Tenet Healthcare Corp. announced on Monday a $550-million deal to sell five hospitals, underscoring the company's departure from an aggressive growth strategy.
Less than a year ago, Santa Barbara-based Tenet was a finalist to buy a 14-hospital chain based in Kansas City, Mo., an acquisition that would have made Tenet the dominant player in a prime Midwest market.
Now, Tenet plans to sell 12 hospitals and close two others by year's end to pare debt. The sale announced Monday -- to Naples, Fla.-based Health Management Associates Inc. -- would be the first to be completed under the downsizing plan.
"Ten months ago, no one would have predicted this situation," said analyst B. Kemp Dolliver of SG Cowen Securities Corp. "But they did get a pretty reasonable price."
Tenet is under investigation for its Medicare billing and other practices. It reported a $195-million loss for the second quarter -- its worst quarterly performance in six years.
If the sale is approved by regulators, Health Management Associates will get a 128-bed hospital in Florida, two hospitals in Missouri with a total of 539 beds, and two Tennessee hospitals with a combined 394 beds. The five facilities generate about $400 million in annual revenue.
Tenet shares climbed 31 cents on the New York Stock Exchange to $14.99.
Analyst Andreas Dirnagl of Harris, Nesbitt, Gerard noted that Tenet "wanted to pay down about half a billion in debt by the end of the year. My assumption is that the company will use this to pay debt."
But Dirnagl cautioned that other properties may not fetch as good a price.
"This was a bulk sale of the more attractive facilities. They were a nice fit for HMA Inc. and they were willing to pay for that," Dirnagl said.
The hospitals being sold or closed "no longer fit the company's core operating strategy," Trevor Fetter, Tenet's president and acting chief executive, said in a statement.