Tenet Healthcare Q3 Earnings Call Highlights

Key Points

• Tenet Healthcare raised its 2026 adjusted EBITDA outlook to $5.05 billion-$5.2 billion after reporting $5.6 billion in third-quarter revenue and $1.355 billion in adjusted EBITDA. Adjusted diluted EPS increased 80% year over year to $6.64.
• USPI continued to drive growth, with adjusted EBITDA up 9.1% and revenue per case up 6.1%, supported by a focus on higher-acuity procedures such as joint replacements. Hospital performance also improved through higher admissions and expense controls.
• Tenet generated $1.1 billion in quarterly adjusted free cash flow, repurchased $255 million of shares, and refinanced $2 billion of debt to push major maturities to 2028. However, $450 million of Conifer transition-related EBITDA expected in 2026 is not expected to recur in 2027.

Tenet Healthcare NYSE: THC reported third-quarter 2026 net operating revenue of $5.6 billion and consolidated adjusted EBITDA of $1.355 billion, while adjusted diluted earnings per share rose 80% from a year earlier to $6.64.

Chairman and Chief Executive Officer Saum Sutaria said the company’s core operations continued to grow after excluding $147 million of one-time Conifer contract-transition items that were not included in prior guidance. On that basis, Tenet reported a 21.8% adjusted EBITDA margin and 10% adjusted EBITDA growth compared with the third quarter of 2025.

The company raised its full-year adjusted EBITDA outlook to a range of $5.05 billion to $5.2 billion, an increase of $195 million at the midpoint from its outlook following the second quarter. Sutaria said more than 40% of the full-year guidance increase was attributable to fundamental operating outperformance.

USPI growth led by higher-acuity procedures

United Surgical Partners International, or USPI, generated $537 million of adjusted EBITDA, up 9.1% from the prior-year quarter, with an adjusted EBITDA margin of 39.2%. Same-facility systemwide revenue increased 4.5%, as net revenue per case rose 6.1% while same-facility case volumes declined 1.5%.

Management attributed the volume decline in part to its focus on higher-acuity procedures. Sutaria said total joint replacements at the company’s ambulatory surgery centers increased 12.8% year over year, the strongest quarterly result for that category in 2026.

“Our high acuity strategy continues to yield benefits,” Sutaria said.

USPI invested more than $100 million during the quarter and began patient care at four de novo centers year to date. Sutaria said the company continues to see an attractive pipeline of potential partnerships and acquisitions, with many acquisition opportunities coming directly to USPI rather than through competitive processes.

Looking beyond orthopedic procedures, Sutaria identified urology, general surgery, advanced-body robotics, spine and cardiac centers as areas of opportunity. He also said the company is working to move appropriate cases from hospital outpatient departments to freestanding outpatient settings.

Hospital results supported by admissions and cost controls

Tenet’s hospital segment benefited from 3.2% growth in same-hospital adjusted admissions and continued expense-management efforts. Excluding Conifer transition benefits, hospital adjusted EBITDA increased 11% from the third quarter of 2025, according to Sutaria.

Chief Financial Officer Sun Park said revenue per adjusted admission increased 0.2% year over year. Commercial employer revenue strength was partly offset by declining exchange enrollment and volumes. Exchange admissions and revenues declined 18% from a year earlier and accounted for approximately 5.5% of consolidated net operating revenue during the quarter.

Management characterized exchange-related trends as stabilizing in the third quarter following a greater acceleration in the second quarter. Park said the increase in uncompensated care reflected reduced exchange volumes and did not point to a broader issue beyond that trend.

Tenet recognized $32 million in out-of-period supplemental Medicaid revenue during the quarter, compared with $38 million in the prior-year period. Year to date, the company recorded $124 million of favorable out-of-period supplemental Medicaid revenue related to prior years.

During the analyst discussion, Sutaria said the hospital business has tilted more toward emergent and medical care than surgical care this year, though both remain important to its strategy. He highlighted the company’s transfer-program strategy, under which Tenet hospitals accept higher-acuity patients from smaller suburban and rural facilities and return patients to their home communities when appropriate.

Conifer items lift 2026 outlook but are not expected to recur

Tenet recorded a $147 million net benefit associated with revenue-recognition timing and transition activities related to Conifer. The benefit included $97 million of revenue recognition that Park said was a timing shift from the fourth quarter into the third quarter and would not affect full-year revenue from the transitioning contract.

The remaining $50 million reflected transition activities, including expense reductions that occurred earlier than expected. Sutaria said Conifer transition activities are now expected to contribute $450 million of adjusted EBITDA in 2026, but those contributions are not expected to recur in 2027.

Despite that expected rollover, management said it expects the enterprise to grow adjusted EBITDA in 2027 after normalizing for the $450 million of transition items. The outlook assumes currently known regulatory frameworks, while the company continues to assess potential exchange headwinds and the estimated effect of Medicaid work requirements.

Park said Tenet is more than 90% contracted with commercial payers for 2027, with renewals generally running in the 3% to 5% range. He said the company expects technology investments and Conifer’s revenue-cycle capabilities to support revenue yield and help manage payer administrative requirements and denials.

Cash flow funds buybacks, investment and debt management

Tenet generated $1.1 billion of adjusted free cash flow in the third quarter and $2.5 billion year to date. The company ended September with $2.67 billion in cash and no borrowings under its credit facility.

During the quarter, Tenet issued $2 billion of senior unsecured notes due in 2034 and used the proceeds to retire $2 billion of notes that had been scheduled to mature in 2027 and 2028. The company said it now has no significant debt maturities until 2028.

Tenet repurchased 970,000 shares for $255 million during the third quarter. Year to date, it has repurchased 8 million shares for $1.615 billion. Its leverage ratio was 2.11 times EBITDA, or 2.58 times EBITDA less noncontrolling interests, as of Sept. 30.

For 2026, Tenet expects net operating revenue of $22.05 billion to $22.45 billion and adjusted free cash flow after noncontrolling interests of $1.925 billion to $2.155 billion. The cash-flow outlook includes roughly $150 million of tax payments related to the Conifer transaction.

About Tenet Healthcare (NYSE:THC)

Tenet Healthcare Corp. NYSE: THC is a diversified healthcare services company headquartered in Dallas, Texas. Through its hospital operations and outpatient platforms, the company provides a range of medical services to patients across the United States.

Tenet operates acute care and specialty hospitals, ambulatory surgery centers, imaging facilities and other outpatient care sites. Its United Surgical Partners International subsidiary is a major provider of ambulatory surgery services and partners with physicians and health systems.

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