Tenet Healthcare and subsidiary United Surgical Partners International are expanding their ownership of ambulatory surgery centers, buying 92 from SurgCenter Development.
The $1.2 billion deal expands USPI’s reach into high-growth regions in Arizona, Florida and Texas and includes an attractive case mix of service lines, including musculoskeletal care for total joint and spine procedures, Tenet said in a statement. The transaction will further diversify Tenet’s mix with a larger portion being produced by its higher-margin ambulatory portfolio.
SurgCenter Development owns a minority interest of approximately 39% on average in 86 of the ambulatory surgery centers and a majority interest of approximately 55% on average in six of the ASCs, Tenet said in a released statement.
Tenet plans to finance the transaction through the issuance of first-lien secured notes. The transaction is expected to close in the fourth quarter.
United Surgical Partners International and SurgCenter Development will enter into a five-year partnership and development agreement to provide continuity and support for SCD’s facilities and physician partners, Tenet said. Going forward, USPI also has the exclusive option to partner with SCD on new development projects over the life of the agreement.
The centers to be acquired are located in 21 states. They include 65 mature centers, as well as 27 that have either opened within the last year or will start to perform their first cases in 2022.
Why This Matters
Since 2009, USPI has acquired 67 SurgCenter Development centers. Additionally, in the coming months, USPI plans to acquire a portion of equity interests in the ASCs from physician owners for up to $250 million. Following the addition, USPI will have more than 440 facilities in 35 states.
The terms of the transaction include entry into a new development agreement under which USPI will partner with SCD on the future development of a minimum target of at least 50 centers over a period of five years.
With each center, USPI will have the exclusive option to obtain an immediate ownership position at the time of development with an additional option to purchase SCD’s ownership stake 18 months after the opening of such facilities.
Tenet said it expects the transaction to generate strong financial returns and to realize at least $45 million of annual run-rate synergies over the next three to four years.
The Larger Trend
Tenet Healthcare Corporation, headquartered in Dallas, includes United Surgical Partners International. It operates 60 hospitals, more than 460 other healthcare facilities and Conifer Health Solutions, which provides revenue cycle management and value-based care services to hospitals, health systems, physician practices, employers and other clients.
On Aug. 2, Tenet announced it had completed the sale of its five hospitals and related operations in Florida’s Miami-Dade and Southern Broward counties to Steward Health Care for a reported $1.1 billion. But Tenet’s ambulatory facilities operated by United Surgical Partners International in these markets remained with Tenet and were not included in the transaction.
On The Record
“We are extremely pleased to announce this transformative transaction and partnership, which builds upon USPI’s position as a premier growth partner and SCD’s track record of developing high-quality centers with leading physicians,” said Dr. Saum Sutaria, who took over leadership of Tenet as CEO this September. “By welcoming these centers into our company, USPI will maintain its reach as the largest ambulatory platform for musculoskeletal services, a high-growth service line. We are also creating a pathway for further expansion through a partnership that pairs the expert development and operational capabilities of our two organizations.”
Source: Healthcare Finance