Tenet Healthcare Corporation (NYSE: THC) has significantly expanded its ambulatory surgery platform with a new acquisition. The Texas-based health system has purchased a portfolio of 45 ambulatory surgery centers (ASCs) located in Arizona, Florida, Indiana, Louisiana, Maryland, New Hampshire, Ohio, Texas and Wisconsin from SurgCenter Development (SCD), which partners with local surgeons to create physician-owned and physician-operated ASCs. Tenet Healthcare will buy the majority interests by fully acquiring SCD’s interests, and partially acquiring interests from physician partners, for $1.1 billion in cash and the assumption of approximately $18 million of center-level debt. 

The ASCs will be operated by Tenet’s United Surgical Partners International (USPI) subsidiary as part of its ambulatory surgery platform. Tenet’s ownership interest will be up to 60% in each center, with the remainder owned by the physician partners. Tenet will become the leading provider of musculoskeletal (MSK) surgeries across the care continuum.  The portfolio has over 800 medical staff physicians and a case mix weighted heavily toward high-growth MSK procedures in a lower cost-of-care setting, with approximately 80 percent attributed to orthopedics, pain and spine. 

Tenet expects the transaction to generate double-digit returns on invested capital within three years of completion, along with approximately 28 percent accretion to earnings per share in 2021. The transaction will further diversify Tenet’s adjusted EBITDA with approximately 42 percent expected to be generated by the company’s ambulatory business in 2021. Tenet also expects to realize approximately $40 million to $50 million of annual run-rate synergies over the next three years. 

Following completion, USPI’s surgical portfolio will have as many as 310 ambulatory surgical facilities, including 24 surgical hospitals, in 33 states.As of December 10, 2020, Tenet has completed the acquisition of a majority of the 45 centers and expects to complete the acquisition of the remainder of the portfolio by the end of 2020. 

According to our Healthcare Deal Database, this is Tenet’s first deal with USPI since the health system purchased the company in 2015 for $425 million. Instead of expansion through M&A activity, USPI and Tenet have focused primarily on joint-venture partnerships and opening new facilities.