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The Dallas-based health care company and its subsidiaries operate acute care and specialty hospitals, as well as ambulatory surgery centers and other health care facilities around the U.S.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Tenet Healthcare operates a network of hospitals, acute care centers, emergency departments, imaging centers, and ambulatory surgery centers through its subsidiaries and joint ventures, comprising one of the largest for-profit hospital chains in the U.S. Its Conifer Health Solutions subsidiary provides revenue cycle management to hospitals and health systems nationwide.

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Tenet Healthcare (THC): Company Profile, Stock Price, News, Rankings

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Tenet Healthcare

tenet healthcare

Good morning. Welcome to Tenet Healthcare's third quarter 2026 earnings conference call. After the speaker remarks, there will be a question-and-answer session for industry analysts. If you would like to ask a question, please press star one on your telephone keypad. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing these star keys. Tenet respectfully asks that analysts limit themselves to one question each. I will now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We are pleased to have you join us for a discussion of Tenet's third quarter 2026 results, as well as a discussion of our financial outlook. Tenet senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer, and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation which has been posted to the investor relations section of our website, tenethealth.com.

Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation, as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission. With that, I will turn the call over to Saum.

Thank you, Will, and good morning, everyone. Third quarter net operating revenues were $5.6 billion, and consolidated adjusted EBITDA was $1.355 billion. Adjusted diluted earnings per share increased 80% to $6.64 in the third quarter of 2026 compared to the prior year. More importantly, after adjusting for one-time items related to contract transitions that generated adjusted EBITDA of $147 million that was not reflected in our previous guidance, the core business continued its strong growth trajectory in 2026 with an adjusted EBITDA margin of 21.8% and 10% growth in adjusted EBITDA over third quarter 2025.

We continue to manage through payer mix shifts and enrollment declines in the exchanges and execute on our technology-enabled growth and expense management plans that support our margin strength. Our strong performance is driving significant free cash flow that we continue to deploy for the benefit of shareholders. Year-to-date, we have deployed over $1.6 billion for share repurchases. Turning to our segments. USPI generated $537 million in adjusted EBITDA, which represents 9% growth over third quarter 2025. Same-facility revenues grew 4.5% as our high acuity strategy continues to yield benefits and is highlighted by our strongest quarterly performance this year with 12.8% same-store growth in total joint replacements in the ASCs over prior year.

USPI also had a very successful quarter in development, with over $100 million of investments in the third quarter alone. We remain the preferred acquirer of assets in this space and continue to have an attractive pipeline of partnerships interested in joining USPI. Additionally, we have commenced patient care at four de novo centers to date. Turning to our hospital segment. Our performance in the quarter was driven by 3.2% adjusted admissions growth and strong margin performance from sustained expense efficiencies.

The investments that we have made in support of our high acuity strategy continue to pay dividends and drive incremental growth. Excluding the contract transition benefits that I mentioned, adjusted EBITDA grew a very attractive 11% over third quarter 2025, again, producing results ahead of our expectations. We are pleased with our performance in both operating segments, which continue to generate strong same-store revenue growth, attractive margins, and robust free cash flows. Turning to guidance for the rest of 2026. We began the year with attractive growth expectations and delivered an outsized and competitively differentiated increase to our guidance when we reported our second quarter results.

At this point in the year, we are raising our full year 2026 adjusted EBITDA guidance to a range of $5.05 billion-$5.2 billion, which represents an increase of $195 million, or 4% at the midpoint of the range, over our increased guidance after the second quarter. The guidance increase is supported by our continued expectations for strong fundamental performance, as well as the one-time items in the back half of the year. Notably, over 40% of our total guidance increase for this year is from fundamental outperformance. I'd like to now spend a few minutes discussing some early thoughts on 2027.

After excluding the impact of the transition activities at Conifer, we expect our enterprise to deliver overall adjusted EBITDA growth in 2027. This assumes the current known regulatory frameworks. The value of our diversified business mix support our belief in this outcome for 2027. We are still conducting business planning, so details will come after the fourth quarter as usual. We are sizing further potential exchange headwinds and the estimated impact of Medicaid work requirements. USPI should not be materially impacted by these, and we expect same-store revenue growth, consistent margins, and further expansion of the asset portfolio in our ambulatory business.

In the Hospital segment, we currently see healthy patient demand that would support same-store volume growth and a stable operating environment supported by disciplined cost controls in 2027. To help you bridge the years, we now expect various transition activities at Conifer to total $450 million of adjusted EBITDA in 2026. We do not expect these contributions to recur in 2027, and I will reiterate that this is an estimate depending on how the transitions proceed operationally. We will provide an update following our fourth quarter results.

We are pleased with the results of this highly attractive Conifer transaction, as the total value generated from the contract sale will now increase to approximately 15x 2025 adjusted EBITDA minus NCI. In summary, we have a transformed portfolio of businesses with strong underlying fundamentals, disciplined operations, and a business mix which is diversified from many of the reimbursement headwinds that are affecting the industry. Finally, I will again reiterate our commitment to returning free cash flow to shareholders via repurchases, especially at our attractive valuation multiple in light of recent comparable multiples for combination ASC hospital platforms. For more details on our results, I will now turn it over to Sun.

Thank you, Saum, and good morning, everyone. We again delivered strong performance in the third quarter of 2026, generating total net operating revenues of $5.6 billion and consolidated adjusted EBITDA of $1.355 billion. Third quarter adjusted EBITDA margins were driven by strong revenue performance and disciplined operating expense management with continued progress on the efficiency initiatives that we outlined at the beginning of the year, as well as favorable transition items as described in the earnings release. I would now like to highlight some key items for both of our segments, beginning with USPI.

In the third quarter, USPI adjusted EBITDA grew 9.1% over third quarter 2025 at $537 million, with adjusted EBITDA margins at 39.2%. Same-facility system-wide revenues increased 4.5%, with net revenue per case up 6.1% and same-facility case volumes down 1.5%, reflective of our high acuity focus. Turning to our Hospital segment, same Hospital adjusted admissions rose 3.2% in the quarter as demand remained healthy. Revenue per adjusted admission increased 0.2% year-over-year in the quarter, primarily due to strength in commercial employer revenues offset by the impact of reduced exchange volumes.

Exchange admissions and revenues declined 18% from third quarter of 2025 and represented about 5.5% of consolidated net operating revenues in third quarter of 2026. We recognized $32 million of out-of-period supplemental Medicaid revenues in the quarter. This compares to $38 million of out-of-period supplemental Medicaid revenues that we had in the third quarter of 2025. I would note that year-to-date, there is $124 million of favorable out-of-period supplemental Medicaid revenues related to prior years.

Finally, we recognized a net benefit of $147 million associated with the timing of revenue recognition and various transition activities related to Conifer in the third quarter of 2026. This amount is comprised of two items. First, our net operating revenues increased by $97 million due to revenue recognition timing. It is important to note that this is simply a timing shift between the third and fourth quarters, and as such, does not impact our full year 2026 revenues associated with the transitioning contract. Second, we recognized $50 million of EBITDA from various transition activities, including expense reductions that took place earlier than we had originally anticipated.

All in all, our operating discipline and strategic focus enabled us to deliver another strong quarter despite the patient coverage challenges that the industry is facing. Next, we will discuss our cash flow, balance sheet, and capital structure. We generated $1.1 billion of adjusted free cash flow in the third quarter, which brings us to $2.5 billion of adjusted free cash flow year-to-date. As of September 30, 2026, we had $2.67 billion of cash on hand with no borrowings outstanding under our line of credit facility. As previously announced, we issued $2 billion of senior unsecured notes that mature in 2034.

We used the proceeds from the notes to retire $2 billion of notes that would have been due in 2027 and 2028. We now have no significant debt maturities until 2028. Finally, during the third quarter, we repurchased 970,000 shares of our stock for $255 million. Year-to-date, we have repurchased 8 million shares of our stock for $1.615 billion. Our leverage ratio as of September 30, 2026, was 2.11x EBITDA, or 2.58x EBITDA less NCI, driven by our strong operational performance and financial discipline. We remain committed to maintaining a de-leveraged balance sheet and believe that we have significant financial flexibility to support our capital deployment priorities and continue to drive shareholder value.

Let me now turn to our outlook for 2026. For 2026, we now expect consolidated net operating revenues in the range of $22.05 billion-$22.45 billion, an increase of $50 million at the midpoint of the range over prior expectations. As Saum have mentioned, we are raising our 2026 adjusted EBITDA outlook range by $195 million at the midpoint to $5.05 billion-$5.2 billion, reflecting the increased EBITDA expectations associated with our transition activities, as well as the additional out-of-period supplemental Medicaid revenues that we recognized in the quarter.

Turning to our cash flow for 2026, we now expect adjusted free cash flow after NCI in the range of $1.925 billion-$2.155 billion, an increase of $100 million at the midpoint from our previous guidance range. This range includes the payment of about $150 million in tax payments this year for the Conifer transaction. Excluding these tax payments, this would represent $2.2 billion of adjusted free cash flow after NCI at the midpoint of our 2026 outlook. Our businesses continue to deliver strong free cash flow conversion from our EBITDA performance, while we continue to invest in high-priority areas to support future growth.

Turning to our capital deployment priorities, we are well-positioned to create value for shareholders through the effective deployment of free cash flow. First, we will continue to prioritize capital investments to grow USPI through M&A. Second, we expect to continue investing in key hospital growth opportunities to fuel organic growth, including our focus on higher acuity service offerings. Third, we will continue to be active in share purchases.

We continue to see significant opportunity at our current valuation, continued operating performance, and strong leverage position. Finally, we will continue to evaluate opportunities to retire and/or refinance debt. We are pleased with our continued effective execution and remain confident in our ability to deliver on our increased outlook for 2026. With that, we are ready to begin the Q&A. Operator?

Thank you. We will now be conducting a question-and-answer session. Again, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. Again, for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Jason Cassorla with Guggenheim. Please proceed with your question.

Great. Thanks. Good morning. I wanted to ask about commercial pricing. It is an area you have called out a couple of times, or at least the past couple of quarters. Maybe can you just unpack what you are realizing on the commercial rate side, how you are working with payers as a partner to increase revenue yields, reduce administrative costs, and the like, and how you are thinking about the sustainability of this commercial pricing favorability as you look out into the future. Thanks.

Hey, Jason. Good morning. It is Sun. Yeah. I think our relationship with our commercial payers and commercial pricing overall has not changed very much at all from our prior commentary, right? We still are seeing good renewals, a lot of them at the 3%-5% range. We are obviously fully contracted for this year and are basically over 90% contracted for next year as well, so we have good visibility. The only other thing I would note is from a net revenue per just admissions rate, we said 0.2% this year or this quarter, excuse me. A lot of that is driven by, as expected, good pricing mix across our categories, and then obviously offset by exchange headwinds.

The exchange headwinds represented about 1.8% headwind on our net revenue stat. From an operational basis, look, we try to have a win-win relationship with all our payers. We obviously have to be very diligent from our Conifer business operations on our revenue yield as we respond to different requests and candidly denial activity from the payers.

We perform very well, I think, from a revenue yield basis, and that really has not changed over the last several years in our commentary. We think given Conifer's capabilities and the investments we continue to make in technology and Conifer overall, that we will be able to sustain that. I am wondering if you have any other comments on that. All right, thank you for your question.

Thank you. As a reminder, we ask that everyone please limit themselves to only one question. Our next question comes from the line of Ryan Langston with TD Cowen. Please proceed with your question.

This is Brill for Ryan. I just have a quick question on the state-directed payments. You disclose a number in your filings about Medicaid supplemental payments. I was wondering if you could ballpark what percentage of those will not be subject to reductions under H.R.1? Thanks.

Hey, thanks for your question. We disclose our overall state-directed supplemental Medicaid payments, excuse me, and for this quarter, you will see in our 10-Q, it will be $356 million total of supplemental payments. That being said, we do not disclose the proportion of which would be subject to H.R.1 activity going forward.

Fair enough. If I could just ask a quick follow-up then on just work requirements and thinking about that for next year. When you think about your total adjusted admissions, what percentage come from Medicaid expansion individuals? Thanks.

When you look at our admissions, I would say there's about 60% of our admissions that are from expansion states. I think that's about it. I think, you know, that we have markets like Michigan where there's a lot of activity and we're important providers in that expansion state as an example. It's about 60%.

Thank you. Our next question comes from the line of Kevin Fischbeck with Bank of America. You may proceed with your question.

Great, thanks. Just one clarification before I ask the question. When you said that you think you're going to be able to grow EBITDA next year, ex Conifer, is that the only adjustment, the $450 million? Or do we also have to take out the prior year Medicaid supplemental payments? Then I guess, the real question is just about your view on surgeries broadly. There's been a lot of talk about a weaker surgery backdrop, and I'd like to hear what you're seeing on that respect. Thanks.

Yeah, let me start with the second question, I'll pass to Sun. I think the surgical environment, look, from an industry perspective in terms of what we're seeing, we're pleased with our results. Obviously, there are two components, the Hospital segment and the ASC segment, both of which I think are generally consistent or better than what we're seeing in the general industry. Remember, on the USPI side, as I noted, we're still so focused on our strategy of acuity that you have to take those results in light of that.

But again, I think competitively differentiated results there as well, both on revenue and volume. So we're pleased with that. That said, I would not say this is a gangbusters surgical environment right now, right? You just have to take both of them together, and the importance of our strategy is probably the critical point here in terms of what's driving our confidence in the earnings growth going forward into 2027.

Yeah. Kevin, this is Sun. Just on your clarification question, yeah, we do believe we'll grow total EBITDA next year once you normalize for the $450 million of one-time transition items that we called out this year.

Thank you. Our next question comes from the line of Stephen Baxter with Wells Fargo. You may proceed with your question.

Hi, thanks. I was hoping you could update us a little bit on what you're seeing on uncompensated care trends. It looks like in the third quarter, there was some uptick in both unpaid admissions and also, I think a little bit more so, unpaid outpatient visits when compared to the second quarter. Does that go beyond what you're seeing on the exchanges? Any kind of update just on the exchange trajectory throughout the year? Thank you.

First of all, the primary comment I would make is that largely Q3 is a stabilization message from Q2, right? If Q1 started with what would have been under the basic run rate of impact, and Q2 accelerated, Q3 is a stabilization message, is our main takeaway there. Then you're right about the slight changes there. I don't know, Sun, if you have any other comments, but that's how we're viewing it.

Nothing further to add, Saum. It's really exchange volume reductions that we discussed and the commensurate increase in uncompensated care numbers that you're seeing. I don't think there's anything beyond that, Stephen.

Thank you. Our next question comes from the line of Whit Mayo with Leerink Partners. Please proceed with your question.

Thanks. Is there a revenue headwind that we should be aware of as we think about the Hospital segment for the fourth quarter with CommonSpirit now gone? Is the $450 million headwind next year ratably across each of the quarters or does it have a different slope to it? Thanks.

Yeah. Hey, Whit, this is Sun. The only revenue headwind we will call out is the timing piece that we explicitly said, the $97 million that came into Q3 from a timing basis that otherwise would have been in Q4 instead. I think that is the only material one that I would call out from a Hospital segment perspective.

For next year, the $450 million, I would say a big portion of that would be spread ratably throughout the year, and that is the overall contribution of the CommonSpirit contract that we saw this year. Then there is a portion, and we call that about $160 million total between Q3 and Q4. That is going to be more, obviously, second half weighted, given that some of the efficiency and transaction activities took place in the second half of the year versus the first half. I think those are the major moving pieces.

Thank you. Our next question comes from the line of Brian Tanquilut with Jefferies. You may proceed with your question.

Hey, good morning, guys. Sun, as I think about the salaries line, I see it down both sequentially and a year-over-year basis. Is this largely driven by the Conifer transition, or is there anything to think about, in terms of the efforts that you guys have put in on SWB, and is this the right baseline to basically adjust and build off of going forward? Thanks.

Yeah, I would actually say it's the other way around. Most of the efficiency you're seeing in our SWB line is from all the things that we just talked about over the course of the year, where we obviously have spent a lot of time and energy and effort and have shown performance on cost controls, in the face of Ex, exchange reductions and other challenges. There are a lot of moving pieces, obviously, in that line item. But a majority of that is from our efficiency efforts. As you get into Q3 and Q4, as again said, there are some additional efficiency initiative impact that we'll see as we transition activities. But by and large, SWB is from our efficiency efforts overall across Tenet Healthcare.

Thank you. Our next question comes from the line of Pito Chickering with Deutsche Bank. You may proceed with your question.

Hey. Good morning, guys, and thanks for taking my questions. Just looking at the ASC growth engine, for the next few years, ortho, has obviously been a big one. But should we be thinking about other areas like urology, bringing in used da Vinci, used Xi, urology, and as you look past ortho, which again, will continue for another couple of years, where's the next sort of big growth engine that we should be thinking about within ASCs?

Yeah. Thanks, Pito. For sure, orthopedics and the expansion of orthopedics cases beyond the current case mix is an important driver. But in addition for us, as you know, we have been pursuing growth in urology, in general surgery, in advanced body robotics, in spine. There are a number of areas, standing up some new cardiac centers, as I've always said, slower process, but still opportunity. So the diversification into higher acuity areas while maintaining and growing our base are both important drivers of that future.

And really, the combination of that strategy with the regulatory framework and support for moving surgical care into safe, lower-cost settings are both things that I think will benefit us over a multi-year period. In this environment, and look, the regulatory environment is somewhat known and somewhat uncertain based upon what happens from an election standpoint. But I would say and reiterate what I noted in my comments, which is having the diversified platform at the scale we have it is a really important driver of our ongoing ability to build and grow this business at an enterprise level.

Great, and then a follow-up here. You raised the core EBITDA growth by sort of three million versus last quarter. I assume there's a lot of moving pieces within that three million. So can you sort of talk about the good guys and bad guys within that, as it seems pretty solid considering the volatility we're seeing in the markets today? Thank you.

Yeah, Pito, I think, as we kind of said in our prepared comments, the change in our estimates and guidance ranges was pretty mechanical this quarter, where it was virtually all to do with the one-time items as well as the revenue recognition piece that we already mentioned, plus the out-of-period Medicaid. Without those, I would say, from a core fundamental performance basis, we had a very significant raise last quarter, both for the first half of the year and the second half of the year. And we think we obviously delivered to our increased expectations in Q3. So I would say those are probably the moving pieces I would point out.

Yeah, we're reiterating the belief in the strength of the business today and also our ability to manage that into the fourth quarter at the elevated levels that we've provided. And we think we have the foundation in place and the tactics for the fourth quarter in place, given the demand we're seeing right now for a successful end to the year.

Thank you. Again, as a reminder, Tenet respectfully asks that analysts limit themselves to only one question each. Our next question comes from the line of A.J. Rice with UBS. You may proceed with your question.

Hi, everybody. We have had now, with the announcement over the last week, two major deals where non-profit health systems are buying surgery center assets, paying significantly higher premiums than what your business is being valued in the market. USPI has generally been viewed in the industry as probably the premium surgery center asset. I wonder, with that backdrop, can you comment on, is this having any impact in the market on deals, the smaller deals, in terms of how people are thinking about pricing?

Is it changing the competition for ASC assets in any way? Maybe these guys are out of the market because they are in the process of selling, or maybe the nonprofit systems are gearing up to be more active acquirers. Does it do anything to make you think about being more proactive in trying to get recognition for the value that is obviously there at USPI, but does not seem to be recognized by the market?

Well, thanks, A.J. Let's start with the last part of it. As I commented, at the end, I think from a practical perspective, the two things that we can do are continue to deliver differentiated earnings growth. I believe that USPI has delivered differentiated earnings growth versus any other ASC platform in the industry, both recently and over a long period of time. I think the facts would support that pretty easily. The second thing is, with our free cash flow generation, recognizing the attractive valuation of our equity, relative to what are some reasonable valuations of, in this case, more recently, ASC hospital combination platforms, as I noted.

So those are the two practical things. Look, we believe in continuing to build this business and do it in a differentiated manner. In terms of the M&A market, look at the third quarter again, right? A very successful third quarter in acquisitions, the vast majority of which were not competitive processes, but came exclusively to USPI, in those processes. We have a terrific pipeline looking ahead. I know we keep saying that, but the reality is our acquisitions every year continue to confirm that pipeline translates to actual acquisition activity and successful ramp-up of our ability to deliver synergies into those assets.

De novo development, new tools in the toolkit about how we think about those de novo developments, a heavier focus of those de novo developments into some of the higher acuity service lines where we've built a differentiated reputation in the marketplace with physician and physician groups and MSOs, that are investing in those specialties. So I think that's another important feature of what we are able to do, looking forward.

Finally, because of the value that we are providing health plans in the ASC sector and the government, candidly, our ability to move into new markets and new states with our contracting platform and move surgical care into lower cost settings without having to own more acute care hospitals is another important differentiator in what we are able to do with respect to expanding USPI's scope and activity. So again, as you can imagine, we spend a lot of time on this and how we remain competitively differentiated, going forward, not just where we are today.

Hopefully that gives you a little bit of a flavor of it. Look, in terms of the two recent ASC acquisitions, I've personally extended my congratulations to both new owners. This is an important part of the market, and we have a lot of work to do together from an advocacy perspective in order to support and build the growing interest in ambulatory surgery, maintain high quality and safety, and also ensure that regulators understand the benefits that this portion of the surgical sector is providing to the cost of healthcare going forward. I look forward to those collaborations with those leaders.

Thank you. Our next question comes from the line of Justin Lake with Wolfe Research. Please proceed with your question.

Thanks. Good morning. You guys have done an incredible job of managing costs and improving margins at the Hospital segment in particular. Wanted to see if you can give us any color on where you see yourself in terms of the life cycle of that margin trajectory. Effectively asking whether you still see meaningful opportunity here, or should we expect core growth going forward in the hospital business to look more like top-line growth, X items like DPP, exchanges, work requirements that are going to be transitioning?

Hey, Justin. Thanks for the question. We have spent a lot of time and energy making sure that our total business, including hospitals, as you noted, is running efficiently and we are finding cost opportunities wherever we can. That has been a longstanding campaign for Tenet, obviously. This year, as we have talked about several times, we accelerated those efforts, including adoption of different technologies and AI tools, for obvious reasons in the face of some headwinds that we had in Exchange as well as other dynamics.

Going forward, it is tough to say where in the life cycle we are, right? I think it is reasonable to assume that we will have access to even more improved technologies and other solutions as we go that we may not be aware of today, but that we can adopt as we go in the future. I think Tenet's shown the ability to do that. From a more operational basis, the operating environment, I think, is pretty stable, as we've said many times. From a labor standpoint, from our ability to manage our suppliers other medical professional providers. I think, there remains opportunity, and we will continue to work on those, but I think we've managed that pretty significantly.

So listen, I think Tenet's been showing the ability to kind of dial up, dial down, as the situation requires. We'll see as we get through our planning for 2027 what all the headwinds and tailwinds are. Obviously, managing our operating expenses will be a big part of how we deliver our commitments. So hopefully that answers the question. Thanks, Justin.

The only thing I'd add is that our commentary about 2027 is probably a reflection of how positively we feel about our controllable activities, looking forward into the coming year.

Thank you. Our next question comes from the line of Andrew Mok with Barclays. You may proceed with your question.

Hi, good morning. Total joints have been a strong category for quite some time, but it looks like that category re-accelerated at USPI this quarter. Is there anything to call out driving that re-acceleration of total joint growth? And do you believe that share is still coming from hospitals? Thanks.

Yes. I think when you say, is that share coming from hospitals, I think it's coming from migration of cases from probably an HOPD to a freestanding outpatient setting. I think the driver of that is the continued efforts that we make in helping surgeons realize that they have a service-differentiated site of care that, as they get comfortable with it, they can continue to grow their activity in that environment, right? It's more convenient for them, it's more convenient for their patients.

One of the important things that we have, I think I've talked about before, is the ability to help these surgeons, who are pretty smart about opportunity and risk with their patients, to use frameworks we've established to give them more predictability in terms of which cases are safe in the ASC environment, likely to be successful, and which conditions they may want to think about that would drive them to continue for patient success and safety standpoint in the hospital.

Those protocols, I think, are very helpful to growing the confidence in the surgical community of what they can achieve in a USPI ASC, and that's helping to drive the organic growth. It's a matter of really expanding the access to those protocols, which is really about how many surgeons trial an environment in the USPI setting. One of the things we do in this service line is give surgeons an opportunity to trial USPI centers without having to be joint venture partners or equity owners or other things. So that's a really important feature of what we create capacity to do in our environment, because those could be future partners, in perhaps new de novo and other centers.

Thank you. Our next question comes from the line of Sarah James with Cantor Fitzgerald. You may proceed with your question.

Thank you. You guys have talked positively about surgical results versus the industry. Are you gaining surgical share in 2026? Is it on the Hospital, USPI, or both? How are you thinking about the surgical versus medical mix heading into 2027?

Yeah. So two things. I would reiterate our strategic focus. We're primarily focused on growing and succeeding in share capture in our higher acuity surgical areas and continuing to build more access points in some of the more foundational ambulatory surgery center environments, which is effectively share capture by growing the number of surgeons or number of doctors affiliated with USPI. In the high acuity areas, we're doing that, plus we are seeing growth that's based upon the question that we just answered around the migration from higher cost to lower cost settings. It's a combination of the two, which is why you see higher growth rates.

The summary from both of those is that we are increasing the proportional share that's happening in the lower cost ASC setting. In the acute care business, as I noted, this year has tilted a bit more towards both significant emergent and medical care on balance than surgical care, though both have been important drivers of our strategy.

Remember, for us, again, the focus on that higher acuity segment is very important in terms of what we're doing. That's what supports our revenue growth and case mix index growth and the ongoing opportunities for expense management we have with our length of stay platform and the things we're doing there. The mix of business gives us an opportunity to both grow revenue intensity and improve our expense management, which is why you see the margin strength that we're able to deliver.

Thank you. Our next question comes from the line of Ann Hynes with Mizuho Securities. You may proceed with your question.

Good morning. Thank you so much. Thanks on the visibility for able to be able to grow in 2027. Do you have any targets, meaning do you have a long-term target for each segment? And if you do you think you will be able to grow within those long-term targets for each segment? Thank you.

Yeah, Ann, we have not indicated any kind of long-term targets in the segments other than what we sort of repeat year-over-year when we give guidance until there is full clarity about what is going to happen vis-a-vis H.R.1, which we believe is very highly subject to modification based upon election outcomes over the next few years.

Thank you. Our next question comes from the line of Craig Hettenbach with Morgan Stanley. Please proceed with your question.

Yes, thank you. Saum, in the hospital segment, the transfer program has been an important driver of higher acuity growth and margin performance. Can you just touch on the strategy behind that and the durability of that strategy?

Yes. Thanks, Craig. Look, I think it's very important in this environment, coming out of COVID, this is more of a long-term strategy that urban and sort of larger suburban hospitals have an important role to play in providing access to more smaller suburban and certainly more rural communities, where the funding just hasn't been necessarily fully available to refresh capital physician specialty capacity and other things coming out of the COVID crisis. At the same time, there's still people that live there, need access, get very sick, and go to their hospitals.

We have a very important to us transfer program strategy that is willing and able to receive all patients from these outlying locations when there are needs, and importantly, return them to their home communities as appropriate as early as possible as well. Our ability operationally to have built these successful partnerships have been sustainable, we've found over a number of years. In the end, if you're a good partner to more rural and smaller suburban communities, they remember that, and you're reliable, and you take their patients when they need it, and you return their patients to them when appropriate.

They remember that. Those relationships that have been built through the back end of COVID, and all the way into today are an important part of our strategy. Look, we also have built a better expertise than the market in taking care of high acuity patients and transfers because it's the heart of our strategy. We save intensive care unit capacity for these types of patients. We are very good at stepping people down out of the intensive care unit when their care is safe in that manner in order to create that capacity.

We also have emergency department contracts and physicians that understand we take this obligation to these communities very seriously. Therefore, we create and save capacity for those patients in the emergency environment as well. So it is a comprehensive approach that we do not think is very easy to replicate, in terms of what we have put in place. Yes, it is an important driver of our, in the end, to simplify our high acuity strategy.

Thank you. Our next question comes from the line of Ben Hendrix with RBC. You may proceed with your question.

Great. Thank you very much. Just wanted to follow up on some of the joint procedure momentum discussion. I realize that the strength you are seeing reflects the high acuity focus, service line initiatives, share capture, etc. But just hoping to get a sense of some of the underlying demand trends in your markets. I think one of your peers had talked about a lull in high acuity ortho with clinic and imaging volume, not necessarily converting to procedures. Wanted to see what degree you are seeing delays build and if that is informing your growth expectations for 2027. Thanks.

Tenet Healthcare (THC) Q3 2026 Earnings Call Transcript

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