Tenet Healthcare beat out earnings expectations for the second quarter and has raised its guidance for the year by roughly $400 million, citing outperformances across its business segments, strong payer mix and continued execution of its high-acuity, low-overhead portfolio strategy.
Tenet’s net income available to shareholders for the second quarter was $288 million ($3.14 per diluted share) on net operating revenues of nearly $5.3 billion, as opposed to $259 million ($2.64 per diluted share) and $5.1 billion a year prior. Adjusted EBITDA rose from $945 million in the second quarter of 2024 to more than $1.1 billion in the most recent period.
The hospital and ambulatory surgery center operator’s shares briefly rose to an all-time high upon sharing the numbers, but, in the wake of its Tuesday morning earnings call, have undergone a sell-off and, as of early Tuesday afternoon, are trading at 11% below open.
Investors questioning executives during the earnings call often sought more insight into Tenet’s exposure to expiring Affordable Care Act marketplace subsidies. Inquiries around specific areas of volume growth slowdown (same-facility inpatient admissions and adjusted admissions) during the quarter and in the updated 2025 projections as well as any estimates of performance trends in 2026 and beyond were broadly rebuffed by the company’s leaders.
Executives, instead, pointed to the per-patient revenue gains and reduced overhead that drove the higher-than-expected earnings, as well as improvements in key focus areas like ASC total joint replacements, which rose by 12.6%.
“I don’t think it’s worth making anything of, you know, one single quarter, especially when you have seasonal trends and quarter-to-quarter trends, and ramp-on and ramp-off of respiratory illness and other things,” CEO Saum Sutaria, M.D., said in response to the third question of the call seeking clarity on the reduced volumes. “The underlying demand environment, you know, when you compare it to a multiyear basis, still seems strong to me.”
On policy issues, recent plans outlined in the Centers for Medicare & Medicaid Services’ proposed rule for outpatient hospital care to eliminate the inpatient-only requirement for hundreds of procedures would be a clear boon for Tenet’s ASC business, Sutaria said. Responsibly shifting those procedures to an outpatient setting requires expertise around patient selection and other protocols, which “plays to our advantages” and could offer a new platform to work with physicians hoping to move more care to the freestanding setting, he said.
Sutaria noted that key items in the “big, beautiful bill” that would affect Tenet’s business, such as reductions in state provider taxes and state directed payment restrictions, won’t begin to hit for a few more years. This “remains an area of significant uncertainty,” he said, though “there are new legislative proposals that have already come up attempting to rescind some parts” of the bill.
Disregarding some one-time payments, Tenet is currently on track for $1.1 billion to $1.2 billion in Medicaid supplemental payments, Chief Financial Officer Sun Park added.
Rather, Sutaria said that Tenet plans to turn its lobbying efforts toward the renewal of healthcare exchange subsidies. The CEO emphasized the impact losing those funds would have on predominantly red state low-income individuals and on small businesses and said he believed the exchanges “were a critical safety net” during the Medicaid redetermination process.
That influx of enrollees is also responsible in part for Tenet’s recent growth, and particularly on the hospital side of its business, the executives acknowledged. For the second quarter of 2025, there was a 23% year-over-year increase in admissions and a 28% increase in revenues from the exchanges, the volume from which now represents roughly 8% of total admissions and 7% of total consolidated revenues, Park told investors. These patients also contribute to some of the commercial payer mix strength that boosted Tenet’s overall revenues for the quarter’s strong performance, the executives said.
“It is the most important [lobbying] area right now,” Sutaria said, “both for the healthcare industry, for the insurance industry and, importantly … for small businesses keeping … a competitive workforce.”
Other segments of the call’s Q&A had investors congratulating Tenet on its revenue cycle successes in the face of insurers’ increased administrative roadblocks, which executives attributed to recent years’ investments in automation and process standardization. The company heads also touched on lowering consolidated salary, wages and benefits to 41% of net revenues, of which just 1.9% was from contract labor, and a slight uptick in ASC acquisitions during recent quarters.
Tenet, which also beat expectations in the first quarter, raised its 2025 outlook to net operating revenues between $20.95 billion and $21.25 billion, net income available to common stockholders between $1.28 billion and $1.38 billion, and adjusted EBITDA between $4.40 billion and $4.54 billion. Projected revenues in the ambulatory segment increased while those in the hospital segment dipped, though both saw their expected earnings increase. Of note, hospitals’ adjusted admissions projection shifted downward, from between 2% and 3% to between 1.5% and 2.5%.
Net operating revenues within the ambulatory segment for the second quarter rose 11.3% to $1.27 billion, which the company attributed to net revenue per case growth, facility acquisitions and service line increases.
Within the hospital segment, where Tenet has been paring its portfolio, net operating revenues during the quarter rose 0.9% to $4 billion while same-hospital net patient service revenue per adjusted admission rose 5.2%. Same-hospital admissions rose 1.6%, adjusted admissions increased 0.4%, emergency room visits (inpatient and outpatient) dropped 4.7% and hospital surgeries declined 1.7%, all year over year. Each of these were a cutback from the prior year’s same-facility volume growth.
“Our results in both segments exceeded our expectations and extend our track record of consistently strong fundamental execution,” Sutaria said while discussing the health system’s top-line performance near the top of the call.
While the company intends to continue prioritizing ASC market expansion, aligning its hospital portfolio toward high-acuity care and retiring debt, Sutaria said his company is also aiming to “capitalize on our compelling valuation” via share repurchases, another $1.5 billion of which was authorized by the board of directors.
Tenet is the first of the major public for-profit health systems to report its second-quarter earnings. Its increased 2025 outlook stands apart from the health system’s counterparts within the insurance sector, which have so far lowered their guidance amid elevated costs, higher utilization and other headwinds.
