Welcome back to the Barclays Global Healthcare Conference. My name is Andrew Mock. I'm the Facilities and Managed Care Analyst here at Barclays, and I'm pleased to welcome on stage Tenant Healthcare. We have Sam Sutarius, CEO, Sun Park CFO, and Will McDowell, Vice President of Investor Relations. So why don't I kick it off to Will for a prepared statement, and we'll dig into Q&A.

Thanks, Andrew. Good morning, everyone. Thank you for joining us today. In the context of our conversation today, we may be making some forward-looking statements. I would suggest in the context of this statement, you refer back to our cautionary statement filed with our most recent earnings release, as well as other SEC filings. And with that, I'll turn it back to you, Andrew, for Q&A.

Maybe to start, Tenet has delivered mid-teens EBITDA growth over the last two years, yet your guidance this year still embeds an impressive 10% core growth. How would you contrast the strong organic growth underpinning this year's outlook with what drove results in prior years?

Well, I think as we said, look, at a big picture level, we're still in a reasonably good demand environment. Our strategy, of course, has been very focused on high acuity care, both in the ambulatory business and in the acute care hospital business. That demand continues to be strong. It's obviously less elastic in many ways in terms of what we're doing there. The last couple of years, especially as we've gone through our portfolio reorganization with obviously some asset divestitures, but also a few new hospital buildings, we have increased the amount of capital that we're spending in the markets that we retain with the confidence that our market positions are strong, that our ability to build and grow services for the community have been attractive opportunities. And we expect to see some returns from those investments as everybody would. And then finally, you know, as we indicated, 2026 we think is an important opportunity to really take a look on a broad basis at the cost structure of the organization and begin to prepare for the coming years with some cost reduction initiatives that I think will be accretive to this year's results. And so, you know, when you look at the totality of that, And sure, you can step back and look at the last few years and our success there, but if you look at the totality of that and look forward, which is what we've done, we got very comfortable with the guidance that we provided for 2026.

Great. And there does seem to be a big step function change in cost savings in the guidance this How much of that reflects new enablement from AI versus deliberate cost actions taken in

anticipation of a known headwind? Well, I think both, I mean, I'm not, I'm not sure that there isn't overlap between those two, right? I mean, in other words, we've spent a lot of time improving the efficiency of the organization at all levels, obviously, first and foremost, in our operations, but also in over the last few years, right sizing our overhead structure as we have gone through some asset divestitures from a hospital market standpoint. And we committed to when we started that program and we delivered on some of that right sizing. So when you look at the opportunities ahead of us, a lot of it does have to do with the ability to remove work, automate work, find opportunities to use technologies like AI to find efficiencies or enable our workforce to be more efficient and increase the span of management control in what we're doing in the hospital business in particular, you know, on the ambulatory side, some of those initiatives might have a slightly different purpose, right? I mean, sure, there may be some efficiencies that we gain, but at the same time, the ability to pilot and over time deploy some of these technologies could also help us with asset utilization. for example, right? If you think about the ambulatory surgery business, the asset utilization is a key operating statistic that we follow in terms of our ability to generate returns from the fixed capital structure that we have there. So these technologies, we think, will help us not only on direct efficiencies, productivity, but also things like improving asset utilization over time.

Great. Maybe digging into the hospital segment a bit, you've included a $250 million ACA exchange headwind in your 2026 guidance. Can you talk about, you know, any sort of observations you're seeing so far this year, how that's playing out? And could you highlight the most important variables embedded in that assumption that will influence the year?

Yeah, let me bounce this on. On the second part, you know, these are all moving targets. We use our best judgment, but it seems to be that a lot of us are projecting a 20% reduction overall of enrollment. I think something that we thought hard about is that some of our particular states, Michigan, Arizona, as examples, at least the enrollment data that we saw in January seemed to have a little more pressure. So there's state-to-state variability as well that we try to reflect. But, you know, on the positive side, you know, we do think there's probably a small proportion of these, you know, 10 to 15 percent of these patients who will find rotation into other coverage, i.e. other commercial coverage, whether it's a job switch or what have you. And then two other dynamics that we're, you know, we're tracking closely. One is, you know, how many of these patients are moving from maybe silver to bronze, which for us I think is fine, right, just based on our contracts. And then, you know, elective coverage, right? So the other dynamic we try to put into our guidance number is, you know, we do think patients who lose coverage, especially the elective procedures, will probably be impacted. So all those things kind of went into our $250 million guidance. Obviously, the vast majority of that is in the hospital space. And, you know, without commenting specifically on Q1 dynamics, I mean, I think, you know, we're seeing something along those lines.

And what impact do you think that shift to bronze would have on things like utilization and acuity trends?

I mean, for us, again, from an acute hospital standpoint, right, the bronze, silver to bronze coverage, I think, is, like I said, fine. It won't have very much impact. You know, as you start talking about physician visits, you know, HOPD activities, things like that, you could see certainly impact there. But, again, for us, that's a very small part of our hospital business.

Right. If we look at same-store admissions in the hospital segment, I think it had declined for the first time in three years in the fourth quarter. Your initial outlook embeds 1% to 2% volume growth. That's below recent history. Could you frame how much of that moderation is due to the disruption to the ACA exchange coverage versus any change in underlying demand?

Yeah, I mean, look, these are projections, right? I mean, sure, that's going to be a part of it. But I think we let this year play out. You know, the fourth quarter had a relatively softer, at least from prior year, flu season. Our acuity was still strong. Obviously, our net revenue was still very strong, and the margin performance was outstanding. So I think we let this year play out to see what happens. Our guidance is based upon, as I said right up front, a belief that despite these movements in coverage that will play out over the year, We still see a relatively strong underlying demand environment for, in particular, what we're focused on in terms of high-acuity care in combination with the initiatives that we have invested in over the last couple of years. So, you know, where it lands, we'll see. We're actually, again, as I would say, reiterating and pretty confident in the fact that we've given, you know, what is reasonable guidance for this year, we think.

Right. And on the last earnings call, you noted commercial rates are tracking in the 3% to 5% range with strong visibility through 2027. How have you been able to secure such strong commercial rates, particularly as we move further away from pandemic-era inflation?

Yeah, well, look, I think there's a lot of turmoil in the payer and provider markets that's playing out very publicly, right? And there's a lot of situations where plans and providers, both in the MA and commercial business, are out of network. And, you know, you read about this all the time. I wouldn't say fundamentally that the nature of the negotiations have changed very much. I would say that the topics that generate contention are similar. I don't think they've changed very much. I think there's a lot more noise around them. But for us, what I think is becoming clearer and clearer is that there is a value that our combined portfolio brings to whether you're a government payer, a private payer in the government lines of business, or the commercial business, based upon three or four simple things. One is a commitment to site-of-care savings, in particular with the ambulatory business, but also in our acute care business, we have much less of an extensive hospital-based outpatient model for things like lab, x-ray, and other things. We push into a freestanding setting, even in our own practices that we have there, so we have less exposure there. Those are two things. You know, the third is in our acute care business, we tend not to be, from a commercial standpoint, the premium-priced competitor or the highest-priced competitor in the markets in which we operate. We aim to provide value to the payers. And the last piece is we have been very disciplined about reasonable utilization. I mean, things that are clinically appropriate, appropriateness of admission from the emergency department, for example, is something that many of the health plans often recognize us for in the discussions that we have with them around that. So, you know, we feel like we have a more defensible both operations and pricing platform. It's value-creating for both parties, and therefore, as we look forward, we tend to be able to negotiate reasonable rate escalators with the payers as we look forward, and over time, it provides value to both parties.

Right. Sticking on with the commercial market, there's been mixed data points on the strength of U.S. employment. what trends are you seeing across your core markets, and how are those showing up in payer mix or utilization?

I mean, I would say the employment environment is still pretty strong. I mean, we have more recent job reports that may have gone up or down or whatever, but I think overall unemployment rate is still at very, very attractive levels in the United States when you look at it historically. So I wouldn't say that we're seeing any obvious impact from macro-employment rate-related demand in our health care services environment.

Great. Let's move on to USPI. There's been a continued shift in the growth of USPI with growth tilted more towards revenue per case in recent years. Do you expect that to continue in 2026, and is there anything in particular driving the strength this year?

I mean, we're focused on, you know, doing more of the same. Operations excellence, transitioning where we can, you know, to higher acuity, you know, lower volume but higher acuity, procedure mix where those opportunities exist, building upon strategies with respect to new innovative services, Obviously, the inpatient-only list discussion supports that in terms of the new opportunities or growing opportunities there. And then just, I mean, the reality is the core markets of orthopedics and other things are still, from a volume standpoint, very large and have opportunities to move from an HOPD to an ambulatory environment. So our focus from an operational service line, physician relationship, et cetera, standpoint is very, very similar. We had a very good year last year with respect to our ability to onboard and acquire new assets into the portfolio. We see a similarly strong environment in front of us with the pipeline for 2026. So I would expect that we would have a successful year there as well. And as I said, you know, we're working on some of the things for the future. They'll take a little bit of time to embed more technology into this business to see if we can improve some of the typical operating statistics that are more managed in a traditional manner today to improve them for the future.

I wanted to follow up on that inpatient-only list. I think previously you framed that as a gradual tailwind for USPI with some early opportunities in spine and urology. How is that policy shift influencing your physician recruitment strategy, capital allocation, and payer contracting today?

I mean, look, on the margin, you know, we're focused on actually translating the opportunities created from the inpatient-only list down to a list of very specific assets, service lines, positions that we would target in bringing them on board. But, you know, remember, in the areas of especially urology, We've led the way in terms of our partnerships and building that into the ASC environment. We've talked about it for a couple of years. It's been successful. We've been piloting and growing spine programs, in particular with orthopedic spine, but now obviously the opportunity to bring more neurosurgical spine into the ambulatory surgery environment. And there are other things, you know, electrophysiology and cardiac, which is, of course, more voluminous as an opportunity, but requires a different configuration of operating room, you can't just stick them in a normal, you know, ASC, those opportunities, I think, will grow over And yeah, you bet, it's the focus of design, physician relationships, capital, all of it as we look ahead.

Great. There's also been ongoing discussions in Washington around site-neutral payments. If hospital outpatient reimbursement were to move closer to ASD rates for similar procedures, how do you ensure that ASDs continue to differentiate and retain their value proposition?

Well, let me just say, at least first from my perspective, from a site-neutral policy perspective, while there's a range of outcomes being discussed, But at least from my time spent in that regulatory and legislative environment, the focus is much more on things like lab, x-ray, rehab, than it is on surgical cases, which legitimately, both clinically and operationally, oftentimes need the structure of an acute care hospital versus a freestanding ambulatory setting, et cetera. So, you know, if I were to place my bet on where any kind of policy might land in this area, it'll focus more on those much lower acuity areas. So, I mean, we're not terribly focused on what that change would be. I would remind everybody that, you know, our ASC platform is already on freestanding rates. And, you know, we think that's important, but that's, you know, not really the case because we're worried about HOPD price compression in surgical care.

Great. Let's transition to Conifer. Revenue cycle management has become an increasingly strategic priority for hospitals. which capabilities of Conifer's platform are driving the greatest benefit for hospitals today, and which capabilities do you expect to accelerate with full ownership of Conifer?

Yeah, no, that's a really good question because, you know, if you look at our results with Conifer, which have been outstanding both for us and for our clients, as we have noted, or even as our clients have noted, the drivers of revenue cycle performance over the last decade have largely been around the discipline that true workflow automation can create in the back end of the revenue cycle in accounts receivable, the discipline around the mid-cycle, but in particular around accuracy of coding and clinical documentation, And then third, what I would describe as an ability to build a more globalized workforce to have an attractive cost to collect for all of that work. And that pays dividends every single day. I mean, you can see it in our cash results every quarter. I do think your question is an insightful one about how you look forward in the revenue cycle, right? So one is the cost to collect should come down because much of that work can either be automated or be supported very actively to much bigger spans of control using artificial intelligence, number one. Number two, I think the ability to really enable the front end, which has been the talk, and as you've seen in the industry, expensive acquisition after acquisition that hasn't paid off, which we have actually stayed out of, I think becomes a real opportunity now in terms of just the discipline around registration, insurance capture, accuracy of billing, preauthorization. I think there's a real opportunity there now because the technology is finally ready to help from that perspective. And then if you go to the back end of the revenue cycle, the ability to utilize artificial intelligence to have a much more disciplined approach to capturing what comes out of the clinic or the hospital in the physician's own documentation, starting from scribe all the way to producing the code and delivering the claim to the payer or the government for payment becomes another real opportunity. So the game is changing in this space in terms of what the value drivers will be.

Right. Denial intensity also remains elevated across the industry. You've described building tools and mechanisms with payers and using technology to improve dispute resolutions. How do you measure the success of those efforts, and what's the remaining bottleneck here?

Yeah, I mean, first of all, dispute and denial rates have been going up at a rate and have gone up at a rate that is obviously frustrating because it creates costs back and forth that's somewhat, we would argue, somewhat unnecessary. Look, the key metric to look at is the yield on the dispute and denial rate, right? So for us and in our platform within Conifer, while the dispute and denial rate has gone up significantly, our yield rates have not gone up anywhere near that rate. So that's the success. The problem is going from here to here, meaning dispute rates down to what the actual yield rate is, there's a bunch of cost that comes in in terms of generating the same yield that you think you deserve. That's where the opportunity to reduce cost is. I mean, if we're going to have this back and forth with increased rates of denials and disputes, you would ideally find a way to manage that to the same efficacy with a much lower cost, and that's where we're spending our effort.

Great. Maybe to finish up here on capital deployment, Tenet has a meaningful cash balance now, and you expect roughly $3 billion of free cash flow in 2026. Can you outline how you'll be balancing capital deployment this year between growing USPI, investing in hospital service lines, share repurchase, and debt retirement?

Yeah. So we feel very fortunate to be in such a strong leverage and free cash flow position. Listen, if we take a step back and take a look, despite some of the things that we just talked about today, whether it's exchange or future reimbursement that may or may not present to ourselves, we still feel that our business is very investable from a capital standpoint, whether it's the high-acuity strategy in the hospital space, whether it's USPI, obviously both organic and inorganic opportunities, Conifer that we just talked about from a technology standpoint. So there's still a lot of opportunity to invest capital. So I think you'll see us continue to do that. Kind of the same rationale that applies from what do you still do with the rest of the cash flows because even after that, you know, there's a lot of flexibility. And, you know, we honestly do feel our shares, even after the recent performance, are very attractive for long-term investment. So, yeah, you will see us do that. You know, last year, we, you know, we were a little over $1.3 billion of shared purchases. We think that was a very good investment, so you'll see us continue to go on those trends. And then, look, you know, we talk about it a little bit less now, and our leverage is in such a, you know, 2.25 times EBITDA. So it's a less frequent topic, but we still remain committed around the leverage company and being very disciplined with the balance sheet. So you'll see us, you know, opportunistically address our debt load as well.

Great. And as you look at, you know, specific service lines to invest in on the hospital side, where do you see the greatest opportunities there?

Well, I mean, as I indicated before, our focus on the acute care side in terms of investments tends to be more service line oriented in the high acuity space than it does, you know, sort of lots of infrastructure for general med surge. So, I mean, we're back to trauma, cardiovascular, neurosurgery, you know, invasive cancer surgery, you know, broad-based general and abdominal surgery, robotics, right, those sorts of things.

Well, with that, we're just about out of time here, so why don't we stop there. Sam, son, Will, thank you so much for joining us today, and please enjoy the rest of the conference.

Thank you for having us. Thanks, Adrian.