Tenet 2018 outlook: Conifer may be sold and net operating revenue to hit $17.8B — 7 things to know

Tenet intends to explore selling Conifer, its healthcare business services subsidiary, and revealed its outlook for 2018 in an end-of-year update.

 

Here are seven things to know:

1. Tenet aims to improve financial performance and shareholder value through several changes, including the expansion of its cost reduction program and potentially selling Conifer. The company increased its cost reduction initiative by $100 million, and expects to achieve $250 million of annualized run-rate savings by the end of next year, including around $125 million during the 2018 calendar year.

2. Tenet enlisted Goldman, Sachs & Co. as financial advisor and Kirkland & Ellis as legal advisor on the potential Conifer sale. As a leading provider of healthcare business process services, hospital and physician revenue cycle management and value-based care, the business could be sold during the first half of 2018. However, Tenet would not commit to a transaction at this point and may decide to retain its business.

3. Tenet added a Quality and Patient Experience Gatekeeper to its Annual Incentive Plan for next year, which will require improvement and a certain performance level for participants to be eligible. Individuals may not be eligible for the AIP award if they don't meet the quality and patient satisfaction thresholds.

4. In 2018, the company expects net operating revenue to hit $17.8 billion to $18.2 billion. The adjusted EBITDA outlook for hospital operations is $1.435 billion to $1.495 billion; for ambulatory care its $770 million to $800 million. Conifer is expected to report adjusted EBITDA at $270 million to $280 million.

5. Next year, Tenet expects to grow organic revenue in both hospital and ambulatory surgery facilities, as well as follow a promising pipeline of acquisitions and de novo developments for ambulatory offerings. The company will complete divestitures next year.

6. In August, Tenet embarked on a process to refresh its board composition and has appointed three new directors since with healthcare, financial and operational expertise. The board plans to add new independent directors to enhance its expertise by the 2018 annual shareholders meeting. The board currently has 12 directors including five who have joined since November 2016.

7. The board approved a short-term shareholder rights plan in August protecting the company's income tax net operating loss carryforwards. Tenet projects the net operating loss will hit $1.6 billion by the end of the year, and the rights plan will expire after the 2018 annual meeting in May, at which time the board will further evaluate whether the plan is needed going forward.

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