Tenet Healthcare topped its earnings expectations for the year’s first quarter, with CEO Saum Sutaria, M.D., crediting the company’s long-term strategy and “old-fashioned discipline” in the face of volume disruptions plaguing providers in the opening months of 2026.
The company’s net income for the quarter was $8.01 per diluted share ($702 million), or a market consensus-beating 10.6% year-over-year increase to $4.82 per share after adjustments (including over $400 million received from the early severance of a revenue cycle contract with CommonSpirit Health). Net operating revenues increased 2.8% year over year to $5.37 billion, falling short of the market’s consensus estimate.
Executives said they were pleased with the performance of both major segments of Tenet’s business, its ambulatory surgery business and its hospitals.
For the former, which has been growing to include interests in 541 ambulatory surgery centers (ASCs) and 26 surgical hospitals as of March 31, they highlighted $484 million in adjusted EBITDA that represented a 6% year-over-year increase and 22% of its target for the full year. Same-facility system-wide net patient service revenues rose 5.3% as well as 5.6% on a per-case basis. Though the quantity of same-facility system-wide surgical cases fell by 0.3%, Sutaria highlighted a "double-digit" rise in same-store total joint replacements.
Among its 50 hospitals, executives said the $678 million adjusted EBITDA reflects 27.5% of its full-year target for the segment. Adjusted admissions increased 0.6% year over year, though outpatient and emergency room visits were both down. Same-hospital net patient service revenues dipped by about 0.9% and same-hospital net patient service revenue per adjusted admission fell 1.5%, which the company attributed to unfavorable payer mix and a tough comparison to out-of-period Medicaid supplemental revenues that had been recognized a year prior.
Sitting below the topline performances were a now-familiar pair of surprises that have weighed down on health systems’ earnings this season—a soft flu season and a pair of winter storms that impacted operations.
Executives said hospitals’ respiratory admissions declined by 41% year over year while the storms took a bite out of ambulatory volumes, though “our operating teams managed through them and were able to reschedule many of the [affected] procedures, lessening the overall impact in the quarter,” Sutaria said.
A vendor’s cybersecurity event also introduced some “uncertainty” during the quarter, executives said, and the hospital segment faced the beginning of anticipated health insurance exchange disruptions expected to pick up through the year. Still, Sutaria said the company largely weathered the headwinds and outperformed on margins thanks to its efforts around cost management and operational efficiencies.
“As anticipated towards the end of last year, the operating environment is dynamic—there are payer mix shifts, seasonal effects and insurance enrollment uncertainty in the exchanges and Medicaid that impact demand,” Sutaria said during Thursday morning’s earnings call. “Despite these challenges, we delivered a clean quarter characterized by disciplined operations, benefits from execution on our previously described expense opportunities, stable volumes despite headwinds and, as a result, significant free cash flow generation.”
With much of the disruption sequestered to January and early February, Sutaria said Tenet was able to regain ground by adjusting its expenses to better reflect demand and “focusing more on some of our other types of work in the hospitals.”
The hospital segment also greatly benefitted from “a more systematic type of cost agenda” implemented in the back half of 2025 with a goal of improving Tenet’s margins, he said, such as back-office automation that has “almost double or more the productivity” of the analytics team within its Conifer subsidiary. AI pilots and rollouts are ongoing, but so far, “enabled us to more than offset the expected and unexpected headwinds that arose in the quarter,” he said.
That said, the company also had a bit of insight into how the early disruptions might affect operations when it was setting its targets, the CEO admitted.
“We kind of knew early in the year, by the time we had given our guidance, that one of the winter storms had already come through and we were able to maintain our [salaries, wages and benefits] as a percentage of our topline by flexing, even though the revenues were going to be a little bit more challenged,” he said. “So, you know, some of this is just continuing to maintain the ‘old-fashioned discipline’—the discipline of anticipating and flexing intra-quarter.”
Tenet didn’t see any major changes in Medicaid supplemental payment program revenues compared to its initial expectations, though so far the reduction in exchange admissions is a bit below the more “linear” ramp-up it anticipated, executives said.
Specifically, exchange volumes were down about 10% year over year, reflecting a 9% to 10% decline in year-over-year revenues. Still, they said it’s too early in the year to declare any definitive trends on those volumes or the resulting payer mix from those no longer covered under an exchange plan.
Tenet recorded $21.3 billion in net operating revenues, $1.4 billion in net income and 41% higher adjusted diluted earnings per share across the year. Despite the quarter’s earnings overperformance, executives said they were not adjusting Tenet’s FY2026 guidance until revisiting their projections later in the year. The company’s shares have been trading slightly below open throughout Thursday morning and afternoon.