Tenet Navigates ACA Headwinds With AI-Driven Cost Cuts

Date of Call: Feb 11, 2026

Financials Results

• Revenue: $21.3B for FY 2025, up 14% YOY
• Operating Margin: Adjusted EBITDA margin of 21.4% for FY 2025, up over 200 basis points YOY

Guidance:

• Full-year 2026 Adjusted EBITDA expected to be $4.485B-$4.785B.
• Full-year 2026 Adjusted EBITDA for USPI expected to be $2.13B-$2.23B.
• Full-year 2026 Adjusted EBITDA for hospital segment expected to be $2.355B-$2.555B.
• Full-year 2026 consolidated net operating revenues expected to be $21.5B-$22.3B.
• Adjusted cash flow from operations expected to be $3.2B-$3.6B.
• Capital expenditures expected to be $700M-$800M.
• Adjusted free cash flow expected to be $2.5B-$2.8B.
• First quarter 2026 consolidated adjusted EBITDA expected to be 24% of full-year midpoint.
• Assuming a 20% reduction in overall enrollment due to expiration of enhanced premium tax credits, representing a $250M headwind to 2026 Adjusted EBITDA, primarily in the hospital segment.
• Assuming same hospital admission growth of 1%-2% and same facility USPI revenue growth of 3%-6% for 2026.

Business Commentary:

Revenue and EBITDA Growth:

• Tenet Healthcare reported 2025 net operating revenues of $21.3 billion and consolidated adjusted EBITDA of $4.57 billion, representing 14% growth over 2024.
• The growth was driven by strong same-store revenue growth, high acuity, and disciplined cost control.

USPI Segment Performance:

• The USPI segment's adjusted EBITDA grew 12% in 2025 to $2.026 billion, with same facility revenues growing 7.5%.
• This performance was supported by strong volumes and mix, particularly double-digit same-store volume growth in total joint replacements in ASCs.

Hospital Segment Growth:

• The hospital segment's adjusted EBITDA grew 16% to $2.54 billion in 2025, with same-store revenues per adjusted admission up 5.3%.
• Growth was fueled by favorable payer mix, acuity, and reinvestment in the business to enhance capabilities.

2026 Financial Outlook:

• Tenet projects full-year 2026 adjusted EBITDA in the range of $4.485 billion-$4.785 billion.
• The outlook reflects ongoing strength in demand and acuity, anticipated contributions from M&A and de novo center openings, and tactical plans to capitalize on shifts in service mix.

Expense Management and Cost Control:

• The company is focusing on structural expense management through technology and automation, aiming to enhance efficiency and reduce costs.
• This approach is intended to support sustainable growth and improve margins, particularly in anticipation of future challenges like the expiration of enhanced premium tax credits.

Sentiment Analysis:

Overall Tone: Positive

• We reported 2025 net operating revenues of $21.3 billion and consolidated adjusted EBITDA of $4.57 billion, which represents 14% growth over 2024. Full year adjusted EBITDA margin of 21.4%, improved 200 basis points over the prior year. Our fourth quarter results were, again, above our expectations... We are confident in our ability to deliver on our outlook for 2026, and continue to drive value for patients, physician partners, and shareholders.

Q&A:

• Question from Stephen Baxter (Wells Fargo): Hi, thank you. I was hoping that perhaps you could expand a little bit on the same-store hospital volume performance in the quarter and any moving parts that looked like it was a little bit weaker than the trend. And then, just as you’re thinking about hospital volumes in 2026, it looks like at the midpoint, you might be looking for that to potentially improve a little bit versus the 2025 performance. So just I guess, help us think about, you know, the moving pieces there with the exchanges and the core performance. Thanks.
  Response: The respiratory season was weaker than expected, impacting Q4 volumes. For 2026, volume improvement is expected from investments in growth capital and technology made in 2025.

• Question from Whit Mayo (Leerink Partners): When you say, Saum, that you’re tackling expense management more structurally, what do you mean by that? And can you elaborate on what’s incremental about the cost efficiencies that you expect to see this year?
  Response: Structural expense management involves modernizing the business with technology (like AI and automation) and improving clinical throughput (e.g., length of stay management) for more sustainable cost reductions.

• Question from Ben Hendricks (RBC Capital Markets): Great. Thank you very much, and apologies for getting cut off earlier. Just wanted to get a little more color on the hospital admission growth guide, the 1%-2%. Just wanted to talk a little bit about the slowdown from last year, the degree to which, you know, if we can parse out that slowdown between exchange exposure, between kind of investments toward higher acuity and higher margin capabilities in the hospital setting, and then also just a general slowdown of admissions that we’ve been seeing across the acute sector to begin with. So just any commentary you can offer there. Thank you.
  Response: The 1%-2% admission growth guide reflects a 20% enrollment reduction assumption from expired exchange subsidies, but also includes expected returns from 2025 growth capital investments. A wide range of potential outcomes is considered.

• Question from Matthew Gilmore (KeyBank Capital Markets): Hey, thanks for the question. Maybe following up on the cost efficiencies, are you able to quantify what you’re able to pull through this year? I was also curious about the timing or building throughout the year, such that you’ll get a year-over-year benefit in future periods, or do they take place earlier in the year, so they’re all captured in 2026?
  Response: Management is not providing specific quantification, but the 10% core EBITDA growth guidance at the midpoint embeds both value from 2025 capital investments and structural expense management initiatives for 2026 and beyond.

• Question from Kevin Fishbeck (Bank of America): Now, I guess I just want to follow up on, on that point. I guess when we think about that type of growth, I mean, is this, is this the type of growth that you think is sustainable in out years as we think about offsets? Because 10% is a pretty big number to be thinking about. And so I just want to understand, is this new focus on expense management, you know, replicatable, or are you- is it kind of, this is what we’re doing in year one, and that’s it? Or is this is what we’re doing in year one, and, and we should be thinking about similar types of opportunity in the out years? Because it is a little hard to bridge what would normally be viewed as, you know, a hospital business that might grow 3%-5%.
  Response: The company believes the platform built over several years with strong acuity growth and margin expansion provides a foundation to pursue significant margin expansion opportunities, especially given the urgency from potential future regulatory changes.

• Question from Josh Raskin (Nephron Research): Thanks. I want to stay on the same topic, and some appreciate what you just said. You know, I’ve sort of looked at it. Margins are up 680 basis points since 2019, and, you know, the hospital segment’s up 660 basis points, so it’s not really mixed. Seems as though we’ve heard a lot about process improvement and optimization at Tenet for a couple of years, and now we’re hearing about this new focus on expense management. I’d just be curious to get your view on just the broader technology agenda, specifically, including AI, and, you know, overall business, including revenue cycle management. And just, you know, do you think there’s additional step function improvements in margins?
  Response: Given the established standards and processes, deploying new technologies like AI and automation now provides the opportunity for the next level of operational efficiency and margin improvement, especially in light of potential future reimbursement changes.

• Question from Justin Lake (Wolfe Research): Thanks. Good morning. Wanted to follow up on some of the guidance stuff. Appreciate all the details. You mentioned, obviously, the DPP, you gave us the one-time benefit there last year that comes out. I’m just curious if you could specify, is DPP, other than that, flat year over year, any change within that core guidance? Maybe you could also give us the run rate of DPP. And then, I thought your estimate of the impact of the subsidy expirations was towards the higher end of my expectations, at least. And I’m curious how you treated, or at least your thoughts on the shift, the potential shift of some of these enrollees back to employer commercial.
  Response: The normalized run rate for Medicaid supplemental payments (DPP) in 2025 was approximately $1.2 billion. For 2026 guidance, a consistent baseline is assumed. On the subsidy expiration, a 20% overall enrollment reduction is assumed, with 10%-15% of those potentially finding alternative plans, including commercial.

• Question from Peter Chickering (Deutsche Bank): Hey, good morning, guys. Thanks for taking my question. Can I ask about sort of the first quarter guidance? Normally, you guys get more than 24% of you down in the first quarter. I think in the script, you said that 21% would come from the ASCs, which is normal. So these are the changes actually in the hospital segment. So is this something fundamental, like the flu or lower surgical demand, or is this just the $40 million of prior period DPP from last year or something else? And then just a quick clarification, can you, can you quantify the DPP that you received in the fourth quarter of 2025? Thanks.
  Response: The Q1 2026 guidance reflects a standard seasonal pattern for USPI (22% of full year) and the hospital segment, aside from a one-time $40 million DPP benefit in Q1. DPP received in Q4 2025 was $315 million.

• Question from Andrew Mock (Barclays Bank): Hi, this is Thomas Walsh on for Andrew. With Conifer’s services to CommonSpirit, concluding at the end of this year, could you frame the current plan to redeploy existing resources to growth opportunities and otherwise reduce expenses to rightsize the cost structure?
  Response: Cost reductions from the Conifer wind-down are not expected in 2026 as the focus is on executing the transition. Growth opportunities are planned for around 2027. The transaction was accretive, providing a significant NPV benefit and full control of Conifer.

• Question from Scott Fidel (Goldman Sachs): Hi, thanks. Good morning. Was hoping maybe you could elaborate a bit on the ASC business, how you’re thinking about it and planning for investments, they could be either around the new facilities in terms of organic or de novo expansion from a case mix and procedure perspective, just you know, interested in where you see you know, underlying demand the strongest, where you see you know, the best opportunities, you know, to continue to drive the trend that you’ve had of you know, favorable case mix and profitable, you know, sort of acuity and procedure growth in some of these specialty areas of the ASC business.
  Response: Opportunities include the gradual shift from the Inpatient Only List, expanding higher acuity procedures (urology, spine), robotics, and double-digit joint replacement growth. A strong M&A pipeline supports service line diversification, with momentum expected to build through the year.

• Question from Ryan Langston (TD Cowen): Great, thanks. Can you tell us where our exchange volumes and revenues tracked in the fourth quarter? And I know you don’t assume any pickup from the supplemental programs that aren’t approved, but do you have any insight into where we’re at in the approval process for the pending programs like Florida, Arizona, California? Thanks.
  Response: In Q4, exchange admissions were about 7.5% of total HIX admissions, and exchange revenues were a little over 6.5% of consolidated revenues. The company is monitoring pending supplemental program approvals but has not included any in 2026 guidance.

• Question from A.J. Rice (UBS): Hi, everybody. Maybe just some comments on what you’re seeing with managed care contracting. Obviously, that sector continues to be under pressure with some of the government programs, et cetera. And I wonder, is there any change in discussion in terms of the pace of new contract or contract renegotiations or terms, or just general update and rates?
  Response: No change in commentary; contracting remains positive with rates in the 3%-5% range. For 2026, virtually all (high 90s%) contracts are in place, and for 2027, about 80% are contracted.

• Question from Sarah James (Cantor Fitzgerald): Thank you. Can you elaborate a little bit more about what you saw in payer mix in 4Q for USPI, and then unpack what you’re assuming for hospital, and USPI as far as the scale of change in 2026 between 1Q 2026 and 4Q 2026? Thanks.
  Response: USPI payer mix has been very consistent with strong revenue acuity (Q4 net revenue per case up 5.5%). The Q1 2026 guidance percentages do not imply a change in quarterly mix; the wide hospital guidance range reflects enrollment uncertainty, not a forecasted mid-year shift.

• Question from Benjamin Rossi (J.P. Morgan): Hey, good morning. Thanks for taking my question. Just as a follow-up for the ambulatory side. For the $30 million EBITDA headwinds across ambulatory from the EAPTCs expiring, how much of your payer mix for the ambulatory segment came from the ACA exchanges in 2024 and 2025? And then, did you see any pull forward across that cohort here during the fourth quarter, given your typical seasonal dynamics for ambulatory? Thanks.
  Response: Payer mix breakdown by segment is not disclosed, but USPI's HIX exposure is significantly less than the hospital segment. No significant pull forward of volume was seen in Q4.

• Question from John Ransom (Raymond James): You know, there’s a big narrative over the past few months that providers are getting on top of payers, quote, unquote, "with coding advances assisted by AI," particularly claims resubmissions are easier. Is that exaggerated? Are we—what inning are we in? And then, just given that your position owning Conifer and being a provider, what’s your position on that debate?
  Response: Tenet's coding practices have always been compliant and accurate, with no recent changes. The company focuses on resolving disputes and denials through established adjudication processes with payers, not on aggressive resubmissions.

• Question from Craig Hettenbach (Morgan Stanley): Yes, thank you. And appreciate all the details given the fluid backdrop in terms of puts and takes on this year. So I’m just keying off of your comment of taking an active approach to buybacks, especially at the current valuation multiple. You know, given the significantly stronger balance sheet, free cash flow generation, and CommonSpirit kind of proceeds, how are you and the board just thinking about kind of the right cadence here of buybacks?
  Response: The company views its strong balance sheet (bolstered by the Conifer transaction) as an opportunity to continue share buybacks at current attractive valuation multiples, consistent with its behavior as a higher-multiple traded company.

Contradiction Point 1

Exchange Patient Enrollment and Impact

Vastly different assumptions on the number of patients losing coverage due to expiring subsidies.

What is the run rate of DPP payments, and how do you account for the impact of enrollees shifting back to employer commercial plans on your EPTC estimate? - Justin Lake (Wolfe Research)

2025Q4: Assumed that 10%-15% of those disenrolling from exchanges may find alternative commercial coverage. - [Saum Sutaria](CFO)

What was Conifer's contribution in Q3 and can it help identify patients for alternative coverage if ACA subsidies expire? - Benjamin Rossi (JPMorgan Chase)

2025Q3: They are investing to prepare for potential enrollment disruptions or delays in the exchanges, positioning Conifer to help with both enrollment in and out of exchange products. - [Saumya Sutaria](CFO)

Contradiction Point 2

USPI's Exchange Revenue Exposure

Contradictory statements on the scale of USPI's reliance on exchange patients.

What was the ACA exchange payer mix for USPI in 2024/2025, and did you observe any pull-forward of care in Q4? - Benjamin Rossi (J.P. Morgan)

2025Q4: HIX exposure at USPI is significantly less than in the hospital segment (specific segment mix not disclosed). No significant pull-forward observed in Q4. - [Saum Sutaria](CFO)

What is the Q4 guidance and expectations for utilization, including the impact of subsidies expiring? How is USPI's capacity positioned, and where is it insulated from headwinds and exchange exposure? - Kevin Fischbeck (Bank of America)

2025Q3: USPI has less exchange exposure than the hospital segment. Exchange business is less than 10% of USPI revenues. - [Saumya Sutaria](CFO)

Contradiction Point 3

Outlook for Exchange Enrollment and the Impact of EPTC Expiration

Contradiction on the scale and impact of the EPTC expiration on enrollment and revenue.

Could you detail the same-store hospital volume performance in the quarter, any weaker factors, and the 2026 volume outlook versus 2025, considering exchanges and core performance? - Stephen Baxter (Wells Fargo)

2025Q4: The expiration of enhanced premium tax credits (EPTCs) on the exchanges is a headwind, assumed to reduce overall enrollment by ~20% in key states. - [Sun Park](CFO)

What is the potential 2026 earnings impact if ACA subsidies are removed, and what is the 2025 provider tax run rate along with the recent legislation's effect on DPP? - Justin Lake (Wolfe Research, LLC)

2025Q2: The focus is on advocating for subsidy extension... The landscape remains uncertain with significant uncertainty regarding the implementation of recent legislative changes that push impacts to 2027/2028. - [Saumya Sutaria](CFO)

Contradiction Point 4

Expectation for Hospital Volume and EBITDA Growth in 2026

Contradiction on providing specific guidance or commentary for 2026 earnings and headwinds.

Is the 10% EBITDA growth (excluding EPTC headwind) sustainable beyond 2026, and is the new expense focus a replicable strategy or a one-year opportunity? - Kevin Fishbeck (Bank of America)

2025Q4: The company has a track record of strong acuity and margin expansion... The focus is on preparing the business for the future. - [Saum Sutaria](CFO)

What is the EBITDA projection for 2026, accounting for one-time Medicaid supplemental payments? - Stephen Baxter (Wells Fargo Securities, LLC)

2025Q2: The company is not making any comments about 2026 or headwinds/tailwinds for the following year. - [Saumya Sutaria](CFO)

Contradiction Point 5

2026 Hospital Volume Growth Outlook

Contradiction on the primary driver of volume improvement for 2026.

Can you elaborate on the same-store hospital volume performance in the quarter, particularly weaker areas, and provide insights into 2026 hospital volumes, which appear to improve slightly versus 2025, considering exchanges and core performance? - Stephen Baxter (Wells Fargo)

2025Q4: Expect improvement due to returns from significant growth capital investments made in 2025. - [Sun Park](CFO)

How sustainable is the 9.1% USPI revenue per case growth over the next few years due to the shift to higher-acuity specialties? - Ben Hendrix (RBC Capital Markets)

2025Q1: The momentum in revenue per case is expected to persist... Guidance has historically been conservative compared to actual performance. - [Saum Sutaria](CFO)