Tenet Fending Off Uninsured Headwinds So Far

Since late 2017, Tenet Healthcare has undergone a massive turnaround effort in the wake of an acquisition strategy that had previously saddled the company with operating inefficiencies and a debt-heavy balance sheet. In recent years, Tenet’s new leadership has improved governance practices, pruned its asset portfolio through divestitures of underperforming hospitals, and undertaken a restructuring effort. Operationally, Tenet continues to expand its high-acuity service lines in its outpatient surgery centers, improve operating efficiency inside and outside its healthcare facilities, and increase its focus on service quality. All these factors appear to be positively influencing returns on invested capital at Tenet, which now regularly exceed the weighted average cost of capital. We applaud those trends. We also like the firm's increasing focus on the high-margin ambulatory surgery business, which should offer greater growth opportunities than its acute hospital operations in the long run.