UPDATE: Feb. 1, 2024: Novant Health announced Wednesday it completed its purchase of three South Carolina hospitals from Tenet Healthcare. Tenet said it will net approximately $1.75 billion in after-tax proceeds.
Dive Brief:
- For-profit operator Tenet Healthcare has agreed to sell three of its hospitals in South Carolina for about $2.4 billion in cash to Winston-Salem, North Carolina-based Novant Health.
- Proceeds from the deal, which is expected to close in the first quarter in 2024, will primarily go toward paying debt, Tenet said in a news release.
- Under the agreement, Dallas-based Tenet's financial services subsidiary Conifer Health Solutions will also provide revenue cycle management for the hospitals and their related operations under an expanded 15-year contract.
Dive Insight:
Hospital and health system merger and acquisition activity is back to pre-pandemic levels after falling to a historic low in 2021, according to Kaufman Hall. Eighteen deals were announced in the third quarter this year, compared with just 10 during the same period in 2022.
More than a third of transactions announced in the third quarter cited financial distress as a driver for the deal, reflecting the challenges from increased costs of labor and other expenses over the last two years, the consultancy said.
The Tenet acquisition includes Coastal Carolina Hospital in Jasper County, Hilton Head Hospital in Beaufort County and East Cooper Medical Center in Charleston County, as well as affiliated physician practices and other related hospital operations.
The three facilities generated about $552 million in revenue in the past year ended Sept. 30, Tenet said. It expects to post a pre-tax book gain of approximately $1.6 billion from the deal.
However, Tenet will keep its local ambulatory facilities, operated by subsidiary United Surgical Partners International. Novant and USPI will also be “enhancing” their ambulatory surgery partnership, the health systems said.
The latest purchase agreement marks another deal for Novant this year. The nonprofit signed an agreement to buy two North Carolina hospitals from Community Health Systems for about $320 million in February. It also bought rural Pender County Medical Center and announced in August it would take a 30% stake in South Carolina’s Conway Medical Center.
Novant reported $38 million in excess revenues over expenses in the second quarter ended June 30, but said in October it would cut 160 full-time positions to help the health system operate more efficiently as salary and benefit expenses rose.
For-profit Tenet beat Wall Street expectations on revenue in the third quarter and raised the lower end of its full-year revenue guidance. Profit reached $101 million, compared with $131 million in the same period last year. Fitch Ratings called the operator’s outlook stable in May, noting its debt leverage had declined “meaningfully” in recent years, though it was still at high levels.
