Tenet to buy $1.2 billion stake in 92 more ambulatory surgery centers

Tenet Healthcare will pay $1.2 billion to acquire SurgCenter Development in a deal that will add 92 ambulatory surgical centers to the for-profit health system, the company announced Monday.

The transaction includes a five-year partnership and development agreement between Dallas-based Tenet’s ambulatory surgery subsidiary, United Surgical Partners International, and SurgCenter Development’s principals to provide continuity and support for the facilities and their physician partners. After the deal closes, Tenet will own at least part of more than 440 ambulatory surgical centers in 35 states.

The 92 SurgCenter Development centers in which Tenet is acquiring a stake are located in 21 states, including the lucrative Arizona, Florida and Texas markets. The portfolio includes 65 mature centers and 27 that have either opened within the past year or will perform their first procedures in 2022. Their case mix is about 80% musculoskeletal care, including hip and knee replacements and spinal procedures.

“The balance of operational and to-be operational facilities within [SurgCenter Development] now land within [United Surgical Partners International]. They’re all coming over,” Tenet CEO Dr. Saum Sutaria said on a call with analysts Monday.

SurgCenter Development had the largest ambulatory care center portfolio available to acquire and expand Tenet’s footprint in this market, Sutaria said.

Tenet’s United Surgical Partners International plans to open at least 50 new facilities over the next five years as part of the deal with SurgCare Development and the owners who retain stakes in existing facilities.

Tenet and SurgCare Development have a history, Sutaria said. Prior to the new deal, Tenet had acquired 67 of the other company’s ambulatory surgical centers since 2009. The health system spent $1.1 billion to acquire almost 50 of SurgCenter’s facilities last year.

SurgCenter Development owns a roughly 39% average minority interest in 86 of them and a majority interest of about 55% on average in six.

Tenet has not acquired the other owners’ shares of the centers. In the coming months, the company will try to buy portions of physician owners’ equity interests for incremental consideration of up to about $250 million.

Tenet plans to finance the transaction through first-lien secured notes. The company expects to close the deal in the fourth quarter, subject to customary approvals and closing conditions.