Tenet Healthcare to Sell 2 California Hospitals to Adventist Health for $550 Mn

The deal is expected to close this spring and comes alongside a revenue cycle services agreement between the two systems.

Tenet Healthcare, a leading for-profit healthcare provider, has finalized an agreement to sell two of its California hospitals to Adventist Health for approximately $550 million. 

The deal, announced Thursday morning, marks a major step forward in Tenet's ongoing strategic divestiture efforts.

The two hospitals being sold, Sierra Vista Regional Medical Center and Twin Cities Community Hospital, along with their affiliated physician practices and related operations, are located on the central California coast. In 2023, these assets collectively generated approximately $337 million in revenues and $25 million in pretax income.

Sharing thoughts, Saum Sutaria, MD, chairman and CEO of Tenet Healthcare, said, “Adventist Health is a prominent healthcare system with a commitment to compassionate care and serving the communities of San Luis Obispo County.” 

The sale is contingent upon regulatory approvals and closing conditions, with completion expected by this spring. Upon closing, Tenet anticipates after-tax proceeds of around $450 million and an estimated pretax book gain of about $275 million.

In addition to the hospital sale, a revenue cycle services agreement has been established between Adventist Health and Tenet subsidiary Conifer Health Solutions. This agreement will cover more than $3.5 billion of Adventist's net revenue, facilitating collaboration between the two organizations to optimize the patient experience through innovative solutions.

Adventist Health's Expansion & Commitment to Central Coast Communities

Adventist Health, a nonprofit healthcare system, views the acquisition as an opportunity to broaden its geographic footprint and enhance its service offerings. Kerry L Heinrich, president and CEO of Adventist Health, expressed optimism about expanding into the Central Coast region of California, emphasizing the organization's aim to partnering with Sierra Vista Regional Medical Center and Twin Cities Community Hospital to increase access to care for local communities. The purchase of these hospitals aligns with Adventist Health's mission to provide quality healthcare services to diverse populations. Moreover, with the addition of Sierra Vista Regional Medical Center and Twin Cities Community Hospital, Adventist Health's network now comprises 26 hospitals and over 400 clinics, further solidifying its presence in the healthcare landscape. During its 2022 fiscal year, Adventist Health reported total revenue of $5.4 billion.

Tenet Healthcare's Strategic Initiatives & Financial Outlook

For Tenet Healthcare, the sale of these California hospitals represents a strategic move to optimize its portfolio and improve financial performance. With a focus on divesting non-core assets, the company aims to strengthen its balance sheet and enhance shareholder value.

The decision to sell Sierra Vista Regional Medical Center and Twin Cities Community Hospital follows recent divestiture announcements, including the closure of a $2.4 billion sale of three South Carolina hospitals to Novant Health. 

Additionally, Tenet has entered into a new agreement with UCI Health to sell four additional hospitals for $975 million.

During its most recent earnings call, Tenet executives hinted at further divestitures that could generate over $1 billion in funds, supporting the company's efforts to reduce debt and pursue strategic growth opportunities.