Hospital operator Tenet Healthcare (NYSE: THC) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 9% year on year to $5.53 billion. On the other hand, the company’s full-year revenue guidance of $21.9 billion at the midpoint came in 1.4% below analysts’ estimates. Its non-GAAP profit of $4.70 per share was 15.6% above analysts’ consensus estimates.

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StockStory’s Take

Tenet Healthcare’s fourth quarter results were well received by the market, reflecting strong operational execution and higher-than-expected profitability. Management attributed the quarter’s outperformance to robust growth in its ambulatory surgical center (USPI) business, disciplined expense management, and favorable payer mix. CEO Saumya Sutaria emphasized that “high acuity and disciplined cost control” were key factors, while CFO Sun Park highlighted margin improvements driven by lower labor costs and increased net revenue per admission. The company also benefited from recent investments in technology and capital improvements, which helped maintain stable operating margins despite flat same-store sales.

Looking ahead, Tenet Healthcare’s 2026 outlook is shaped by ongoing investment in technology, further expansion in high-acuity ambulatory services, and structural cost initiatives. Management expects the phase-out of enhanced premium tax credits on health exchanges to reduce hospital volumes and shift the payer mix, but aims to offset these pressures with operational efficiencies and strategic M&A. Dr. Sutaria explained that the company is “tackling expense management more structurally,” focusing on automation and new technologies to drive sustainable cost reductions. The company believes these efforts, along with service line expansion and physician recruitment, will support core earnings growth even in a challenging reimbursement environment.

Key Insights from Management’s Remarks

Management emphasized that technology-driven efficiency, service line expansion, and disciplined cost controls were central to delivering strong results despite persistent sector headwinds.

• Ambulatory growth momentum: The USPI ambulatory surgical center segment continued to outperform, posting double-digit volume increases in joint replacement procedures and strong revenue per case growth. Management credited new facility additions and service line diversification, particularly in spine and urology, for driving organic growth.

• Structural cost initiatives: Tenet intensified its focus on sustainable cost savings by deploying automation, technology, and standardizing workflows across clinical and corporate operations. Dr. Sutaria noted that these efforts aim to modernize the business and improve throughput in high-value hospital areas such as operating rooms and emergency departments.

• Hospital segment resilience: Despite flat same-store admissions, the hospital business achieved higher revenue per admission due to increased patient acuity and a favorable payer mix. Investment in higher-acuity service offerings and targeted capital spending were cited as supporting these trends.

• Capital deployment priorities: The company continued to prioritize M&A in USPI, with $350 million invested and 35 facilities added in 2025. Management highlighted a strong pipeline for further acquisitions and new center development, aiming to maintain high returns on invested capital.

• Conifer transformation: Tenet completed a strategic transaction in its Conifer revenue cycle management unit, unlocking over $1 billion in net present value and gaining full strategic control. The company plans to redeploy resources and leverage Conifer’s capabilities to support patient insurance transitions and operational efficiency.

Drivers of Future Performance

Tenet expects growth in ambulatory care, ongoing cost efficiency measures, and payer mix shifts to shape its 2026 performance amid evolving reimbursement dynamics.

• Ambulatory expansion and M&A: Management is targeting continued double-digit growth in outpatient procedures, supported by new facility openings, service line diversification, and M&A activity in USPI. The phase-out of the inpatient-only list is expected to gradually increase the range of procedures performed in ambulatory settings, especially in high-acuity specialties.

• Expense management and technology: The company is implementing structural cost initiatives through automation, process standardization, and technology deployment, aiming for sustainable margin improvements. These measures are designed to offset reimbursement headwinds and rising labor costs, with management highlighting the potential for ongoing efficiency gains beyond 2026.

• Exchange headwinds and payer mix: The expiration of enhanced premium tax credits on health exchanges is projected to reduce hospital volumes and shift the payer mix toward higher uninsured rates, particularly in states like Arizona, Michigan, and California. Tenet is assuming a 20% drop in exchange enrollment and expects this to represent a $250 million EBITDA headwind, while actively monitoring potential policy changes and enrollment trends.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will monitor (1) the pace and impact of automation and technology-driven cost savings on margins, (2) the ability of USPI to maintain double-digit growth in high-acuity ambulatory procedures through continued M&A and service line expansion, and (3) enrollment trends and payer mix shifts as the enhanced exchange tax credits expire. Progress on Conifer’s transformation and execution of structural expense management will also be key areas of focus.

Tenet Healthcare currently trades at $222.94, up from $193.04 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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