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) (NYSE: THC) is a diversified American healthcare services company that owns and operates acute care hospitals and a broad range of outpatient facilities. Its portfolio includes general acute-care hospitals, specialty hospitals, ambulatory surgery centers, urgent care and diagnostic imaging centers, and other ancillary service locations. Tenet’s operations are oriented around delivering inpatient and outpatient clinical care across multiple medical specialties, with an emphasis on surgical services, emergency care, and advanced diagnostics.

In addition to facility-based care, Tenet provides integrated services designed to support clinical operations and improve patient access and care coordination. These services include physician practice partnerships and networks, outpatient surgery and imaging services, and programs aimed at enhancing clinical quality, patient experience and operational efficiency. The company works with payors, health systems and physicians to implement care models that address both fee-for-service and value-based reimbursement environments.

Headquartered in Dallas, Texas, Tenet’s facilities and services are concentrated across the United States. The company has grown and evolved through a combination of facility development, acquisitions and strategic partnerships to expand its geographic footprint and service offerings. Tenet continues to invest in clinical programs, technology and care delivery models intended to advance outcomes and access for the communities it serves while navigating the regulatory and market dynamics of the U.S. healthcare system.

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 Tenet Healthcare's Second Quarter 2025 earnings conference call. After the speaker's remarks, there will be a question-and-answer session for industry analysts. At that time, if you'd like to ask a question, please press star one on your telephone keypad. Tenet respectfully asks that analysts limit themselves to one question each. I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

[Will McDowell, VP of Investor Relations 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 Tenet's second quarter 2025 results, as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation which has been posted to the Investor Relations section of our website, tenethealth.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. Tenet is under no obligation to update any forward-looking statements based on subsequent information.

[Will McDowell, VP of Investor Relations at Tenet Healthcare]

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-K and other filings with the Securities and Exchange Commission. With that, I'll turn the call over to Saum.

[Saum Sutaria, Chairman and 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 2025 net operating revenues of $5.3 billion and consolidated adjusted EBITDA of $1.121 billion, which represents growth of 19% over 2024. Second quarter 2025 adjusted EBITDA margin of 21.3% represents a 280 basis point improvement over the prior year, driven by strong same-store growth and very efficient operating performance. USPI continues to deliver. We generated $498 million in adjusted EBITDA, which represents 11% growth over second quarter 2024. 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

We continue to see a robust pipeline for M&A opportunities and expect to exceed our baseline intention for $250 million of M&A spend in 2025. Turning to our hospital segment, adjusted EBITDA grew 25% to $623 million in the second quarter of 2025. Same-store hospital admissions were up 1.6% in the quarter. Second quarter 2025 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 and CEO at Tenet Healthcare]

We continue to capitalize on our compelling valuation and have deployed $1.1 billion to repurchase 7.2 million shares in the first half of 2025. As we noted in our release, the Board of Directors has authorized a $1.5 billion 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 $4.4 to $4.54 billion, which represents an increase of $395 million, 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. 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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. With that, Sun will provide a more detailed review of our financial results. Sun, turning it over to you.

[Sun Park, EVP and CFO at Tenet Healthcare]

Thank you, Saum, and good morning, everyone. We delivered strong results in second quarter of 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 $5.3 billion. And consolidated adjusted EBITDA of $1.121 billion, a 19% increase over second quarter 2024. Second quarter adjusted EBITDA margin was 21.3%, a 280 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. In the second quarter, USPI's adjusted EBITDA grew 11% over last year, with adjusted EBITDA margin at 39.2%.

[Sun Park, EVP and CFO at Tenet Healthcare]

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 million, 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%. Our consolidated salary, wages, and benefits was 41% of net 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 and disciplined operating expense controls. Finally, we recognized a $79 million favorable pre-tax impact for additional Medicaid supplemental revenues related to prior periods in the second quarter of 2025. This includes the recently approved program in Tennessee.

[Sun Park, EVP and CFO at Tenet Healthcare]

As a reminder, our second quarter 2024 results included a $30 million favorable pre-tax 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 million of free cash flow in the second quarter, and as of June 30, 2025, we had $2.6 billion of cash on hand, with no borrowings outstanding under our $1.5 billion line of credit facility. Additionally, we have no significant debt maturities until 2027. And finally, during the second quarter, we repurchased 4.6 million shares of our stock for $747 million. And year-to-date, through June 30th, we have repurchased 7.2 million shares for $1.1 billion. Our leverage ratio as of June 30, 2025, was 2.45x EBITDA, or 3.11x EBITDA less NCI, driven by our outstanding operational performance and continued focus on financial discipline.

[Sun Park, EVP and CFO at Tenet Healthcare]

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 $20.95 to $21.25 billion, an increase of $300 million over prior expectations. As Saum mentioned, we are raising our 2025 adjusted EBITDA outlook by $395 million at the midpoint to $4.4 to $4.54 billion, 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 2025 adjusted EBITDA of $1.99 to $2.05 billion, a $70 million increase over prior expectations.

[Sun Park, EVP and CFO at Tenet Healthcare]

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 million at the midpoint to $2.41 to $2.49 billion. Additionally, we are lowering our assumption for same-hospital adjusted admissions growth by 50 basis points to 1.5% to 2.5% for 2025. Finally, we expect third quarter 2025 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 2025 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 range of $2.025 to $2.275 billion.

[Sun Park, EVP and CFO at Tenet Healthcare]

Distributions to non-controlling interest in the range of $780 to $830 million, resulting in free cash flow after NCI in the range of $1.245 to $1.445 billion, an increase of $195 million at the midpoint of our range from prior outlook. Turning now to our capital deployment priorities, 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&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. Finally, we'll continue to have a balanced approach to share repurchases, depending on market conditions and other investment opportunities. As Saum noted, our Board of Directors has recently authorized a $1.5 billion increase to our share repurchase program.

[Sun Park, EVP and CFO at Tenet Healthcare]

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. With that, we're now ready to begin the Q&A. Operator.

[Operator]

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press Star one on your telephone keypad. As a reminder, Tenet respectfully asks that analysts limit themselves to one question each. A confirmation tone will indicate your line is in the question queue. You may press Star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the Star keys. One moment, please, while we poll for questions. Our first question comes from A.J. Rice with UBS. Please proceed with your question.

[AJ Rice, Managing Director at UBS]

Hi, everybody. I might just ask about two aspects of the backdrop in Washington, D.C. The proposed rule on outpatient hospital care has the elimination of potentially 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? Also, any updated figures on the public exchange volumes, how that contributed into the quarter, what you're seeing year to year, 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 and CEO at Tenet Healthcare]

Hey, A.J., it's Saum. 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. At the same time, it takes work and experience and 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. I think it plays to our advantages. I think it represents an opportunity for the future, for sure.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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 and CFO at Tenet Healthcare]

Yeah, thank you, Saum. And just to add, obviously, healthcare exchange remains an important part of our business. For second quarter of 2025, 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 second quarter, our exchange volume now represents about 8% of our total admissions and about 7% of total consolidated Tenet revenues.

[AJ Rice, Managing Director at UBS]

Okay, thanks a lot.

[Operator]

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

[Josh Raskin, Research Analyst at Nephron Research]

Hi, thanks. Good morning. I was wondering if we could just give some more specifics on the outperformance in the core results. I'm specifically looking at the incremental $70 million on the USPI side, the increase in guidance. Within that, is there anything Tenet has done specifically to improve your ability to sort of document, categorize patients as you submit claims? Are there new systems, new technologies, new vendors, or partners? Obviously, anything relating to AI? I'd be curious if there's new things that you're doing within there.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Hey, Josh. Kind of going backwards. 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. I mean, 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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 and CFO at Tenet Healthcare]

Yeah, sure. Josh, in the first half and the second quarter, I think 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. All the trends that we've discussed previously, I think, continue in USPI for second quarter. That's why you saw the strong net revenue, overall growth of 7.7%, as well as a strong net revenue per case. I think good operating expense management. We demonstrated 39.2% EBITDA margins in second quarter as well. I think all those trends apply for both Q1 and Q2, which resulted in about a $50 million increase versus our prior guidance. 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.

[Sun Park, EVP and CFO at Tenet Healthcare]

I think we also remain positive on our M&A activity in terms of contribution. As Saum noted in his opening statement, we expect to exceed our $250 million baseline assumption for USPI M&A. I think all those things contribute to the guidance raise.

[Josh Raskin, Research Analyst at Nephron Research]

Thank you.

[Operator]

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

[Andrew Mok, Director of Equity Research at Barclays]

Hi, good morning. I just wanted to ask about the volumes. There was a little bit of a deceleration there in 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 and CEO at Tenet Healthcare]

Hey. First of all, I think the guidance is just simply reflecting the math that would play out for the rest of the year. No, it was a strong quarter. I mean, we had strong volumes, the right acuity and mix. It very much reflects the focus on our service lines as we have prioritized them. I do not think there was anything particularly unusual other than seasonality.

[Andrew Mok, Director of Equity Research 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 at KeyBanc Capital Markets]

Hey, thanks for the question. I wanted to ask about payer contracting. There is 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? Is there anything to report with respect to denial activity?

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Yeah. A couple of things. First of all, obviously, different parts of the sector at various times certainly go through their ups and downs. 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. Also, to create predictability for both sides over a multi-year period. I mean, 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. I think most people were aware that there are a number of contracts that are coming up.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

We're not seeing anything unusual and certainly no change in our guidance with respect to the way that we have been negotiating our contracts. 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, but 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 kind of the disputes, documentation requests, denials, etc., have ramped up over the past few years post-COVID to levels that are, I would argue, not acceptable in some cases. 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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. You can see it in our results, and I think that translates across the board. This is a constant battle with respect to what's appropriate there. 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 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 at Wolfe Research]

Thanks. Good morning. First, I just wanted to follow up on A.J.'s question. 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. 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? Sticking with that D.C. 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 $1.1 billion. Have you analyzed and have anything to share with us in terms of the impact of if that bill that just passed does get rolled out, what the impact to DPP could be over time as provider taxes? Thanks.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Yeah. Hey, Justin. We do not have any comments about 2026 at this stage. 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 is very much my belief that, because of the existence of the exchanges and the subsidies for the people who do not 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. 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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 is 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 is also an important fact. Look, I think the work is ongoing in that area. I think it is important. I think it is important to more than just our industry. It affects other parts of our sector, but it also affects the macroeconomy through the support for small businesses, which helps to make them more competitive in the U.S. economy at large.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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 2027 or really 2028 from that standpoint. We really do not have any insight into how this will be implemented. There are new legislative proposals that have already come up, attempting to rescind some parts of the OBBB, which are in play in Congress. I think it just remains an area of significant uncertainty. We do not have any sort of projections to provide from that standpoint, especially because we are talking about, again, as I said, out to 2028. Sun, do you want to cover? There was a question in there about the DPP programs.

[Sun Park, EVP and CFO at Tenet Healthcare]

Yeah. Let me just clarify that, Justin. For Q2 of 2025, we recorded about $350 million of total Medicaid supplemental payments. For the first half of this year, we are at about the $675 million range. We have pointed out some one-timers. Once you normalize for that, in the first half of the year, our run rate for the full year is right around the $1.1 billion to $1.2 billion range that we previously discussed.

[Justin Lake, Analyst at Wolfe Research]

Thanks.

[Operator]

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

[Sarah James, Managing Director and Equity Analyst 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. What actually changed in this quarter or in your view of the year? Are there certain segments or any kind of deeply?

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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, Managing Director and Equity Analyst at Cantor Fitzgerald]

Thank you.

[Operator]

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

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

Yeah. Hi, thanks. Just to follow up on Justin's question, I just wanted to ask about the jump-off point for EBITDA this year. Is it as simple as removing the added period Medicaid supplemental EBITDA? I think it's $70 million, $79 million this quarter and $40 million with the first quarter. Or are there any other meaningful areas to consider whether they're 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 and 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, Analyst 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. 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 and CEO at Tenet Healthcare]

Yeah. I mean, our strengths in cardiovascular, orthopedic, spine, neurosurgery, broad-based general surgery, robotics, I mean, those are all the areas that 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. 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. Obviously, many of those patients tend to be sicker and may require more complex surgery. All of those things have been contributors to the results from what we describe as a high acuity strategy.

[Ben Hendrix, Analyst at RBC Capital Markets]

Thank you.

[Saum Sutaria, Chairman and 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. 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 SCD, Covenant? Just wondering if those are contributing to any of the growth still. Thanks.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Case mix. Acuity was up. I'm not sure exactly what you're asking, Sun. You may want to comment more specifically on that question. I mean, but consistent with what we're saying about acuity, case mix index was up. That's referring to the hospital segment. On the USPI side. 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, annual 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. That's why we provide the total revenue growth and also the same-store revenue growth so that one can differentiate between those.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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 and CFO at Tenet Healthcare]

Yeah. Saum, just your—I'm sorry, Will—your question on the case mix. We're up about 1% year over year in Q2. 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, Research Analyst at Deutsche Bank]

Hey. Good morning, guys. Thanks for taking my questions. Nice quarter here. DSOs trended down nicely. I think the lowest that I've ever seen with you guys. Can you talk about cash collections and what have you done differently, or are the payers doing something differently? From a cash flow perspective, should we continue with the models for the bulk of free cash flow going into repo with some M&A in there so you can buy back around 10% plus of your market cap each year while still delivering? Is that the right way to think about it?

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Okay. Just two separate things. Sun, do you want to start with the second one and then go back into the revenue cycle question?

[Sun Park, EVP and CFO at Tenet Healthcare]

Yeah. Sure. So Pito, yeah, we agree. We obviously have very strong free cash flow performance, have increased our guidance for free cash flow after NCI. Up $195 million. 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 have not changed, right? USPI, M&A. Hospital, CapEx for high acuity strategy, and then maintaining our deleveraged balance sheet and a balanced share repurchase approach. It is 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.

[Sun Park, EVP and CFO at Tenet Healthcare]

But I do believe our free cash flow and financial performance and balance sheet flexibility will afford us to make the right decisions as those things come.

[Saum Sutaria, Chairman and 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 remained very focused on trying to keep that as tight as possible using technology automation. I mean, 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 timeframes 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Based upon pattern recognition that you would see from various sources that allow us to do that more effectively. 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. I think one of the things that Conifer does well is produce accurate documentation and coding. That has a tendency to also reduce the dispute activity to some extent from the health plans, right? I mean, 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 and 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, Research 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 JPMorgan Chase]

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 Q2. 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. Just curious if there are any particular areas that were contributors to that Q2 growth figure or if it was more broad-based across all specialties for your ACA exchange book? Thanks.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Yeah. I do not think there has been anything unusual in this quarter versus prior quarters with respect to the exchange volumes. I mean, 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. It may still come with higher acuity, but it tends to be more emergency department-driven. That is why the impact of the exchanges on our business is higher in the hospital segment versus the USPI segment, even though it is present in both. I do not 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 and CFO at Tenet Healthcare]

I think you're right, Saum. It's pretty consistent with prior mix overall.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

Okay.

[Benjamin Rossi, Equity Research Associate at JPMorgan Chase]

Got it. Thanks for telling.

[Operator]

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

[Ryan Langston, Director and Senior Analyst at TD Cowen]

Thanks. Good morning. SWB continues to run pretty favorably. I mean, I assume as you achieve these levels, this becomes kind of the new baseline expectation to your operators. I guess the question is, how much more opportunity do you see on SWB? I guess what types of initiatives can you execute on to keep up sort of this level of performance?

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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. 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.

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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. 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 and Senior Analyst at TD Cowen]

Thanks.

[Operator]

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

[John Ransom, Managing Director at Raymond James]

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

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

John, I'm not sure how to answer that question. We don't comment on asset sales. 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 for them of the OBBB or anything else that may come. I would take this opportunity to reiterate that our view from what we have seen so far in the external landscape related to legislation, regulation, etc., Washington, essentially. We think about this pretty carefully. It has not changed our commitment to our core strategy as it stands right now. I feel good about that, looking forward.

[John Ransom, Managing Director at Raymond James]

Yeah. So you let me write some other questions. Now that this bill is behind us, what are your current legislative and lobbying priorities in D.C.? And where are you going to spend your time there?

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

The most important area right now. As I said, both for the healthcare industry, for the insurance industry. 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 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, Director and Senior Equity Research at Bank of America]

All right. Great. Thanks. I guess I 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? If we took exchanges out, would you still be talking about improved payer mix to the same degree? When we think about the volume outlook, the volume outlook being lower, you guys have always had a different view on volume, so it's hard to kind of tell 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, or did it decelerate kind of similar to how your overall volumes decelerated from Q1 to Q2? Thanks.

[Saum Sutaria, Chairman and 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 mix strength is. Definitely on the payer mix side is definitely coming from the exchanges. 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, etc., demand and. Exists solely on a high acuity strategy, right?

[Saum Sutaria, Chairman and CEO at Tenet Healthcare]

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 12—I mean, we were just looking over the last 12 months or even over the last three to four years—has been significant. 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 multi-year basis, still seems strong to me.

[Kevin Fischbeck, Director and Senior Equity Research 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

• Sun Park, EVP and CFO
• Saum Sutaria, Chairman and CEO
• Will McDowell, VP of Investor Relations

Analysts

• Matthew Gillmor, Director at KeyBanc Capital Markets
• AJ Rice, Managing Director at UBS
• Stephen Baxter, Senior Equity Research Analyst at Wells Fargo
• Pito Chickering, Research Analyst at Deutsche Bank
• John Ransom, Managing Director at Raymond James
• Ben Hendrix, Analyst at RBC Capital Markets
• Josh Raskin, Research Analyst at Nephron Research
• Sarah James, Managing Director and Equity Analyst at Cantor Fitzgerald
• Whit Mayo, Senior Managing Director at Leerink Partners
• Ryan Langston, Director and Senior Analyst at TD Cowen
• Justin Lake, Analyst at Wolfe Research
• Benjamin Rossi, Equity Research Associate at JPMorgan Chase
• Andrew Mok, Director of Equity Research at Barclays
• Kevin Fischbeck, Director and Senior Equity Research at Bank of America