On February 8, 2024, Tenet Healthcare Corp (THC, Financial) released its 8-K filing, detailing a robust financial performance for the fourth quarter and the full year of 2023. The Dallas-based healthcare services organization, which operates approximately 60 hospitals and over 550 ambulatory surgery centers and other outpatient facilities, has reported a significant increase in net income and Adjusted EBITDA, reflecting disciplined operating management and strong volume growth in its Ambulatory Care and Hospital Operations segments.
Financial Highlights and Performance
For the fourth quarter of 2023, Tenet Healthcare Corp reported net income from continuing operations available to common shareholders of $244 million, or $2.30 per diluted share, a substantial increase from $102 million, or $0.92 per diluted share, in the fourth quarter of 2022. Adjusted diluted earnings per share from continuing operations was $2.68, up from $1.96 in the prior year's quarter. The company's consolidated Adjusted EBITDA for the fourth quarter reached $1.012 billion, marking a 12.8% increase over the same period in 2022.
The increase in Adjusted EBITDA was attributed to strong volume growth in both the Ambulatory Care and Hospital Operations segments, favorable payer mix, and improved contract labor costs. Notably, the Ambulatory Care segment's Adjusted EBITDA of $464 million in the fourth quarter represented a 14.0% increase over the prior year, driven by a 3.9% increase in same-facility system-wide ambulatory surgical cases.
Balance Sheet and Cash Flow Strength
Tenet's cash flows from operating activities for the year ended December 31, 2023, were $2.374 billion, a significant improvement from $1.083 billion in the previous year. The company's free cash flow for the year was $1.623 billion, compared to $321 million in 2022. The improved cash flow allowed Tenet to repurchase shares and reduce its net debt to Adjusted EBITDA ratio to 3.89x, down from 4.10x at the end of 2022.
Strategic Transactions and 2024 Outlook
Recent strategic transactions include the completion of the sale of three hospitals in South Carolina and the signing of a definitive agreement to sell four hospitals in California. These transactions are expected to favorably impact the company's income tax expense in 2024 by approximately $190 million due to a reduction in interest expense limitations.
Looking ahead, Tenet's 2024 outlook anticipates Adjusted EBITDA to be in the range of $3.285 billion to $3.485 billion. This forecast reflects the completion of the South Carolina hospital sale and assumes the closing of the California hospital sale in March 2024.
Management Commentary
"Our businesses performed exceptionally well in 2023, driven by strong same facility revenue growth and disciplined operating management," said Saum Sutaria, M.D., Chairman and Chief Executive Officer of Tenet. "We carry momentum into 2024 and are focused on continuing to expand access to care and investing in cutting edge technology for our patients and physician partners, while strategically reducing our debt and growing our ambulatory care and hospital businesses."
Tenet Healthcare Corp's strong financial performance in 2023, coupled with strategic asset sales and a positive outlook for 2024, positions the company well for continued growth and operational efficiency. Investors and stakeholders can anticipate Tenet's sustained focus on expanding access to care, technological advancements, and prudent financial management in the coming year.
Explore the complete 8-K earnings release (here) from Tenet Healthcare Corp for further details.
