The Dallas-based system told investors Monday that it will slash another 700 jobs on top of previously-announced cuts totaling 1,300. Current CEO and Executive Chairman Ron Rittenmeyer also said the system's $250 million cost-reduction plan includes cutting corporate overhead by 20 percent compared to 2016 figures and the elimination of the regional management layer in their hospital business.
Tenet has already initiated the sale of Conifer, Rittenmeyer said. Conifer's reach touches 800 hospitals in 43 states, but Rittenmeyer told investors though it's a "very valuable asset" it's not strategic to own it.
They have also divested their non-core markets and assets, their health plans and post-acute businesses. Tenet expects to see $125 million in run-rate savings in 2018 and exit the year with $250 million in run-rate savings. All told, the divestiture of non-core markets and assets, which Rittenmeyer said is on track, is expected to yield in excess of $1 billion of proceeds, including over $700 million in cash and approximately $300 million from the elimination of capital leases and related debt.
As Tenet looks to the next term, its sights are set on the completion of divestitures of non-core markets including Aspen, Philadelphia and Chicago and assessing additional opportunities They will focus their capital investments on services for chronic disease patients, higher acuity care, ambulatory care access and telemedicine. Rittenmeyer also said they plan to buy up to a 95 percent ownership stake and further integrate USPI into Tenet's healthcare delivery business and will identify and reduce further run-rate costs.
Tenet's Board has also seen revolving changes, with three new independent Board members added in the fourth quarter and promises of continued refreshing the Board with "capabilities consistent with the new strategic direction."
Back when the first job cuts were announced at the end of October, Tenet has predicted restructuring costs totaling about $40 million in the fourth quarter of 2017 related to employee severance payments that will begin that quarter.
"The cost reduction program we announced today includes a number of structural changes in the way we operate, all intended to reinforce accountability, improve agility and speed decision making," Rittenmeyer said. "We believe these changes will help us drive organic growth, expand margins, and better support our hospitals and other facilities in delivering higher levels of quality and patient satisfaction."
At that time, Tenet reported a $366 million operating loss in the third quarter, according to the company. That loss followed a $56 million operating loss in the second quarter.