Tenet Healthcare Drops Revenue Cycle Management Subsidiary Spinoff

Tenet Healthcare has announced that it will not go through with the planned spinoff of its revenue cycle management subsidiary, Conifer Health Solutions.

Tenet’s Board of Directors, with the help of independent legal and financial advisors, determined that the company was now in a stable financial position with increased shareholder value and an improved business foundation.

“We have achieved significant operational and financial progress within Conifer in the last few years and dramatically improved Tenet’s profile across key financial metrics like Adjusted EBITDA, Free Cash Flow, and net debt leverage,” Ron Rittenmeyer, executive chairman of Tenet Healthcare, stated in the press release. “We believe that continuing to build on our progress with Conifer will provide greater returns for Tenet’s shareholders.”

The health system said that Conifer’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin has improved by more than 1,000 basis points since 2017. In addition, Tenet said it expects that Conifer will deliver ample revenue growth in fiscal year 2022 and maintain a substantial margin and cash flow profile.

According to the press release, Tenet expects to see benefits from its redesigned commercialization efforts and a new slew of sales talent and technology resources. Tenet also said it anticipates new client additions and promising growth prospects within the revenue cycle management company.

Tenet first showed signs of possible financial turmoil in late 2017. In September 2017, the health system sold the last of its Philadelphia hospitals to Paladin Healthcare, a private equity-based firm in California.

In October 2017, Tenet declared that it would eliminate 1,300 jobs and implement a company-wide cost reduction initiative to reduce annual operating costs by $150 million by the end of 2018.

The health system later announced plans to outsource more than 1,000 positions in its healthcare workforce to improve financial performance. The plan included offshoring Conifer employees, hospital workers, and those employed under Tenet’s ambulatory platform venture United Surgical Partners International.

The company had started a strategic review process for Conifer in December 2017, in which it started to consider a potential spinoff of the revenue cycle management company.

Tenet officially announced its plans to complete a tax-free spinoff of Conifer in July 2019. The health system intended to spin off the revenue cycle management company into a separate, publicly traded company to maximize Conifer’s value and produce positive outcomes for Tenet shareholders. The entities had expected to finalize the transaction by the end of the second quarter of 2021.

The decision to call off the spinoff reflects Tenet’s financial improvements during year two of the COVID-19 pandemic. Following the announcement of a new chief executive officer, Tenet’s 2021 second quarter results showed that the company’s net income increased from $88 million during the second quarter of 2020 to $120 million in 2021.

According to Tenet, the improved income resulted from an increase in healthcare service utilization during 2021 compared to the first year of the pandemic.