One of the nation’s largest hospital operators is ditching its home health and hospice businesses entirely, citing the unnecessary risks the businesses pose to the company.
Dallas-based Tenet Healthcare (NYSE: THC) has entered into letters of intent to sell its home health and hospice businesses, which are “sub-scale and not essential” for the company to own, Tenet Healthcare Chairman and CEO Trevor Fetter said recently at the 35th Annual J.P. Morgan Healthcare Conference in San Francisco.
An objective in refining Tenet’s portfolio is to “further reduce risk in [the] business through the divestiture of non-core operations,” Fetter explained.
The timing and financial details of the home health divestment have yet to be determined.
Tenet is not alone among hospital companies looking to exit the home health business. In fact, the news of Tenet’s home health exit comes just a few months after Almost Family Inc. (Nasdaq: AFAM) announced it will acquire 80% of Community Health Systems’ (NYSE: CYH) home health operations for $128 million.
Community Health Systems is currently in the process of repositioning itself through divestitures, as it is more than $15 billion in debt. The hospital company reported a loss of $1.43 billion in the second quarter of 2016.
Tenet, meanwhile, reported a third-quarter 2016 net loss from continuing operations of $9 million, a marked improvement from the company’s $28 million net loss from continuing operations recorded in the third quarter of 2015.
Tenet further intends to refine its portfolio by selling several non-core hospitals and exiting its health plan business, which is “unprofitable in the aggregate” and necessitates capital, Fetter said. The company announced plans to exit the health plan business in November 2016.
“All together, these actions are consistent with the goals that we’ve previously articulated of improving margins, improving free cash flow, focusing on hospital markets where we have strong local share and reducing risk in the enterprise generally,” Fetter said.
Tenet intends to use the cash raised from asset sales on higher-return investments across its capital structure, which could include debt repayment, repurchasing shares or accelerating its purchase of United Surgical Partners International (USPI).
Tenet Healthcare currently owns 79 acute care hospitals in 25 U.S. markets, 472 outpatient facilities in the U.S. and nine hospitals in the UK. It is the sixth largest hospital chain in the U.S., according to Becker’s Hospital Review.
Written by Mary Kate Nelson