Tenet Healthcare Q2 2025 Earnings Report

Tenet Healthcare EPS Results

• Actual EPS: $4.02
• Consensus EPS: $2.84
• Beat/Miss: Beat by +$1.18
• One Year Ago EPS: $2.31

Tenet Healthcare Revenue Results

• Actual Revenue: $5.27 billion
• Expected Revenue: $5.16 billion
• Beat/Miss: Beat by +$111.65 million
• YoY Revenue Growth: +3.20%

Tenet Healthcare Announcement Details

• Quarter: Q2 2025
• Date: 7/22/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, July 22, 2025
• Conference Call Time: 10:00AM ET

Tenet Healthcare (NYSE:THC) operates as a diversified healthcare services company in the United States. The company operates through two segments: Hospital Operations and Services, and Ambulatory Care. Its general hospitals offer acute care services, operating and recovery rooms, radiology and respiratory therapy services, clinical laboratories, and pharmacies. The company also provides intensive and critical care, and/or coronary care units; cardiovascular, digestive disease, neurosciences, musculoskeletal, and obstetrics services; outpatient services, including physical therapy; tertiary care services, such as cardiothoracic surgery, complex spinal surgery, neonatal intensive care, and neurosurgery services; quaternary care services in heart and kidney transplants; and limb salvaging vascular procedure, acute level 1 trauma, intravascular stroke care, minimally invasive cardiac valve replacement, imaging, surgical robotic, and telemedicine access services. In addition, it offers a range of procedures and services, such as orthopedics, total joint replacement, and spinal and other musculoskeletal procedures; gastroenterology; pain management; otolaryngology; ophthalmology; and urology. It operates hospitals, ambulatory surgery centers, imaging centers, surgical hospitals, off-campus emergency departments, and micro-hospitals. Tenet Healthcare Corporation was founded in 1967 and is headquartered in Dallas, Texas.

Tenet Healthcare Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Tennant reported strong Q2 results with net operating revenues of $5.3 B and consolidated adjusted EBITDA of $1.121 B, up 19% year-over-year and a margin of 21.3% (+280 bps).
• Positive Sentiment: USPI segment grew EBITDA by 11% in Q2, delivering 7.7% same-facility revenue growth, adding eight high-acuity ASCs, and targeting over $250 M in M&A spend.
• Positive Sentiment: Hospital segment EBITDA jumped 25% to $623 M, with same-store admissions up 1.6% and revenue per adjusted admission up 5.2%, driven by high-acuity services.
• Positive Sentiment: Share repurchase program expanded after deploying $1.1 B to buy back 7.2 M shares in H1; board authorized an additional $1.5 B.
• Positive Sentiment: Raised full-year 2025 guidance to $20.95–21.25 B in revenues (+$300 M) and $4.40–4.54 B in adjusted EBITDA (+$395 M, ~10% growth), reflecting confidence in ongoing momentum.

Presentation

[Operator]

Good morning. Welcome to Tennant Healthcare's Second Quarter twenty twenty five Earnings Conference Call. After the speakers' remarks, there will be a question and answer session for industry analysts. Each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

[William McDowell, VP - IR at Tenet Healthcare]

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 Tennant's second quarter twenty twenty five results as well as a discussion of our financial outlook. Tennant's senior management participating in today's call will be Doctor. Saum Satoria, Chairman and Chief Executive Officer and Sun Park, Executive Vice President and Chief Financial Officer.

[William McDowell, VP - IR at Tenet Healthcare]

Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenanthealth.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. 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 ks and other filings with the Securities and Exchange Commission.

[William McDowell, VP - IR at Tenet Healthcare]

And with that, I'll turn the call over to Saum.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Thank you, Will, and good morning, everyone. The second quarter continues our track record of strong outperformance in each of our businesses. We reported second quarter twenty twenty five net operating revenues of $5,300,000,000 and consolidated adjusted EBITDA of $1,121,000,000 which represents growth of 19% over 2024. Second quarter twenty twenty five adjusted EBITDA margin of 21.3% represents a two eighty basis point improvement over the prior year driven by strong same store growth and very efficient operating performance. USPI continues to deliver.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

We generated $498,000,000 in adjusted EBITDA, which represents 11% growth over second quarter twenty twenty four. Same facility revenues grew 7.7% in the second quarter, highlighted by a 12.6% growth in total joint replacements in the ASCs over the prior year. We added eight new centers in the quarter, including facilities specializing in high acuity procedures such as spine, orthopedics and neurosurgery. We continue to see a robust pipeline for M and A opportunities and expect to exceed our baseline intention for $250,000,000 of M and A spend in 2025. Turning to our Hospital segment, adjusted EBITDA grew 25% to $623,000,000 in the second quarter of twenty twenty five.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Same store hospital admissions were up 1.6% in the quarter. Second quarter twenty twenty five revenue per adjusted admission was up 5.2% over the prior year as payer mix and acuity remained strong. We are making significant investments to expand our network to support growth in our markets and have confidence that the demographic trends, our high acuity service line priorities and our efficient operating platform can generate ongoing returns in this segment. We have also reduced overhead given we downsized our hospital portfolio. Our results in both segments exceeded our expectations and extend our track record of consistently strong fundamental execution.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

We continue to capitalize on our compelling valuation and have deployed $1,100,000,000 to repurchase 7,200,000.0 shares in the first half of twenty twenty five. As we noted in our release, the Board of Directors has authorized a $1,500,000,000 increase to our share repurchase program. Turning to our full year guidance. At this point in the year, we are raising our full year 2025 adjusted EBITDA guidance to a range of $4,400,000,000 to $4,540,000,000 which represents an increase of $395,000,000 or 10% roughly at the midpoint of the range of our prior guidance. The guidance increase is supported by fundamental strength in our businesses and expectations for continued growth.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

In summary, we continue to deliver on our commitments to a strong balance sheet and significantly improved free cash flow generation. Finally, in closing, we are committed to a culture of quality, transparency and compliance. This culture permeates our business and is reflected in the dedication of our colleagues and caregivers that go to work each day to care for our patients and communities that we serve. We are pleased that these are the values that we have instilled into our organization, which continue to drive results and outperformance. And with that, will provide a more detailed review of our financial results. Sun, turning it over to you.

[Sun Park, EVP & CFO at Tenet Healthcare]

Thank you, Sam, and good morning, everyone. We delivered strong results in 2025 with adjusted EBITDA well above the high end of our guidance range driven by strong fundamentals including same store revenue growth, continued high patient acuity, favorable payer mix and effective cost controls. We generated total net operating revenues of $5,300,000,000 and consolidated adjusted EBITDA of $1,121,000,000 a 19% increase over second quarter twenty twenty four. Second quarter adjusted EBITDA margin was 21.3%, a two eighty basis point improvement over prior year. I would now like to highlight some key items for each of our segments beginning with USPI, which again delivered strong operating results.

[Sun Park, EVP & CFO at Tenet Healthcare]

In the second quarter, USPI's adjusted EBITDA grew 11% over last year with adjusted EBITDA margin at 39.2%. USPI delivered a 7.7% increase in same facility system wide revenues with net revenue per case up 8.3% and case volumes down 0.6% reflecting our continued disciplined shift towards higher acuity services. Turning now to our Hospital segment. Second quarter adjusted EBITDA was $623,000,000 with margins up 300 basis points over last year at 15.6%. Same hospital inpatient admissions increased 1.6% and revenue per adjusted admissions grew 5.2%.

[Sun Park, EVP & CFO at Tenet Healthcare]

Our consolidated salary wages and benefits was 41% of revenues, a 140 basis point improvement from the prior year. And our contract labor expense was 1.9% of consolidated SWB expense. This improvement has been driven by our data driven approach to capacity and labor management management and disciplined operating expense controls. Finally, we recognized a $79,000,000 favorable pretax impact for additional Medicaid supplemental revenues related to prior periods in the second quarter of twenty twenty five. This includes the recently approved program in Tennessee.

[Sun Park, EVP & CFO at Tenet Healthcare]

As a reminder, our second quarter twenty twenty four results included a $30,000,000 favorable pretax impact for additional Medicaid supplemental revenues related to prior year. Next, we will discuss our cash flow balance sheet and capital structures. We generated $743,000,000 of free cash flow in the second quarter. And as of 06/30/2025, we had $2,600,000,000 of cash on hand with no borrowings outstanding under our $1,500,000,000 line of credit facility. Additionally, we have no significant debt maturities until 2027.

[Sun Park, EVP & CFO at Tenet Healthcare]

And finally, during the second quarter, we repurchased 4,600,000.0 shares of our stock for $747,000,000 And year to date through June 30, we have repurchased 7,200,000.0 shares or $1,100,000,000 Our leverage ratio as of 06/30/2025 was 2.45 times EBITDA or 3.11 times EBITDA less NCI driven by our outstanding operational performance and continued focus on financial discipline. We are very pleased with our ongoing cash flow generation capabilities and remain committed to a deleveraged balance sheet. We believe we have significant financial flexibility to support our capital allocation priorities and drive shareholder value. Let me now turn to our outlook for 2025. For 2025, we now expect consolidated net operating revenues in the range of $20,950,000,000 to $21,250,000,000 an increase of $300,000,000 over prior expectations.

[Sun Park, EVP & CFO at Tenet Healthcare]

As Saum mentioned, we are raising our 2025 adjusted EBITDA outlook by $395,000,000 at the midpoint to 4,400,000,000 to $4,540,000,000 reflecting the strong fundamental performance of our business. At the midpoint of our range, we now expect our full year 2025 adjusted EBITDA to grow 12% over 2024. At USPI, we are now expecting twenty twenty five adjusted EBITDA of 1,990,000,000.00 to $2,050,000,000 a $70,000,000 increase over prior expectations. In addition, we have increased our assumption for same facility USPI revenue growth by 100 basis points to 4% to 7% for 2025. In Hospitals, we are raising our 2025 adjusted EBITDA outlook range by $325,000,000 at the midpoint to 2,410,000,000.00 to $2,490,000,000 Additionally, we are lowering our assumption for hospital adjusted admissions growth by 50 basis points to 1.5% to 2.5% for 2025.

[Sun Park, EVP & CFO at Tenet Healthcare]

Finally, we expect third quarter twenty twenty five consolidated adjusted EBITDA to be in the range of 22.5% to 23.5% of our full year consolidated adjusted EBITDA at the midpoint. We expect third quarter twenty twenty five USPI EBITDA to be in the range of 23.5% to 24.5% of our full year USPI adjusted EBITDA at the midpoint. Turning to our cash flows for 2025. We now expect free cash flows in the the range of $2,025,000,000 to $2,275,000,000 distributions to non controlling interest in the range of $780,000,000 to $830,000,000 resulting in free cash flow after NCI in the range of $245,000,000 to $1,445,000,000 an increase of $195,000,000 at the midpoint of our range from prior outlook. Turning now to our capital deployment priorities.

[Sun Park, EVP & CFO at Tenet Healthcare]

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 and 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. And finally, we'll continue to have a balanced approach to share repurchases depending on market conditions and other investment opportunities.

[Sun Park, EVP & CFO at Tenet Healthcare]

As Saum noted, our Board of Directors has recently authorized a 1,500,000,000 increase to our share repurchase program. 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 those in the communities we serve. And with that, we're now ready to begin the Q and A. Operator?

[Operator]

Thank you. At this time, we'll be conducting a question and answer session. Our first question comes from A. J. Rice with UBS. Please proceed with your question.

[A.J. Rice, Managing Director at UBS Group]

Hi, everybody. I might just ask about two aspects of the backdrop in Washington. The proposed rule on outpatient hospital care has the elimination of potentially of the inpatient only rule. Can you just comment on what you think that might mean for your hospital and ASC business if that were to go through? And then just any updated figures on the public exchange volumes, how that contributed into the quarter, what you're seeing year to year?

[A.J. Rice, Managing Director at UBS Group]

And do you have any updated thoughts on what the outlook for next year might be if the enhanced subsidies go away?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Hey, A. J, it's Sam. Thanks for the questions. The first one, obviously, enabling additional innovation in the ASCs is positive for the USPI business. I think about it this way, which is one is the reimbursement, allowable reimbursement and certainly, this move is positive.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

At the same time, it takes work and experience in higher acuity ASC procedures to actually be able to successfully move those things from an inpatient setting to an outpatient setting. As you know, the patient selection criteria and expertise makes a big difference there so that you're doing the right things clinically. Those are all areas in which we're pretty advanced as an ASC operator and platform. So I think it plays to our advantages. I think it represents an opportunity for the future for sure.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

And I also think it gives us a platform to work with physicians to build the right protocols for many of these things to move into that more freestanding setting with the right patient selection. Sun, do you want to comment on the update on our exchange volumes? I would say just as a summary statement there, A. J, obviously the efforts to lobby for their extension and importantly the critical role they play in supporting small businesses and employees of small businesses in America is an added benefit of the exchanges that is obviously part of the discussion today.

[Sun Park, EVP & CFO at Tenet Healthcare]

Yes. Thank you, Sam. And just to add, obviously healthcare exchange remains an important part of our business. For second quarter of twenty twenty five, we saw about a 23% increase in admissions year over year and we saw about a 28% increase in revenues from exchange year over year. In the second quarter, our exchange volume now represents about 8% of our total admissions and about 7% of total consolidated tenant revenues.

[A.J. Rice, Managing Director at UBS Group]

Okay. Thanks a lot.

[Operator]

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

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

Hi, thanks. Good morning. I was wondering if you could just give some more specifics on the outperformance in the core results, and I'm specifically looking at the incremental $70,000,000 on the USPI side, the increase in guidance.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

And then within that, is there anything Tennant has specifically to improve your ability to sort of document categorized patients as you submit claims? Are there new systems, new technologies, new vendors or partners? And obviously anything relating to AI, I'd be curious if there's new things that you're doing within there.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Hey, Josh. Well, going you know, kinda going backwards, we have the there USPI has its own significant revenue cycle capability. We think it's an industry leading capability. It's an environment that mostly serves our own ASCs, but certainly serves ASCs beyond that. We're pretty busy in advancing a lot of those capabilities.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

It is not difficult for me to say that some of the improvement in our results over the last few years has been related to real standardization technology deployment, better reporting and certain advanced analytical tools that we have deployed into the ASC environment, not surprising given our focus in revenue cycle as a company that we have done that and it's certainly paying dividends in terms of how we work in that environment, both on the retail collection side, as you can imagine, these are elective procedures, but also on the wholesale collection side all the way from authorization back through accurate documentation and more efficient management of the AR through technology and offshore capabilities. We're really pleased with the platform that's being built for ASC revenue cycle within USPI. Sun, do you want to comment on the nature of the guide?

[Sun Park, EVP & CFO at Tenet Healthcare]

Yes, sure. Josh, the first half and the second quarter, I both consistent themes. We've seen high acuity, good case mix, good payer mix, good growth in some of our key case lines service lines including ortho and total joints. So all the trends that we've discussed previously I think continue in USPF for second quarter. That's why you saw the strong net revenue overall growth of 7.7% as well as the strong net revenue per case.

[Sun Park, EVP & CFO at Tenet Healthcare]

So and then I think good operating expense management. So we demonstrated a 39.2% EBITDA margins in second quarter as well. So I think all those trends apply for both Q1 and Q2, which resulted in about a 50,000,000 increase versus our prior guidance. And then our general expectation is for those trends to continue into the second half, which is part of the guidance raised for the remaining full year. I think we also remain positive on our M and A activity in terms of contribution.

[Sun Park, EVP & CFO at Tenet Healthcare]

As Saum noted in his opening statement, we expect to exceed our $250,000,000 baseline assumption for USP M and A. So I think all those things contribute to the guidance raise.

[Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC]

Thank you.

[Operator]

Our next question comes from Andrew Mock with Barclays. Please proceed with your question.

[Andrew Mok, Director at Barclays]

Hi, good morning. I just wanted to ask about the volumes. There's a little bit of a deceleration there on both the inpatient and adjusted admissions in the quarter. You took down the guidance by I think 50 basis points. Were volumes impacted by any discrete items in the quarter or anything else to kind of call out driving some of the deceleration for the quarter and the full year? Thanks.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Hey, well, first of all, I think the guidance is just simply reflecting the math that would play out for the rest of the year. That was a strong quarter. We had strong volumes, the right acuity and mix and very much reflects the focus on our service lines as we prioritized them. So, I don't think there's anything particularly unusual other than seasonality.

[Andrew Mok, Director at Barclays]

All right. Thank you.

[Operator]

Our next question comes from Matthew Gillmor with KeyBanc Capital Markets. Please proceed with your question.

[Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets]

Hey, thanks for the question. Wanted to ask about payer contracting. There's a lot of different dynamics creating pressure on payers. Has there been any discernible shift in terms of your negotiations with payers? Are you still getting the normal updates you'd expect?

[Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets]

And is there anything to report with respect to denial activity?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Yes. Well, a couple of things. First of all, obviously, different parts of the sector, at various times certainly go through their ups and downs. And I think our philosophy most importantly with the health plans, both the national plans and state based plans is to work consistently to create value in what we do in our level of pricing and our negotiations and also to create predictability for both sides over a multiyear period.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

I think that's ultimately what's probably most important on both sides so that each party can then manage their own operations. We have extended that philosophy over the last few years into the next wave of contracts. Think most people were aware that there are a number of contracts that are coming up and we're not seeing anything unusual and and certainly no change in our guidance with respect to the way that we have been negotiating our contracts. But again, I think that's because, we're committed to the value that we provide there both from the standpoint of our highly efficient ambulatory business, also working in an environment with reasonable and predictable rate increases so that we can focus on managing our own operations. Look, the denials activity and it's really not just denial, it's the disputes, documentation requests, denials, etcetera, have ramped up over the past few years post COVID to levels that are, I would argue not acceptable, in some cases.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

And we have adapted, obviously this is part of Conifer's job is to adapt and learn to respond to those things. In the early days, the responses were driving up expenditures. Today, as we have evolved and realized this is a new normal, we have of course deployed more technology, more automation, trained up more offshore staff and other things to be able to respond to those types of requests and activities in a more efficient and I would argue more effective manner. We track things like our yield relative to the volume or dollars that were disputed or denied. I think Conifer is doing well there for both ourselves and for our clients relative to the overall industry.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

You can see it in our results and I think that translates across the board. And so this is a constant battle with respect to what's appropriate there. And obviously, we welcome both regulation and other things that would support a reduction of some of that what we consider inappropriate activity.

[Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets]

Got it. Thank you.

[Operator]

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

[Justin Lake, Analyst - Healthcare Services at Wolfe Research, LLC]

Thanks. Good morning. First, I just wanted to follow-up on A. J. Question.

[Justin Lake, Analyst - Healthcare Services at Wolfe Research, LLC]

I do understand that the industry is lobbying for an extension of these subsidies and how important that could be to a lot of folks. But is there a framework that the company can share with us in terms of how to think about the potential impact to 2026 earnings if those subsidies do go away. And then sticking with that DC stuff, maybe you can give us an update on the provider tax run rate you're seeing in 2025 versus I think the previous guidance was about 1,100,000,000.0 And have you analyzed and have anything to share with us in terms of the impact of if that the bill that just passed, it does get rolled out, what the impact to DPP could be over time as provider taxes? Thanks.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Yeah. Hey, Justin. So we don't have any comments about 2026 at this stage and certainly all of the work and effort is focused on helping stakeholders realize again how important the exchanges are for families who utilize them including those that came off of Medicaid from a Medicaid redetermination standpoint over the last few years. It's very much my belief that because of the existence of the exchanges and the subsidies for the people who don't have very high income levels as Medicaid redetermination proceeded, the exchanges were a critical safety net for the individuals who needed healthcare insurance to have a landing spot and it created what I consider a pretty smooth Medicaid redetermination process, because of the availability of those insurance options for individuals and families that needed it. And so that in addition to the fact that the exchanges represent critical support for small businesses that are unable to provide broad based insurance coverage options to their employees, which supports obviously a very large part of the economy represents two of the most important prongs of the conversation around why it's important to extend these subsidies, not the least of which is that it affects red states more than blue states given the nature of the administration and Congress today, that's also an important fact. So look, think the work is ongoing in that area. I think it's important and I think it's important to more than just our industry. It affects other parts of, our sector, but it also affects the macro economy through the support for small businesses, which helps to make them more competitive in The US economy at large. The current situation and bill that passed, a lot of the impacts as you know have been pushed out pretty far into the very, very end of twenty seven or really '28 from that standpoint and we really don't have any insight into how this will be implemented.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

There are new legislative proposals that have already come up attempting to rescind some parts of the OBBB, which are in play in Congress and I think it just it remains an area of significant uncertainty and we don't have any projections to provide from that standpoint, especially because we're talking about, again, I said, out to 2028. Sun, do you want to cover there was a question in there about the DPP programs.

[Sun Park, EVP & CFO at Tenet Healthcare]

Yes. Let me just clarify that Justin. So for Q2 of twenty twenty five, we recorded about $350,000,000 of total Medicaid supplemental payments. So for the first half of this year, we're at about $675,000,000 range. Now we have pointed out some one timers.

[Sun Park, EVP & CFO at Tenet Healthcare]

So once you normalize for that in the first half of the year, our run rate for the full year is right around the $1100000000.01200000000.0 dollars range that we previously discussed.

[Justin Lake, Analyst - Healthcare Services at Wolfe Research, LLC]

Thanks.

[Operator]

Our next question comes from Sarah James with Cantor Fitzgerald. Please proceed with your question.

[Sarah James, MD and Equity Analyst - Healthcare Services & HCIT at Cantor Fitzgerald]

Thank you. I just wanted to circle back to what went on with the volume guide down. I understand seasonality and just the math of the quarter impact on the year, but what actually changed in this quarter or in your view of the year? Are there certain segments or any type of deflation?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Well, the most important thing that we would be focused on that happened in the second quarter was, as I said earlier, the strength and success of our high acuity strategy that has been in place for multiple years continuing to demonstrate in this market the ability to generate revenue and earnings across our hospital portfolio. I mean, that's really at the end of the day, that's the most notable and important trend in the second quarter, which is that that strategy continues to deliver results.

[Sarah James, MD and Equity Analyst - Healthcare Services & HCIT at Cantor Fitzgerald]

Okay. Thank you.

[Operator]

Our next question comes from Steven Baxter with Wells Fargo. Please proceed with your question.

[Stephen Baxter, Senior Equity Research Analyst at Wells Fargo]

Yes. Hi, thanks. Just to follow-up on Justin's question. I wanted to ask about the jump off point for EBITDA this year. Is it as simple as removing the out of period Medicaid supplemental EBITDA?

[Stephen Baxter, Senior Equity Research Analyst at Wells Fargo]

I think it's $149,000,000 this quarter and $40,000,000 with the first quarter? Or are there any other meaningful areas to consider whether there are Medicaid supplemental payments or other sort of one time contributors to the year that we should think about as we're bridging to 2026? Thank you.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

We're not making any comments about 2026 nor are we commenting on headwinds and tailwinds yet for the following year.

[Operator]

Our next question comes from Ben Hendrix with RBC Capital Markets. Please proceed with your question.

[Ben Hendrix, Vice President at RBC Capital Markets]

Thank you very much. Just a quick follow-up on the acuity trends that you're seeing. Appreciate that the revenue per shows strong acuity trends there and that's consistent with your strategy.

[Ben Hendrix, Vice President at RBC Capital Markets]

But also just wanted to square that with the hospital inpatient surgeries being down. Just a little more detail on where you're seeing that stronger case mix and how that's kind of translating into the stronger rates on the hospital side? Thanks.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Yes. I mean our strength in cardiovascular, orthopedics, spine, neurosurgery, broad based general surgery, robotics, I mean, are all the areas that, you know, we continue to focus on in terms of our work. Now I would add to that emergency driven trauma and trauma surgery. As you know, we have a lot of very large urban emergency departments that have built trauma capabilities in order to service patients in need of trauma. And finally, as we have indicated over the past few years, our transfer strategy always being willing to accept any patient from any outlying hospital, as long as we have the services available to help them, we have been committed to providing that help.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

And obviously many of those patients tend to be sicker and may require more complex surgery. So all of those things, have been contributors to the results from what we described as a high acuity strategy.

[Ben Hendrix, Vice President at RBC Capital Markets]

Thank you.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Of course.

[Operator]

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

[Whit Mayo, Senior Managing Director at Leerink Partners]

Yeah. Thanks. Just one quick clarification. I was wondering if you could comment briefly on how much your medical case mix did increase in the quarter and if it changed much from prior trends. But my real question is looking at the EBITDA growth at USPI. Is there any way to quantify the contribution that you may still be seeing from continued synergies whether from SED covenant? Just wondering if those are contributing to any of the growth still. Thanks.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Well, case mix acuity was up. I'm not sure exactly what you're asking. Son, you may want to comment more specifically on that question. Mean, but consistent with what we're saying about acuity, case mix index was up. That's referring to the hospital segment.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

On the USPI side, you know, the revenue growth that we see obviously in a very dynamic business comes from all sorts of things, including same store growth, volume growth, our payer contract, escalators, rostering of new facilities onto our managed care contracts as part of our network strategy of having an alliance of high quality reliable centers. All of that contributes to the revenue growth, but that's why we provide the total revenue growth and also the same store revenue growth, so that one can differentiate between those. I think all of that data is consistent with both with success of the high acuity strategy, but also we're consistently performing in revenue growth above our long term trend, which has been very positive for USPI.

[Sun Park, EVP & CFO at Tenet Healthcare]

Yes. And Saum just your I'm sorry, what your question on case mix, We're up about 1% year over year in Q2. And obviously if you look at a longer period of time that growth would be more significant based on acuity.

[Whit Mayo, Senior Managing Director at Leerink Partners]

Okay. Thanks.

[Operator]

Our next question comes from Pito Chickering with Deutsche Bank. Please proceed with your question.

[Pito Chickering, Analyst at Deutsche Bank]

Hey, good morning guys. Thanks for taking my questions. Nice quarter here. DSOs trended down nicely, maybe the lowest that I've ever seen with you guys. Can you talk about cash collections and what have you done differently?

[Pito Chickering, Analyst at Deutsche Bank]

Or are the payers doing something differently? And from a cash flow perspective, should we continue to model sort of bulk of free cash flow going into repo with some M and A in there, so you can buy back around 10% plus of your mark cap each year while still delevering. Is that the way the right way to think about it?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Well, okay. Just two separate things. Sun, do you want to start with the second one and then we'll back into the revenue cycle question?

[Sun Park, EVP & CFO at Tenet Healthcare]

Yes, sure. So Peter, yes, we obviously have very strong free cash flow performance have increased our guidance for free cash flow after NCI up 195,000,000 I would say the other notable piece obviously is the amount of share repurchases we completed in the second quarter of this year. It was a substantial increase from our normal trends. I would say looking forward, our capital allocation priorities haven't changed, right? USPI, M and A, hospital CapEx for high acuity strategy and then maintaining our deleveraged balance sheet and a balanced share repurchase approach.

[Sun Park, EVP & CFO at Tenet Healthcare]

It's hard to predict what our run rate share repurchase activity will be in the next quarter, the second half of this year into 2026. I think that will depend on facts and circumstances. But I do believe our free cash flow and financial performance and balance sheet flexibility will afford us make the right decisions as those things come.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Yeah. Look in summary on the first part of the question, as the industry has trended up overall in terms of denials and also, the times to collect given some of the dispute and back and forth on documentation requests and other things. We've we've remained very focused on trying to keep that as tight as possible using technology automation. I mean, you know, one of the advantages that Conifer has is an incredibly standardized workflow that is really critical to not only collections, but also timely collections, in an environment where those time frames have been increasing for a long period of time. We're obviously, as we've talked about before, supplementing some of those capabilities that we have today that used to be manual with AI enabled technologies that allow us to produce more rapid automated responses to various types of disputes based upon pattern recognition that you would see from various sources that allow us to do that more effectively.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

And that makes in the end what we're doing more reliable, but also as you're pointing out sort of faster. The other thing I would say about this environment in which we talk a lot about the dispute denial activity and as I said earlier, I think some of it's highly inappropriate. But it's also important that we spend our time being committed to very accurate documentation and coding. And I think one of the things that Conifer does well is produce accurate documentation and coding and that has a tendency to also reduce the dispute activity to some extent from the health plans. It is a two way street in the end and both parties have to perform in that direction and that speeds up collections to some extent.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Anyway, I said this earlier and I'll let it be, adapting to the current environment, from a collection standpoint is a critical capability that we have developed and that capability has moved from being manual when it first started to increase to much more technology driven and workflow automation driven.

[Pito Chickering, Analyst at Deutsche Bank]

Great. Thanks so much.

[Operator]

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

[Benjamin Rossi, Equity Research Associate at JP Morgan]

Good morning. Thanks for the question here. Just as a follow-up on your ACA exchange volumes. With your reported hospital length of stay down, call it, 3% year over year and ACA exchange volumes up 28% during 2Q, is there any additional detail you can provide on procedural mix or length of stay across those exchange based volumes? We've just been getting some comments from prominent payers in recent weeks regarding the elevated trend there across that group.

[Benjamin Rossi, Equity Research Associate at JP Morgan]

So just curious if there are any particular areas that were contributors to that 2Q growth figure or if it was more broad based across all specialties for your ACA exchange book? Thanks.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

I don't think there's been anything unusual in this quarter versus prior quarters with respect to the exchange volumes. Remember, the one thing I would say is the exchange business tends to behave similar to the Medicaid business more than the commercial business in the sense that a disproportionately larger amount of it is emergency department driven, may still come with higher acuity, it tends to be more emergency department driven. That's why the impact of the exchanges on our business is higher hospital segment versus the USBI segment even though it's present in both, but I don't think that I noticed anything unusual about the nature of the exchange volumes this quarter. Sun, is there anything you would point out there?

[Sun Park, EVP & CFO at Tenet Healthcare]

No, I think you're right, Sam. It's pretty consistent with prior mix overall.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Okay.

[Benjamin Rossi, Equity Research Associate at JP Morgan]

Got it. Thanks for the color.

[Operator]

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

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

Thanks. Good morning. SWB continues to run I mean, I assume as you achieve these levels this becomes kind of a new baseline expectation to your operators. But I guess the question is how much more opportunity do you see on SWB?

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

And I guess what types of initiatives can execute on to keep up sort of this level of performance?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Well, obviously effective labor management has been a strength of our organization, not just recently, but over the last few years. We stay focused on the various parameters that drive demand, obviously length of stay, the acuity, the day to day productivity and accurate staffing needs that we have in our hospitals. But at the same time from a supply standpoint, we've really I think benefited from improved recruiting strategies, relationships with some terrific nursing schools around the country, where we've created good opportunities for their students and graduates to work in our environments and also improving our retention rates as a result of what we've done. We found that making investments and we have made real investments in our nursing and overall hospital management, director and other supervisor levels with special recognitions and other things that have been ongoing for multiple years because we see the value that they provide in terms of creating a stable and effective workforce for patient care. That has been an important part of what we have done over the last few years and recognizing their efforts.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

I mean, I think look, all of those things are sustainable strategies and all of them contribute to the improvements that we've made both in our efficiencies and effectiveness there.

[Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen]

Thanks.

[Operator]

Our next question comes from John Ransom with Raymond James. Please proceed with your question.

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

Hey, good morning. I'm going to ask Tom a question. He's not going to answer. When he doesn't answer it, I will ask him another question. Do you think that now that we've gotten the bill behind us and we know the nodes, is the environment if you were able to look to sell any more hospitals, is the environment stabilized such that that's more profitable now?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

John, I'm not sure how to answer that question. We don't comment on asset sales and anything that we may be looking at there. We're pretty happy with the portfolio. It's obviously performing based upon the last couple of years in the post transaction environment. I don't know how to comment on whether the broader industry has fully understood the implications implications for them of OBBB or anything else that may come.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

I would take this opportunity to reiterate that our view from what we've seen so far in the external landscape, related to legislation, regulation, etcetera, Washington essentially, we think about this pretty carefully. It has not changed our commitment to our core strategy as it stands right now. So I feel good about that looking forward.

[John Ransom, MD & Director - Healthcare Research at Raymond James Financial]

Yes. So you let me write to my other question. Now that this bill is behind this, what are your current legislative and lobbying priorities in DC? And then where are you going to spend your time there?

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

The most important area right now, as I said, both for the healthcare industry, for the insurance industry, and importantly, we think now that we have an understanding of how important these exchanges are for small businesses and keeping and remaining a competitive workforce for small businesses in in America is engaging in dialogue about mechanisms to extend the exchange subsidies.

[Operator]

Our final question comes from Kevin Fischbeck with Bank of America. Please proceed with your question.

[Kevin Fischbeck, Equity Analyst at Bank of America]

All right. Great. Thanks. I guess wanted to understand a little bit more of the commentary on hospital volumes and the payer mix. I guess how much of the payer mix improvement that you're seeing is because of the exchange growth?

[Kevin Fischbeck, Equity Analyst at Bank of America]

If we took exchanges out, would you still be talking about improved payer mix to the same degree? And then when we think about the volume outlook, the volume outlook being lower, you guys have always had a different view on volumes. It's hard to kind of tell what how much is this high acuity strategy versus underlying demand. Do you have a sense of what underlying demand growth was in the quarter? Was it consistent with where Q1 was?

[Kevin Fischbeck, Equity Analyst at Bank of America]

Or did it decelerate kind of similar to how your overall volumes decelerated from Q1 to Q2? Thanks.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

Yeah. A couple of things. One is commercial mix was strong. And as I indicated earlier, maybe another way of describing that. I mean, obviously the growth that Sun described in the exchanges indicates that some of that mixed strength is is definitely on the payer mix side is definitely coming from the exchanges.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

And this is again going back to the importance of the exchanges as a landing spot as Medicaid redetermination has worked its way through the overall system. It's been an important landing spot. And then finally, no, I mean, I think look, underlying demand in this environment is still strong on a macro basis. I mean, it wouldn't be the case, that we would be able to lose significant amounts of underlying what you would call general med surge, emergency department, etcetera demand and exists solely on a high acuity strategy, right? The high acuity strategy is meant to support the types of margin expansion and growth that we have seen on an efficient basis in the hospital segment and the margin expansion in the hospital segment over the last twelve, we were just looking over the last twelve months or even over the last three to four years has been significant.

[Saum Sutaria, Chairman & CEO at Tenet Healthcare]

And that's really what the strategy has helped support. But I don't think it's worth making anything of one single quarter, especially when you have seasonal trends and quarter to quarter trends and ramp on and ramp off of respiratory illness and other things. I think this will play itself out over time. The underlying demand environment when you compare it to a multiyear basis still seems strong to me.

[Kevin Fischbeck, Equity Analyst at Bank of America]

Okay, great. Thanks.

[Operator]

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.

Participants

Executives

• William McDowell, VP - IR
• Saum Sutaria, Chairman & CEO
• Sun Park, EVP & CFO

Analysts

• A.J. Rice, Managing Director at UBS Group
• Joshua Raskin, Partner - Managed Care & Providers at Nephron Research LLC
• Andrew Mok, Director at Barclays
• Matthew Gillmor, Director & Equity Research Analyst at KeyBanc Capital Markets
• Justin Lake, Analyst - Healthcare Services at Wolfe Research, LLC
• Sarah James, MD and Equity Analyst - Healthcare Services & HCIT at Cantor Fitzgerald
• Stephen Baxter, Senior Equity Research Analyst at Wells Fargo
• Ben Hendrix, Vice President at RBC Capital Markets
• Whit Mayo, Senior Managing Director at Leerink Partners
• Pito Chickering, Analyst at Deutsche Bank
• Benjamin Rossi, Equity Research Associate at JP Morgan
• Ryan Langston, Director & Senior Analyst - Healthcare Research at TD Cowen
• John Ransom, MD & Director - Healthcare Research at Raymond James Financial
• Kevin Fischbeck, Equity Analyst at Bank of America