Tenet Starts Chicago Market Exit with Sale of MacNeal Hospital

October 17, 2017 - Tenet Healthcare Corporation recently announced that Loyola Medicine has signed a definitive agreement to purchase MacNeal Hospital, one of Tenet’s four hospitals in the Chicago area.

Loyola Medicine, an affiliate of Trinity Health, will buy the 368-bed hospital as well as Tenet-owned independent physician practices in the area, the Chicago Health System (CHS) independent physician practice containing almost 1,000 providers, and the associated CHS accountable care organization.

Neither Tenet, nor Loyola Medicine disclosed the financial terms of the hospital purchase, but both stakeholders expect the deal to close by the first quarter of 2018, pending regulatory approvals and closing conditions.

While Tenet is officially losing one of its hospitals in the Chicago market, the for-profit, Dallas-based company also plans to sells its other three hospitals and exit the Chicago market entirely, the Chicago Tribune reported.

Tenet also owns Weiss Memorial Hospital in the city, Westlake Hospital in Melrose Park, and West Suburban Medical Center in Oak Park.

The company is reportedly in talks with several potential buyers for the three hospitals.

The possible Chicago area exit comes just couple months after Tenet announced a new divestiture strategy. The company plans to divest in eight hospitals in domestic markets as well as nine facilities in the United Kingdom.

Tenet decided on which hospitals to sell based on whether the facilities had the first- or second-highest market shared in their respective regions, the Chicago Tribune stated.

The healthcare company had a market share of about 2.1 percent by net patient revenue in Chicago in 2015, which was significantly less than market shares for Advocate Health Care (16.8 percent), Northwestern Memorial Healthcare (11.6 percent), and Rush (8.4 percent), a cited analysis from Allan Baumgarten revealed.

The analysis also uncovered that Tenet’s McNeal and West Suburban hospitals were profitable in 2015. However, Weiss and Westlake facilities were not.

Tenet also recently exited the Philadelphia healthcare market. The company sold Hahnemann University Hospital and St. Christopher’s Hospital for Children to Paladin Healthcare, a private equity-based firm from California. The hospitals sold for $170 million in September 2017.

According to Tenet’s CEO Trevor Getter, all planned hospital divestitures should boost the company’s revenue between $900 million and $1 billion.

Company leaders expect the hospital sales to offset recent financial losses. Tenet reported in August 2017 that the company experienced a $56 million net loss from continuing operations attributable to shareholders in the second quarter of 2017.

The company also decreased its predicted annual revenue from between $19.7 billion to $20.1 billion to between $19.1 billion and $19.4 billion.

The financial losses stemmed from a drop in hospital admissions and an increase in uncompensated care costs. The company reported a 1.4 percent decrease in adjusted hospital admissions.

Uncompensated care in the second quarter of 2017 also accounted for 22.3 percent of revenue before bad debt, uninsured discounts, and charity care write-offs. The percentage is up from 19.9 percent in the same quarter of 2016.

The hospital sales may also make Tenet more attractive for a possible sale of the whole company, the Wall Street Journal recently reported. The largest for-profit hospital chain is allegedly working with investment banks to explore strategic business options, including a potential sale.

According to the Wall Street Journal, Tenet has over $15 million in debt and a market value of $1.6 billion.

Divestitures in under-performing healthcare markets may alleviate some of the financial strain and encourage buyers.