Five months after closing on a merger with Nashville-based Vanguard Health Systems, the CEO of Tenet Healthcare Corp. says the move has already doubled revenue at its Texas hospitals and he anticipates the company’s open-armed strategy toward Obamacare will capture even more market share.
The two disparate strategies—Tenet’s national sprawl and Vanguard’s concentrated presence in specific markets—have combined to provide the Dallas-based corporation with more opportunities to expand its focus on outpatient care, which is trending upward industry-wide while inpatient care dwindles.
Tenet President and CEO Trevor Fetter spoke in Miami Tuesday at the Barclays Global Healthcare Conference. He elaborated on the immediate success of October’s merger and reminded attendees of his hopeful outlook about healthcare reform’s impact on the hospital industry.
Before acquiring Vanguard, Tenet’s properties were hardly concentrated, Fetter said. The company had two out of three hospitals in a pair of California markets—Palm Springs and San Luis Obispo—and a 50 percent market share in El Paso. The company’s other locations dotted the U.S. map. Vanguard, meanwhile, employed a different strategy: Concentration in attractive urban markets, namely San Antonio, Phoenix, and Detroit.
“It literally doubled our revenues in the state of Texas and took Texas to the No. 1 position in terms of our largest state market for Tenet,” Fetter said of the merger. “It took California and Florida, which historically have been No. 1 and No. 2 for Tenet, and made them No. 2 and No. 3 and put Michigan in the mix in almost a similar range of size to California.”
Fetter said Tenet has seen a 3.3 percent increase in outpatient services in the last quarter of 2013 and a 2.3 percent decrease in inpatient services.
And remember, Fetter embraced the Affordable Care Act early, speaking on its behalf on CNBC, Bloomberg TV, and other cable outlets. Now, he says, 97 percent of the company’s hospitals are in network with the Affordable Care Act’s silver plans.
“We think that’s where action is,” he said. “That should lead to market share capture.”
When talking about Obamacare, Fetter stuck to those sorts of phrases: “We think;” “that should.” He then passed the question to Chief Financial Officer Dan Cancelmi, who had a more defined standing on the impact of reform.
“We are seeing some visible signs of progress, particularly in California, which probably doesn’t surprise anyone,” Cancelmi said. “The state of California got in front of this more so than any other state.”
Unlike Texas and 35 other states, the California Legislature voted in June to expand Medicaid to 1.4 million low-income residents. It also maintains a state-run insurance marketplace—unlike Texas, which opted out from creating its own exchange. To Tenet, California is a model for the country; it expects more states to begin expanding Medicaid.
In 2012 in Modesto, Tenet set up an affordable care organization, which is a government-led program that pays providers depending on how effective it is at preventing health problems among its customers. Tenet says enrollment in that program has jumped 20 percent compared to this point last year.
“I think as it becomes more ingrained and people become more comfortable with the enrollment process, other states will expand their Medicaid program as we move into 2015,” Fetter said. “I think you’ll see continued growth in providers.”
