been able to manage that fairly well due to both our sourcing optimization exercises, whether it's contracting, whether it's working with our vendors, whether it's picking the right products, as well as through efforts through our GPO.

We remain confident based on our contract structure that we have a couple more cycles where we'll be able to manage this. Obviously, as we get into the future years, we'll have to remain nimble on the tariff dynamic.

Our next question comes from Benjamin Rossi with JPMorgan Chase. Please proceed with your question.

Hey. Good morning. Thanks for taking my question. I guess just checking in on Conifer. How did Conifer's contribution within the hospital operations segment shake out during 3Q? You've previously mentioned Conifer's ability to assist with patient eligibility and enrollment services during things like Medicaid redeterminations. I guess, should the ACA exchange subsidies expire, do you think Conifer could have a similar utility for you in helping identify patients with lost coverage and could be eligible for coverage elsewhere? Thanks.

That's a very good insight about some of the capabilities that we have in Conifer. By the way, I would flip it the other direction as well. Given the timeframe we're at, but the likelihood, you know, the positive likelihood of a compromise that we keep hearing, it will also be important that we have invested in the right capacity and capabilities to utilize Conifer's ability to help with enrollment and enrollment in our markets, in our clients' markets on the exchanges if the exchange enrollment timeline gets delayed or extended. Yes, obviously, the capabilities to help enroll in other products are there, but we're also ramping up our investments and approach to support what might be a little bit of a dislocated enrollment timeline on the exchanges, given the potential for a later compromise.

It'll work well on both dimensions, and we have been investing up in both our staffing and field deployment in preparation for that already. Conifer's performing well according to our expectations within the segment. Not a lot else to comment on there. We're really happy with the way it's performing in the market for us and our base of clients from a cash collection standpoint that I noted before.

Our next question comes from Ryan Langston with TD Cowen. Please proceed with your question.

Thanks. Good morning. Nice to see the ASC volumes positive. Any particular service lines or maybe even geographies driving this? Maybe same thing for the acute side, any hospital service lines stronger or weaker than you expected in the third quarter? Thank you.

Yeah, no, appreciate the question. A couple of things. I mean, we said this at the start of the year when we gave guidance that, you know, we kind of saw the environment at USPI picking up later in the year, just given, you know, we look very carefully, obviously, at how busy our physicians are. As we looked at that, we saw it ramping up in the latter part of the year. I would say probably the biggest driver of that growth, in addition to the core of the higher acuity services that we're investing in, ortho, spine, some of the things we're doing in robotics and other things, those things continue to go strong.

We saw, just based upon the numbers, healthier GI recovery into the third quarter, which is kind of what we were expecting given what the volumes and busyness of our physicians looked like in the first half. That was probably an outsized driver of the USPI volume contribution. On the hospital side, you know, and you can tell from the acuity net revenue per case, etc., that environment continues to be strong. Obviously, things like trauma and high-acuity emergency visits and stuff, there's less elasticity there, right, with market conditions, given the nature of that. The only thing I would note on the hospital side is that, especially outpatient visits, which contribute to adjusted admissions, the respiratory and infectious disease volumes were a little bit lower than perhaps expectations. That just may signal some sort of a slower start to the respiratory season. The numbers certainly seem to indicate that.

Again, we're talking about the third quarter, right? It is less of a harbinger than one would say. Factually speaking, the infectious disease respiratory areas are the only areas I would call out on a proportional basis.

Our next question comes from Justin Lake with Wolfe Research. Please proceed with your question.

Thanks. Good morning. I might have missed it, but I was hoping to get an update on total contribution from DPP in provider taxes in the third quarter and your updated estimate on that benefit for the year. I appreciate you pointing out the $148 million of prior year DPP that we should think about as being kind of one-time, I assume. Any other items we should consider for 2026 in terms of that bridge year-over-year versus kind of typical growth? Thanks.

Yeah. Hey, Justin. On the DPP in Q3, we had about recorded almost $350 million, $346 million of supplemental Medicaid programs, of which we noted $38 million of that was prior year. That brings us to a little over $1 billion, $1.02 billion for year to date in fiscal 2025. Of that, $148 million was out-of-period. I think we're on track. It's right in the middle of our expectations once you normalize for the out-of-period prior year payments. In terms of normalizations, I would say from a technical math basis, the $148 million of Medicaid supplemental payments that we pointed out are the largest normalization factor for 2025 into 2026. Obviously, there are a lot of other dynamics that Saum touched on in his opening comments around reimbursement and other dynamics that we'll have to take into consideration as we get deeper into guidance in our next earnings call.

Our next question comes from Brian Tanquilut with Jefferies. Please proceed with your question.

Hey, good morning. Just this question of capital allocation. Obviously, you've set goals for USPI's acquisition spend, and you've already exceeded that. How should we be thinking about that and the buyback in terms of how you're thinking about, you know, throwing capital at the buyback since you've hit your M&A targets already? Thanks.

Yeah. I mean, the M&A targets every year are obviously guidance that we go into the year with respect to expectations of what we're going to do. We're responsive to a marketplace, as you can imagine, and we're very careful about our diligence in maintaining our high bar for acquisitions. This year, we've found more opportunities, a broader pipeline, certain processes that may have been competitive in addition that we won, and just continued momentum on our de novo strategies. I mean, the kind of cash flow that USPI generates, we can fund those increases. Now, obviously, if you go back historically, with the platform deals that we have done, we've also outspent our typical guidance. We try to update that as we go quarter to quarter based upon what we're seeing in the environment and what we're bringing on board.

Obviously, having these additional assets on board is positive for the organization going into the following year. As I noted, we also continue to see some more opportunity in the fourth quarter. We'll see how that all plays out. I mean, we just remain focused on executing the M&A and de novo strategy. If we do it with the appropriate diligence and onboarding, we're just updating what the spend looks like in the given year. Look, on the second point, we've been very active repurchasers of our shares this year. I would continue to reiterate at our trading multiples. We're long-term active repurchasers of our shares. This quarter obviously was lower than the prior quarter. There's also a lot more uncertainty in the market. We feel fine about what we've achieved this year in that regard.

Our next question comes from A.J. Rice with UBS. Please proceed with your question.

Hi, everybody. As you start to think about 2026, pulling budgeting together, etc., are there any particular areas on the expense management side? I know you've talked a little bit about some of the things you're seeing this year in labor, whether it's labor, supplies, other, that are opportunities for incremental savings or programs to initiatives to move forward. Obviously, there's a lot of discussion about AI, whether there's anything on AI that's worth calling out that you're focused on being able to deploy that.

Hey, A.J. So short, medium, long-term, you know, kind of all embedded in there. We have undertaken over the last few months an ongoing business transformation initiative that is designed to look for those opportunities and also do contingency planning given the uncertainty in the marketplace. Those opportunities would include how we think about all aspects of, you know, what I would call labor costs within the organization. Obviously, this year, as we have noted before, we have done some work to right-size our corporate structure given some of the asset divestitures that we've had in the past. It has very much been our philosophy to, I think you know this, to use advanced analytics and where we have the ability to more automation and leveraging our global business center, which is continuing to perform well and scale up.

This year, proportionally, will be one of the larger scale-up years in the last few years within the global business center, which we feel very good about. There are a lot of opportunities there. Sun already talked about supplies, so I won't, you know, I won't say a lot more there. We continue to invest actively in improvement opportunities in our ability to drive more efficient and better collections in Conifer, some of which we've noted, you know, in earlier parts of this call. Very much, very much comprehensively looking at these opportunities, but with a mindset of finding both shorter-term and longer-term opportunities that will impact the business.

Our next question comes from Josh Raskin with Nephron Research. Please proceed with your question.

Hi. Thanks. Just first was a quick clarification, I think, on Kevin's question. Did you see the contribution from exchanges? The revenue contribution was less than the percentage of adjusted admissions. My real question, just sort of getting back to the M&A environment for the ASCs, there have been a couple more reports, media reports in terms of maybe a competitive landscape. I'm just curious if that's been changing or if you're seeing anything on valuations yet. As you speak to your conversations with physicians, maybe how they're evaluating opportunities in ASCs as well.

I think the commentary, going back to the first question from Kevin, was simply that the exposure to exchanges, either on volumes or revenue, is less than in the hospital business. At USPI, the exposure, whether you're looking at volumes of exchange patients or revenue from exchange patients, proportionally in their business, is less than the hospital business. That was what the comment was. I hope that helps clarify. The ASC opportunity, first of all, I would say it has so many different dimensions in terms of the growth platform that we have built at USPI, right? We're active in de novo development. Those are more focused on higher-end specialties and partnerships with our more proactive health system partners. There are really two threads there.

We've worked hard to work with MSO organizations that are deploying capital and scaling their businesses to be the partner of choice on the ASC side. I think that has played out very nicely. The strategies are across multiple different service lines: GI, orthopedics, things that we do with MSOs in ophthalmology, obviously, our urology platform, etc. There are multiple avenues of growth that develop there. Of course, we talk about the acquisition market a fair amount. In that acquisition market, we have been for a long period of time the partner of choice. It's the reason we've scaled so effectively.

Physicians, to get to your question of what are they looking for, I mean, they're looking for somebody who's delivered a consistent track record, who has demonstrated the ability to grow, who has demonstrated the ability to take on new assets and find that other doctors tell them that it went well when onboarded. Many times, single specialty physicians are looking for somebody who has a proven track record to help them diversify their business to grow the center and make it multi-specialty, which is, as you know, something that USPI has historically been very, very good at in terms of running larger multi-specialty type of centers that help these physicians get to the next level of maturity in their investment. When I look across the board on the way the market works, we continue to be the advantage party in what it takes to build and grow this segment.

That's what gives us the confidence to continue ahead, to spend more than we had originally thought we would spend, and look forward to a healthy pipeline in 2026.

This is Sun. Hey, Josh, just to give you the numbers again, what we said was for HICS, it represents 8.4% of our admissions in Q3 of 2025 and 7% of our total consolidated revenues. The admissions stat is slightly higher than the revenue stat, and that's been consistent for us historically. Thanks. Hopefully, that helps.

Our next question comes from Whit Mayo with Leerink Partners. Please proceed with your question.

Hey, Saum. CMS has this new WISeR model in fee-for-service Medicare that starts next year. Do you see any impact on prior auth or administrative work for USPI? I know it's only six states, but Texas is one of them, and knee arthroscopy and certain implants, I think, are an area they're focused on. Just any thoughts or insight into how you're preparing for this? Thanks.

Yeah. There is some movement in the pre-authorization space in fee-for-service Medicare, as you correctly note. The WISeR program, you know, still has some uncertainty about how and what scope of services it will be implemented for. Yes, we have taken into consideration, you know, what will be required there. There are really three threads to it. One is preparing documentation, understanding of documentation requirements for appropriate care. Two is actually consistently complying with those. Three is the operational element of managing our scheduling to be, you know, to be complemented by pre-authorization having been achieved. You know, we're sort of prepared to do all of that. I mean, we don't talk about it much, but we have a very capable revenue cycle function within USPI that deals with, you know, all of the end-to-end type of services that are required there.

We feel pretty good about that. Look, the other thing is that in any marketplace when these types of things are introduced, you know, there's an adjustment period, but also physicians have the opportunity to adjust different mix into the centers as they fill their, especially the ones that have block time. I think, you know, part of the move here will also be to increase commercial mix and work with the physicians to increase their commercial mix in that process.

Our last question comes from Andrew Mok with Barclays Bank. Please proceed with your question.

Hi. This is Thomas Walsh on for Andrew. As we await the finalization of the hospital outpatient rule, could you comment on whether the removal of the inpatient-only list is a net positive or net negative for the enterprise?

Okay. That came through really garbled. I think the question was, is the inpatient-only rule list going away, and is that a benefit to us? I don't know that it's going away. I think there's been discussion about the inpatient-only rule list and what that impact would be. Obviously, for us, the benefit would be in the USPI segment and, you know, potentially a push for more in certain types of volumes that have been in the hospital setting into the outpatient setting. In our acute care hospital segment, because of our greater focus on high-acuity work, proportionally, and it's not to say that we don't have the business, but proportionally, those cases wouldn't be affected as much as maybe a typical general acute care facility. We haven't done any quantification of that that we've shared anywhere.

I think this policy is still very much up in the air being discussed and not even at the point where I would say that we're engaging in rulemaking discussions about it.

We have reached the end of the question and answer session, and this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Tenet Healthcare (THC) Q3 2025 Earnings Call Transcript

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