Tenet Healthcare on Monday said it will take a majority stake in United Surgical Partners International from current owner Welsh, Carson, Anderson & Stowe, establishing a joint venture that will rank the Dallas for-profit healthcare giant as the top provider of ambulatory surgery operations in the United States, the company said.
According to the deal, Tenet will own a 50.1 percent stake in the new partnership and will consolidate the financial results for both companies. However, Tenet will fully assume ownership within 5 years.
The deal gives Tenet control a total over 244 ambulatory surgery centers, 16 short-stay surgical hospitals and 20 imaging centers in 29 states under the joint venture, though they will still be run under the United Surgical Partners International brand. Many of the ambulatory centers are run in partnership with a host of nonprofit hospitals, a specific strategic benefit to Tenet as it looks to partner more with the nonprofit health sector.
Tenet will also link its imaging facilities with the ambulatory centers and said the companies will likely add new centers in the future.
As for financial terms, Tenet said it will will pay a combined $425 million in cash to Welsh, Carson and the other existing shareholders and will raise a total of $2.2 billion in debt for the deal, using $1.5 billion to refinance United Surgical’s debt. The company said the joint venture will be worth $2.6 billion.
In a separate deal, Tenet said it will acquire Aspen Healthcare, which runs nine hospitals in the United Kingdom, from Welsh, Carson for $215 million. It will not be part of the joint venture, and instead was meant to give Tenet an entry into the U.K market.
The deals are expected to close in the third quarter pending regulatory approvals.
Tenet’s play in the ambulatory space reflects the move in healthcare to cut back on hospital utilization as a way to improve quality of care and rein in costs.
"The partnership accelerates Tenet’s and USPI’s shared strategy to expand our ambulatory service offerings to meet growing consumer demand for services that are provided in a lower cost, more convenient setting and that are aligned with the long-term transition to value-based care," said Tenet CEO Trevor Fetter in a statement.
Fetter has already said the health system is actively seeking joint venture opportunities, especially within nonprofit healthcare, as a means to grow Tenet's footprint instead of outright purchasing. Tenet already set up a joint venture with Birmingham, Alabama-based Baptist Health System in 2014.
“If you want to end up owning, either a piece or the majority of really high quality assets that are going to be transformative in a market, that’s going to increasingly require a JV approach," Fetter said in a February conference call announcing Tenet's year-end financials.
Tenet earned $12 million in 2014 on $16.6 billion in revenue.
Shares of Tenet jumped as high as 5 percent in early trading on Wall Street.