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Tenet and USPI complete $1.1 billion acquisition of SurgCenter Development

by John R. Fischer, Senior Reporter | December 28, 2021
Business Affairs Operating Room
Tenet and USPI have completed their $1.1 billion acquisition of SurgCenter Development
Tenet Healthcare and its subsidiary, United Surgical Partners International have completed their approximately $1.1 billion acquisition of SurgCenter Development.

The deal gives the two SCD’s ownership interest in 86 ambulatory surgery centers, as well as related ambulatory support services. It also gives USPI an expanded reach as an ambulatory surgery platform and partner of multispecialty physicians, including musculoskeletal, ENT and other practices.

The centers are located in 21 states and expand USPI into Arizona, Florida and Texas, as well as deepen its stake in relatively newer markets in Ohio, Indiana, Wisconsin and Maryland. They also provide the company with a scalable entry point into Michigan.

“By welcoming these centers into our company, USPI will maintain its reach as the largest ambulatory platform for musculoskeletal services, a high-growth service line. We are also creating a pathway for further expansion through a partnership that pairs the expert development and operational capabilities of our two organizations,” said Dr. Saum Sutaria, CEO of Tenet Healthcare, in a statement.

Tenet and USPI announced their deal back in November. They expect a phased consolidation of various centers that will add up to an estimated fully ramped Adjusted EBITDA of approximately $275 million sometime between years three and four.

SCD owns a minority interest of approximately 39% on average in 86 of the ASCs. It also has a majority interest of approximately 55% on average in six others. USPI is proposing to pay an incremental consideration of approximately $250 million for a portion of equity interests in the ASCs from physician owners. Acquiring these interests would give USPI a majority ownership position and enable Tenet to include the results of the centers in its financial statements.

In addition, USPI has a new partnership with SCD to develop a minimum of at least 50 de novo centers over five years. USPI will have the exclusive option to obtain an immediate ownership position at the time of development for each center and will have an additional option to purchase SCD’s ownership stake 18 months after the opening of a facility. Together, the acquisition and partnership are expected to provide USPI with part ownership in more than 440 facilities in 35 states.

Tenet has acquired 67 of SDC’s ASCs since 2009 and spent $1.1 billion last year to acquire almost 50 such facilities, according to Modern Healthcare.

SCD has developed more than 200 centers since its inception in 1993 and expects to build on this record with de novo ASCs and its new partnership with USPI. It has the largest ambulatory care center portfolio available to acquire and expand Tenet's footprint in the market, according to Sutaria.

With its care network and United Surgical Partners International, Tenet operates 60 hospitals. It also runs or has an ownership interest in approximately 550 other healthcare facilities, including surgical hospitals, ambulatory surgery centers, imaging centers and other care sites and clinics.

Tenet used first-lien secured notes to fund the transaction.

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