Tenet Healthcare, one of the largest health systems in the U.S., announced over the past week that it has completed the sale of its three South Carolina hospitals and related operations for approximately $2.4 billion and signed a definitive $975 million agreement to sell four others in California.

Out east, the company sold Coastal Carolina Hospital, Hilton Head Hospital, East Cooper Medical Center, affiliated physician practices, and other related hospital operations to Novant Health. After-tax proceeds amounted to approximately $1.75 billion. Tenet’s subsidiary Conifer Health Solutions will run the facilities’ revenue cycle management operations as part of an expanded 15-year contract.

In Orange County and Los Angeles County, it struck a deal with UCI Health to sell Fountain Valley Regional Hospital, Lakewood Regional Medical Center, Los Alamitos Medical, Placentia-Linda Hospital, and other related operations. For this sale, after-tax proceeds are estimated to be approximately $800 million, and Tenet will retain net working capital related to pre-closing operations. Conifer Health Solutions will continue providing RCM services during the transition.

“UCI Health is an innovative academic health system with a deep commitment to enabling accessibility to world-class, academic medicine closer to home. Integrating these hospitals into their system will meaningfully enhance access to the benefits of university medicine,” said Dr. Saum Sutaria, chairman and CEO of Tenet Healthcare, in a statement.

The California hospitals and their related operations earned the company approximately $1 billion combined, as well as pretax income of approximately $29 million, and Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of approximately $71 million, excluding an interest expense of approximately $3 million and a depreciation and amortization expense of approximately $39 million. From the sale, the company estimates it will have a pretax book gain of approximately $500 million.

The South Carolina sales were announced back in November. The hospitals together earned approximately $552 million in revenue (approximately $126 million in taxes), as of September 2023. Their Adjusted EBITDA is approximately $150 million, excluding an interest expense of approximately $1 million, litigation and investigation costs of approximately $3 million, and a depreciation and amortization expense of approximately $20 million.

Tenet says it will continue to manage ambulatory centers in South Carolina through its subsidiary United Surgical Partners International (USPI).

It expects that the pretax book gains from both transactions will reduce its income tax expense in 2024 by approximately $190 million due to the decrease in interest expense limitations and says the sales also align with its goal of reducing leverage and repaying debt retirement.

Additionally, it estimates that after accounting for any unusual financial transactions and normalizing its Q4 $52 million aggregate pretax income it earned following adjustments in the Medicaid supplemental revenue program in California and Texas, its adjusted EBITDA for 2023 will surpass the high end of its current adjusted EBITDA financial forecast. It attributes this to strong surgical growth at USPI.

The California deal is subject to customary regulatory approvals, clearances, and closing conditions, and is expected to be completed in the spring of 2024.

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