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Tenet Healthcare (THC) to Rejig Business by Selling Urgent Care

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Tenet Healthcare Corporation THC has announced that it will sell its urgent care platform to FastMed Urgent Care.

Tenet’s urgent care platform is operated under the CareSpot and MedPost brands and managed by the company’s United Surgical Partners International (USPI) subsidiary. The transaction, expected to be completed in the first quarter of 2021, will involve the sale of 87 CareSpot and MedPost centers to FastMed’s healthcare services in Arizona and Texas.

This deal is in line with the company’s efforts to streamline its Ambulatory Care segment for growing its surgery centre business and trimming the urgent care business. To this end, the company recently announced that it will buy a portfolio of up to 45 ambulatory surgery centers (ASCs) from SurgCenter Development (SCD) for $1.1 billion.

Post completion of the deal, Tenet’s United Surgical Partners will operate as many as 310 ambulatory surgical facilities across 33 states. The company’s Ambulatory surgery business is more profitable than the urgent care business.

The company’s Ambulatory Care business generated net operating revenues of $1.42 billion in the nine months ending Sep 30, 2020, down 6.7% year over year.

Tenet consistently focuses on opportunities to expand its Ambulatory Care segment through organic growth, building new outpatient centers, corporate development activities and strategic partnerships. USPI’s surgery centers and surgical hospitals offer many advantages to patients and physicians including greater affordability, predictability, flexibility and convenience. Moreover, partly owing to advancements in medical technology and partly because of the lower cost structure and greater efficiencies that are attainable at a specialized outpatient site, management believes that the volume and complexity of surgical cases performed in an outpatient setting will continue to increase following the containment of the COVID-19 pandemic.

Historically, the company’s outpatient services (ambulatory surgery) generated significantly higher margins than the inpatient ones (urgent care).

The company boasts a strong inorganic growth story. Tenet made numerous acquisitions, partnerships and strategic alliances, aimed primarily at boosting the scale of its business, operating capacity and geographical expansions.

Year to date, the stock has gained 5.9% compared with its industry’s growth of 8.3%.

Other companies in the same space, namely HCA Healthcare, Inc. HCA  and Community Health Systems, Inc. CYH have also rallied 11.8% and 167.3%, respectively, but Universal Health Services,Inc. UHS  has lost 4.1% during the same time frame.

Tenet carries a Zacks Rank #3 (Hold), currently.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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