泰納特醫療 (THC) 2026 年第三季法說會：上調 EBITDA 財測指引

重點摘要

• Tenet Healthcare 估算 2026 年第三季淨營業收入為 56 億美元，合併調整後 EBITDA 為 13.55 億美元。調整後稀釋每股盈餘 (EPS) 年增 80% 至 6.64 美元。
• 扣除與 Conifer 合約轉移相關的 1.47 億美元收益後，核心調整後 EBITDA 年增 10%，調整後 EBITDA 利潤率為 21.8%。
• USPI 調整後 EBITDA 成長 9.1% 至 5.37 億美元，利潤率為 39.2%。同院區營收成長 4.5%，全關節置換手術量增加 12.8%。
• 同醫院調整後住院人數增加 3.2%。扣除合約轉移收益後，醫院部門調整後 EBITDA 較 2025 年第三季成長 11%。
• 管理層將 2026 全年調整後 EBITDA 指引上調至 50.5 億至 52.0 億美元，扣除非控制權益 (NCI) 後的調整後自由現金流指引上調至 19.25 億至 21.55 億美元。
• Tenet 預計在扣除 2026 年預計不會重複出現的約 4.5 億美元 Conifer 轉移貢獻進行常態化調整後，2027 年調整後 EBITDA 將實現成長。

關鍵財務數據

業務與營運表現

USPI 的同院區體系營收成長 4.5%。每例淨營收成長 6.1%，病例量則下降 1.5%，反映公司專注於高重症度手術的策略。同店全關節置換手術量增加 12.8%，創下 2026 年表現最強勁的單季紀錄。

USPI 在該季度投資超過 1 億美元用於業務拓展，今年以來已有 4 家新建中心投入營運。管理層還強調了骨科、泌尿科、一般外科、先進機器人手術、脊椎和特定心臟中心方面的發展機會。

在醫院部門方面，同醫院調整後住院人數增加 3.2%。每調整後住院人數營收微幅增加 0.2%，主要因為商業雇主營收的強勁表現，大幅被平價醫療法案交易平台 (Exchange) 量能下降所抵銷。來自交易平台的住院人數與營收年減 18%，約占合併淨營業收入的 5.5%。

Tenet 在第三季認列了 3,200 萬美元的跨期醫療補助 (Medicaid) 補充營收，而去年同期為 3,800 萬美元。今年以來與往年相關的收益累計為 1.24 億美元。

該季度還包含來自 Conifer 轉移活動的 1.47 億美元淨收益。其中包括因收入認列時間由第四季移至第三季的 9,700 萬美元，以及來自轉移活動（包括優於預期的費用削減）的 5,000 萬美元。

Tenet 發行了 20 億美元於 2034 年到期的高級無擔保債券，並將所得用於償還 2027 年及 2028 年到期的債券。該公司表示，在 2028 年之前已無重大債務到期。

管理層財務指引

自由現金流展望包含約 1.5 億美元與 Conifer 交易相關的 2026 年稅款支付。管理層指出，若扣除該筆稅款，扣除 NCI 後的調整後自由現金流在中位數將達到約 22 億美元。

展望 2027 年，在扣除 2026 年約 4.5 億美元的 Conifer 轉移貢獻後，管理層預期企業調整後 EBITDA 將實現成長。該展望是以目前已知的監管架構為前提。Tenet 預計 USPI 將實現同店營收成長、維持穩定的利潤率並進一步擴展投資組合；同時，醫院部門預計將受益於健康的市場需求、同店業務量成長以及嚴格的成本控制。

風險與關注領域

• 醫療交易平台 (Exchange) 的住院人數與營收年減 18%，對醫院每調整後住院人數淨營收帶來 1.8% 的逆風。
• 管理層正評估醫療交易平台的進一步壓力，以及 2027 年 Medicaid 工作要求政策可能產生的影響。
• 2026 年預估 4.5 億美元與 Conifer 轉移相關的調整後 EBITDA 預計不會在 2027 年重複出現，且仍取決於營運層面轉移進展的情況。
• 儘管 Tenet 擁有展現差異化的營運表現與高重症度策略，但管理層形容整體外科手術環境並未特別強勁。
• 該公司尚未制定長期部門目標，因為認為 HR1 法案的影響及未來潛在政策變動仍具不確定性。

分析師問答亮點

商業合約續約率大部分仍維持在 3% 至 5% 的區間。Tenet 已完全簽署 2026 年合約，且 2027 年合約簽署率已超過 90%，使管理層對商業定價具有高度可預見性。

管理層表示，薪資、工資和福利效率的提升大部分來自全公司範圍的成本控制措施，而非 Conifer 轉移。目前技術與 AI 工具正應用於患者聯繫、減少手術取消、手術室排程、營收獲取以及事前授權。

談及 USPI 的成長，管理層表示第三季的大多數收購項目皆為平台獨家獲得，而非透過競標程序。公司還計劃增加新建中心 (de novo) 的開發，特別是在高重症度的專科領域。

管理層將全關節手術的成長歸因於患者持續從醫院門診部轉移至獨立門診手術中心 (ASC)。臨床協定、外科醫生管道以及更高效的手術室利用率正推動這一轉變。

Tenet 還強調其醫院轉診計畫是高重症度策略中持久的一環。該計畫將規模較大的城市與郊區醫院，與較小的郊區及農村社區相連結，同時為轉診患者保留加護病房和急診量能。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good morning. Welcome to Tenet Healthcare's Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I'll now turn the call over to your host, Mr. Will McDowell, Vice President of Investor Relations. Mr. McDowell, you may begin.

William McDowell

Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tenet's third quarter 2026 results as well as a discussion of our financial outlook. Tenet's senior management participating in today's call will be Dr. Saum Sutaria, Chairman and Chief Executive Officer; and Sun Park, Executive Vice President and Chief Financial Officer. Our webcast this morning includes a slide presentation, which has been posted to the Investor Relations section of our website, tenethealth.com.

Listeners to this call are advised that certain statements made during our discussion today are forward-looking and represent management's expectations based on currently available information. Actual results and plans could differ materially. Tenet is under no obligation to update any forward-looking statements based on subsequent information. Investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission.

With that, I'll turn the call over to Saum.

Saumya Sutaria

Thank you, Will, and good morning, everyone. Third quarter net operating revenues were $5.6 billion, and consolidated adjusted EBITDA was $1.355 billion. Adjusted diluted earnings per share increased 80% to $6.64 in the third quarter of 2026 compared to the prior year.

More importantly, after adjusting for onetime items related to contract transitions that generated adjusted EBITDA of $147 million that was not reflected in our previous guidance, the core business continued its strong growth trajectory in 2026 with an adjusted EBITDA margin of 21.8% and 10% growth in adjusted EBITDA over third quarter of 2025. We continue to manage through payer mix shifts and enrollment declines in the exchanges and execute on our technology-enabled growth and expense management plans that support our margin strength.

Our strong performance is driving significant free cash flow that we continue to deploy for the benefit of shareholders. Year-to-date, we have deployed over $1.6 billion for share repurchases.

Now turning to our segments. USPI generated $537 million in adjusted EBITDA, which represents 9% growth over third quarter 2025. Same-facility revenues grew 4.5% as our high-acuity strategy continues to yield benefits and is highlighted by our strongest quarterly performance this year with 12.8% same-store growth in total joint replacements in the ASCs over prior year.

USPI also had a very successful quarter in development with over $100 million of investments in the third quarter alone. We remain the preferred acquirer of assets in this space and continue to have an attractive pipeline of partnerships interested in joining USPI. Additionally, we have commenced patient care at 4 de novo centers to date.

Turning to our Hospital segment. Our performance in the quarter was driven by 3.2% adjusted admissions growth and strong margin performance from sustained expense efficiencies. The investments that we have made in support of our high-acuity strategy continue to pay dividends and drive incremental growth. Excluding the contract transition benefits that I mentioned, adjusted EBITDA grew a very attractive 11% over third quarter 2025, again, producing results ahead of our expectations. We are pleased with our performance in both operating segments, which continue to generate strong same-store revenue growth, attractive margins and robust free cash flows.

Turning to guidance for the rest of 2026. We began the year with attractive growth expectations and delivered an outsized and competitively differentiated increase to our guidance when we reported our second quarter results. At this point in the year, we are raising our full year 2026 adjusted EBITDA guidance to a range of $5.05 billion to $5.2 billion, which represents an increase of $195 million or 4% at the midpoint of the range over our increased guidance after the second quarter. The guidance increase is supported by our continued expectations for strong fundamental performance as well as the onetime items in the back half of the year. Notably, over 40% of our total guidance increase for this year is from fundamental outperformance.

I'd like to now spend a few minutes discussing some early thoughts on 2027. After excluding the impact of the transition activities at Conifer, we expect our enterprise to deliver overall adjusted EBITDA growth in 2027. This assumes the current known regulatory frameworks. The value of our diversified business mix supports our belief in this outcome for 2027.

We are still conducting business planning, so details will come after the fourth quarter as usual. We are sizing further potential exchange headwinds and the estimated impact of Medicaid work requirements. USPI should not be materially impacted by these, and we expect same-store revenue growth, consistent margins and further expansion of the asset portfolio in our ambulatory business.

In the Hospital segment, we currently see healthy patient demand that would support same-store volume growth and a stable operating environment supported by disciplined cost controls in 2027. To help you bridge the years, we now expect various transition activities at Conifer to total $450 million of adjusted EBITDA in 2026. We do not expect these contributions to recur in '27, and I will reiterate that this is an estimate, depending on how the transitions proceed operationally. We will provide an update following our fourth quarter results. We are pleased with the results of this highly attractive Conifer transaction as the total value generated from the contract sale will now increase to approximately 15x 2025 adjusted EBITDA minus NCI.

In summary, we have a transformed portfolio of businesses with strong underlying fundamentals, disciplined operations and a business mix which is diversified for many of the reimbursement headwinds that are affecting the industry.

Finally, I will again reiterate our commitment to returning free cash flow to shareholders via repurchases, especially at our attractive valuation multiple in light of recent comparable multiples for combination ASC hospital platforms.

For more details on our results, I will now turn it over to Sun.

Sun Park

Thank you, Saum, and good morning, everyone. We again delivered strong performance in the third quarter of 2026, generating total net operating revenues of $5.6 billion and consolidated adjusted EBITDA of $1.355 billion. Third quarter adjusted EBITDA margins were driven by strong revenue performance and disciplined operating expense management, with continued progress on the efficiency initiatives that we outlined at the beginning of the year as well as favorable transition items as described in the earnings release.

I would now like to highlight some key items for both of our segments, beginning with USPI. In the third quarter, USPI adjusted EBITDA grew 9.1% over third quarter 2025 at $537 million, with adjusted EBITDA margins at 39.2%. Same-facility system-wide revenues increased 4.5%, with net revenue per case up 6.1% and same-facility case volumes down 1.5%, reflective of our high-acuity focus.

Turning to our Hospital segment, same-hospital adjusted admissions rose 3.2% in the quarter as demand remained healthy. Revenue per adjusted admission increased 0.2% year-over-year in the quarter, primarily due to strength in commercial employer revenues, offset by the impact of reduced exchange volumes.

Exchange admissions and revenues declined 18% from third quarter of 2025 and represented about 5.5% of consolidated net operating revenues in the third quarter of 2026. We recognized $32 million of out-of-period supplemental Medicaid revenues in the quarter. This compares to $38 million of out-of-period supplemental Medicaid revenues that we had in the third quarter of 2025. I would note that year-to-date, there is $124 million of favorable out-of-period supplemental Medicaid revenues related to prior years.

Finally, we recognized a net benefit of $147 million associated with the timing of revenue recognition in various transition activities related to Conifer in the third quarter of 2026. This amount is comprised of 2 items. First, our net operating revenues increased by $97 million due to revenue recognition timing. It is important to note that this is simply a timing shift between the third and fourth quarters and, as such, does not impact our full year 2026 revenues associated with the transitioning contract.

Second, we recognized $50 million of EBITDA from various transition activities, including expense reductions that took place earlier than we had originally anticipated. All in all, our operating discipline and strategic focus enabled us to deliver another strong quarter despite the patient coverage challenges that the industry is facing.

Next, we will discuss our cash flow, balance sheet and capital structure. We generated $1.1 billion of adjusted free cash flow in the third quarter, which brings us to $2.5 billion of adjusted free cash flow year-to-date. As of September 30, 2026, we had $2.67 billion of cash on hand, with no borrowings outstanding under our line of credit facility.

As previously announced, we issued $2 billion of senior unsecured notes that mature in 2034. We used the proceeds from the notes to retire $2 billion of notes that would have been due in 2027 and 2028. We now have no significant debt maturities until 2028.

And finally, during the third quarter, we repurchased 970,000 shares of our stock for $255 million. Year-to-date, we have repurchased 8 million shares of our stock for $1.615 billion.

Our leverage ratio as of September 30, 2026 was 2.11x EBITDA or 2.58x EBITDA less NCI, driven by our strong operational performance and financial discipline. We remain committed to maintaining a deleveraged balance sheet and believe that we have significant financial flexibility to support our capital deployment priorities and continue to drive shareholder value.

Let me now turn to our outlook for 2026. For 2026, we now expect consolidated net operating revenues in the range of $22.05 billion to $22.45 billion, an increase of $50 million at the midpoint of the range over prior expectations. As Saum mentioned, we are raising our 2026 adjusted EBITDA outlook range by $195 million at the midpoint, to $5.05 billion to $5.2 billion, reflecting the increased EBITDA expectations associated with our transition activities as well as the additional out-of-period supplemental Medicaid revenues that we recognized in the quarter.

Turning to our cash flows for 2026, we now expect adjusted free cash flow after NCI in the range of $1.925 billion to $2.155 billion, an increase of $100 million at the midpoint from our previous guidance range. This range includes the payment of about $150 million in tax payments this year for the Conifer transaction. Excluding these tax payments, this would represent $2.2 billion of adjusted free cash flow after NCI at the midpoint of our '26 outlook. Our businesses continue to deliver strong free cash flow conversion from our EBITDA performance while we continue to invest in high-priority areas to support future growth.

Turning to our capital deployment priorities, we are well positioned to create value for shareholders through the effective deployment of free cash flow. First, we will continue to prioritize capital investments to grow USPI through M&A. Second, we expect to continue investing in key Hospital growth opportunities to fuel organic growth, including our focus on higher acuity service offerings. Third, we'll continue to be active in share repurchases. We continue to see significant opportunity at our current valuation, continued operating performance and strong leverage position. And finally, we will continue to evaluate opportunities to retire and/or refinance debt.

We are pleased with our continued effective execution and remain confident in our ability to deliver our increased outlook for 2026.

And with that, we're ready to begin the Q&A. Operator?

Operator

[Operator Instructions] Our first question comes from the line of Jason Cassorla with Guggenheim.

分析師問答

Jason Cassorla

Great. I wanted to ask about commercial pricing. It's an area you've called out a couple of times or at least the past couple of quarters. Maybe can you just unpack what you're realizing on the commercial rate side, how you're working with payers as a partner to increase revenue yields, reduce administrative costs and the like, and how you're thinking about the sustainability of this commercial pricing favorability as you look out into the future?

Sun Park

Jason, it's Sun. Yes, I think our relationship with our commercial payers and commercial pricing overall hasn't changed very much at all from our prior commentary, right? We still are seeing good renewals, a lot of them at the 3% to 5% range. We're obviously fully contracted for this year and are basically over 90% contracted for next year as well. So we have good visibility.

The only other thing I would note is from a net revenue per just admissions rate, we said 0.2% this year -- or this quarter, excuse me. A lot of that is driven by, as expected, good pricing mix across our categories, and then obviously offset by exchange headwinds. The exchange headwinds represented about 1.8% headwind on our net revenue stat.

And then from an operational basis, look, I mean we try to have a win-win relationship with all our payers. We obviously have to be very diligent from our Conifer business operations on our revenue yield as we respond to different requests and, candidly, denial activity from the payers. And we performed very well, I think, from a revenue yield basis. And that really hasn't changed over the last several years in our commentary. And we think given Conifer's capabilities and the investments we continue to make in technology and Conifer overall, that we'll be able to sustain that.

Saum, I don't know if you have any other comments on that. Thank you for your question.

Operator

[Operator Instructions] Our next question comes from the line of Ryan Langston with TD Cowen.

Will Spivack

This is Bill on for Ryan. I just have a quick question on the state directed payments. So you disclosed a number in your filings about Medicaid supplemental payments. I was wondering if you could ballpark what percentage of those will not be subject to reductions under HR1?

Sun Park

Yes, we did -- we disclosed our overall state -- supplemental Medicaid payments, excuse me. And for this quarter, you'll see in our 10-Q, it will be $356 million total of supplemental payments. That being said, we don't disclose the proportion of which would be subject to HR1 activity going forward.

Will Spivack

Fair enough. If I could just ask a quick follow-up then on just work requirements and thinking about that for next year. When you think about your total adjusted admissions, what percentage come from Medicaid expansion individuals?

Sun Park

So when you look at our admissions, I would say there's about 60% of our admissions that are from expansion states. I think that's about it. I think you know that we have markets like Michigan, where there's a lot of activity and we're important providers in that expansion state, that's an example. So it's about 60%.

Operator

Our next question comes from the line of Kevin Fischbeck with Bank of America.

Kevin Fischbeck

Great. Just one clarification before I asked the question. When you said that you think you're going to be able to grow EBITDA next year ex Conifer, is that the only adjusted to $450 million? Or do we also have to take out the prior year Medicaid supplemental payments? And then I guess the real question is just about your view on surgeries broadly. There's been a lot of talk about ambulatory surgery backdrop, and I'd like to hear what you're seeing on that respect.

Saumya Sutaria

Yes. Let me start with the second question and I'll pass to Sun. I think surgical environment, look, I mean, from an industry perspective, in terms of what we're seeing, we're pleased with our results. Obviously, there are 2 components, the Hospital segment and the ASC segment, both of which, I think, are generally consistent or better than what we're seeing in the general industry.

Remember, on the USPI side, as I noted, we're still so focused on our strategy of acuity that you have to take those results in light of that. But again, I think competitively differentiated results there as well, both on revenue and volume. So we're pleased with -- we're pleased with that.

And that said, I would not say this is a gangbusters surgical environment right now, right? So you just have to take both of them together. And the importance of our strategy is probably the critical point here in terms of what's driving our confidence in the earnings growth going forward into 2027.

Sun Park

Yes. And Kevin, this is Sun. Just on your clarification question, yes, we do believe we'll grow total EBITDA next year once you normalize for the $450 million of onetime transition items that we called out this year.

Operator

Our next question comes from the line of Stephen Baxter with Wells Fargo.

Stephen Baxter

I was hoping you could update us a little bit on what you're seeing on compensated care trends. It looks like in the third quarter, there was some uptick in both unpaid admissions and also, I think, a little bit more so unpaid outpatient visits when compared to the second quarter. Does that go beyond what you're seeing on the exchanges? Any kind of update just on the exchange trajectory throughout the year?

Saumya Sutaria

I mean, first of all, the primary comment I would make is that, largely, Q3 is a stabilization message from Q2, right? I mean if Q1 started with what would have been under the basic run rate of impact and Q2 accelerated, Q3 is a stabilization message is our main takeaway there. And then you're right about the slight changes there.

I don't know, Sun, if you have any other comments, but that's how we're viewing it.

Sun Park

No, nothing further to add, Saum. It's really exchange volume reductions that we discussed and the commensurate increase in unite care numbers that you're seeing. I don't think there's anything beyond that.

Operator

Our next question comes from the line of Whit Mayo with Leerink Partners.

Benjamin Mayo

Is there a revenue headwind that we should be aware of as we think about the hospital segment for the fourth quarter with CommonSpirit now gone? And is the $450 million headwind next year, is that ratably across each of the quarters? Or does it have a different slope to it?

Sun Park

Yes. Whit, this is Sun. The only revenue headwind we'll call out is the timing piece that we explicitly said, the $97 million that came into Q3 on a timing basis that otherwise would have been in Q4 instead. I think that's the only material one that I would call out from a Hospital segment perspective.

For next year, the $450 million, I would say a big portion of that is -- would be spread ratably throughout the year, and that is the overall contribution of the CommonSpirit contract that we saw this year. And then there is a portion, and we called out about $160 million total, between Q3 and Q4, that is going to be more, obviously, second half weighted given that some of the efficiency and transaction activities took place in the second half of the year versus the first half. So I think those are the major moving pieces.

Operator

Our next question comes from the line of Brian Tanquilut with Jefferies.

Brian Tanquilut

Maybe, Sun, as I think about the salaries line, I see it's down both sequentially and year-over-year basis. Is this largely driven by the Conifer transition or is there anything to think about in terms of the efforts that you guys have put in on SW&B? And is this the right baseline to basically adjust and build off of going forward?

Sun Park

Yes. I would actually say it's the other way around. I mean most of the efficiency you're seeing in our SW&B line is from all the things that we just talked about over the course of the year, where we, obviously, has spent a lot of time and energy and effort and have shown performance on cost controls in the base of HICS exchange reductions and other challenges. So there are a lot of moving pieces, obviously, in that line item, but a lot of -- majority of that is from our efficiency efforts.

Now as you get into Q3 and Q4, as again said, there are some additional efficiency impact that we'll see as we transition activities. But by and large, SW&B is from our efficiency efforts overall across Tenet Healthcare.

Operator

Our next question comes from the line of Pito Chickering with Deutsche Bank.

Pito Chickering

Just looking at the ASC growth engine for the next few years, ortho is a big one. But should we be thinking about other areas like urology, bringing to use the da Vincis, use XIs, urology, I mean kind of as you look past ortho, which again will continue for another couple of years, where is the next sort of big growth engine that we should be thinking about within ASCs?

Saumya Sutaria

Yes, Pito. For sure, orthopedics and the expansion of orthopedics cases beyond the current case mix is an important driver. But in addition, for us, as you know, we have been pursuing growth in urology, in general surgery, in advanced body robotics, in spine. I mean there are a number of areas, standing up some new cardiac centers, as I've always said, slower process, but still opportunity.

So the diversification in the higher acuity areas while maintaining and growing our base are both important drivers of that future. And really, the combination of that strategy with the regulatory framework and support for moving surgical care into safe, lower-cost settings are both things that I think will benefit us over a multiyear period.

In this environment -- and look, the regulatory environment is somewhat known and somewhat uncertain based upon what happens from an election standpoint. But I would say and reiterate what I noted in my comments, which is having the diversified platform at the scale we have it is a really important driver of our ongoing ability to build and grow this business at an enterprise level.

Pito Chickering

Great. And then a follow-up here, look, you raised the core EBITDA growth by sort of $3 million versus last quarter. I assume there's a lot of moving pieces within that $3 million. So can you sort of talk about the good guys and bad guys within that as it seems pretty solid considering the volatility we're seeing in the markets today.

Sun Park

Pito, I mean, I think as we kind of said in our prepared comments, the change in our estimates and guidance ranges was pretty mechanical this quarter, right, it was virtually all to do with the onetime items as well as the revenue recognition piece that we mentioned plus the out-of-period Medicaid.

Without those, I would say, from a core fundamental performance basis, we had a very significant raise last quarter, both for the first half of the year and the second half of the year. And I think we think we obviously delivered to our increased expectations in Q3. So I would say those are probably the moving pieces that I would point out.

Saumya Sutaria

Yes. I mean we're reiterating the belief in the strength of the business today and also our ability to manage that into the fourth quarter at the elevated levels that we've provided. And we think we have the foundation in place and the tactics for the fourth quarter in place given the demand we're seeing right now for a successful end to the year. .

Operator

[Operator Instructions] Our next question comes from the line of A.J. Rice with UBS.

Albert Rice

We've had now, with the announcement of the last week, 2 major deals where nonprofit health systems are buying surgery center assets, paying significantly higher premiums than what your business is being valued in the market. And you historically, I think USPI has generally been viewed in the industry as probably the premium surgery center asset.

I wonder with that backdrop, can you comment on, is this having any impact in the market on deals, the smaller deals, in terms of how people are thinking about pricing? Is it changing the competition for ASC assets in any way that maybe these guys are out of the market because they're in the process of selling or maybe the nonprofit systems are gearing up to be more active acquirers? And does it do anything to make you think about being more proactive in trying to get recognition for the value that's obviously there at USPI but doesn't seem to be recognized by the market?

Saumya Sutaria

A.J., I mean let's start with the last part of it. I mean, again, as I commented at the end, I think from a practical perspective, the 2 things that we can do are continue to deliver differentiated earnings growth. I believe that USPI has delivered differentiated earnings growth versus any other ASC platform in the industry, both recently and over a long period of time. I think the facts would support that pretty easily.

And the second thing is with our free cash flow generation, recognizing the attractive valuation of our equity relative to what are some reasonable valuations of, in this case, more recently, ASC hospital combination platforms, as I noted. So those are the 2 practical things. Look, we believe in continuing to build this business and do it in a differentiated manner.

In terms of the M&A market, look at the third quarter, again, right? A very successful third quarter in acquisitions, the vast majority of which were not competitive processes but came exclusively to USPI in those processes. And we have a terrific pipeline looking ahead. I know we keep saying that, but the reality is our acquisitions every year continue to confirm that that pipeline translates to actual acquisition activity and successful ramp-up of our ability to deliver synergies into those assets.

At the same time, our strategy is diversifying more and more inclusive of more rapid pace of de novo development, new tools in the toolkit about how we think about those de novo developments, a heavier focus of those de novo developments into some of the higher acuity service lines where we've built a differentiated reputation in the marketplace with physician and physician groups and MSOs that are investing in those specialties. So I think that's another important feature of what we are able to do looking forward.

And then finally, because of the value that we are providing health plans in the ASC sector and the government, candidly, our ability to move into new markets and new states with our contracting platform and move surgical care into lower-cost settings, without having to own more acute care hospitals, is another important differentiator in what we are able to do with respect to expanding USPI's scope and activity.

So again, as you can imagine, we spend a lot of time on this and how we remain competitively differentiated going forward, not just where we are today. And hopefully, that gives you a little bit of a flavor of it.

Look, in terms of the 2 recent ASC acquisitions, I personally extended my congratulations to both new owners. This is an important part of the market. And we have a lot of work to do together from an advocacy perspective in order to support and build the growing interest in ambulatory surgery, maintain high quality and safety, and also ensure that regulators understand the benefits that this portion of the surgical sector is providing to the cost of health care going forward. And so I look forward to those collaborations with those leaders.

Operator

Our next question comes from the line of Justin Lake with Wolfe Research.

Justin Lake

You guys have done an incredible job of managing costs and improving margins at the Hospital segment in particular. I wanted to see if you can give us any color on where you see yourself in terms of the life cycle of that margin trajectory, effectively asking whether you still see meaningful opportunity here, or should we expect core growth going forward in the Hospital business to look more like top line growth ex items like DPP, exchanges, work requirements that are going to be transitioning?

Sun Park

Justin, thanks for the question. And we have spent a lot of time and energy making sure that our total business, including hospitals, as you noted, is running efficiently and we're finding cost opportunities wherever we can. And that's been a long-standing campaign for Tenet, obviously. This year, as we've talked about several times, we accelerated those efforts, including adoption of different technologies and AI tools, for obvious reasons in the face of some headwinds that we had in exchange as well as other dynamics.

Going forward, it's tough to say where in the life cycle we are, right? I think it's reasonable to assume that we will have access to even more improved technologies and other solutions as we go that we may not be aware of today but that we can adopt as we go in the future, and I think Tenet has shown the ability to do that. From a more operational basis, the operating environment, I think, is pretty stable, right, as we said in many times, from a labor standpoint, from our ability to manage our suppliers and other medical professional providers. I think there remains opportunity and we will continue to work on those, but I think we've managed that pretty significantly.

So listen, I think Tenet's been showing the ability to kind of dial up, dial down as the situation requires. We'll see as we get through our planning for '27 what all of the headwinds and tailwinds are. And obviously, managing our operating expenses will be a big part of how we deliver our commitments. So hopefully, that answers your question.

Saumya Sutaria

The one thing I'd add is that our commentary about 2027 is probably a reflection of how positively we feel about our controllable activities looking forward into the coming year.

Sun Park

Agree.

Operator

Our next question comes from the line of Andrew Mok with Barclays.

Andrew Mok

Total joints have been a strong category for quite some time, but it looks like that category reaccelerated at USPI this quarter. Is there anything to call out driving that reacceleration of total joint growth? And do you believe that share is still coming from hospitals?

Saumya Sutaria

Yes. I mean, I think when you say is that share coming from hospitals, I think it's coming from migration of cases from probably an HOPD to a freestanding outpatient setting. I think the driver of that is the continued efforts that we make in helping surgeons realize that they have a service-differentiated site of care that, as they get comfortable with it, they can continue to grow their activity in that environment, right? It's more convenient for them, it's more convenient for their patients.

They have -- one of the important things that we have, I think I've talked about before, is the ability to help these surgeons who are pretty smart about opportunity and risk with their patients, to use frameworks we've established to give them more predictability in terms of which cases are safe in the ASC environment likely to be successful, in which conditions they may want to think about that would drive them to continue for patient success and safety standpoint in the hospital. And those protocols, I think, are very helpful to growing the confidence in the surgical community of what they can achieve in a USPI ASC. And that's helping to drive the organic growth.

And it's a matter of -- it's a matter of really expanding the access to those protocols, which is really about how many surgeons trial an environment in the USPI setting. One of the things we do in this service line is give surgeons an opportunity to trial USPI centers without having to be joint venture partners or equity owners or other things. So that's a really important feature of what we create capacity to do in our environment. Because those could be future partners in perhaps new de novo and other centers.

Operator

Our next question comes from the line of Sarah James with Cantor Fitzgerald.

Sarah James

You guys have talked positively about surgical results versus the industry. Are you gaining surgical share in 2026? And is it on the Hospital, USPI or both? And how are you thinking about the surgical versus medical mix heading into '27?

Saumya Sutaria

Yes. So 2 things. I mean I would reiterate our strategic focus, right? We're primarily focused on growing and succeeding in share capture in our higher acuity surgical areas and continuing to build more access points in some of the more foundational ambulatory surgery center environments, which is effectively share capture by growing the number of surgeons or number of doctors affiliated with USPI.

In the high acuity areas, we're doing that, plus we are seeing growth that's based upon the question that we just answered around the migration from higher cost to lower cost settings. It's a combination of the 2, which is why you see higher growth rates. The summary from both of those is that we are increasing the proportional share that's happening in the lower-cost ASC setting.

In the acute care business, as I noted, this year has tilted a bit more towards both significant emergent and medical care on balance than surgical care, though both have been important drivers of our strategy. Remember, for us, again, the focus on that higher acuity segment is very important in terms of what we're doing. So that's what supports our revenue growth and case mix index growth, and the ongoing opportunities for expense management we have with our length of stay platform and the things we're doing there. So the mix of business gives us an opportunity to both grow revenue intensity and improve our expense management, which is why you see the margin strength that we're able to deliver.

Operator

Our next question comes from the line of Ann Hynes with Mizuho Securities.

Ann Hynes

Thanks on the visibility for able to -- be able to grow in 2027. Do you have any targets, meaning do you have a long-term target for each segment? And if you do, do you think you'll be able to grow within those long-term targets for each segment?

Saumya Sutaria

Yes, Ann, we have not indicated any kind of long-term targets in the segments other than what we sort of repeat year-over-year when we give guidance until there is full clarity about what's going to happen vis-a-vis HR1, which we believe is very highly subject to modification based upon election outcomes over the next few years.

Operator

Our next question comes from the line of Craig Hettenbach with Morgan Stanley.

Craig Hettenbach

Saum, in the Hospital segment, the transfer program has been an important driver of higher acuity growth and margin performance. Can you just touch on the strategy behind that and the durability of that strategy?

Saumya Sutaria

Yes, Craig. So look, I think it's very important in this environment coming out of COVID. This is more of a long-term strategy that urban and sort of larger suburban hospitals have an important role to play in providing access to more smaller suburban and more -- certainly more rural communities where the funding just hasn't been necessarily fully available to refresh [ capital], physician specialty capacity and other things coming out of the COVID crisis.

And at the same time, there are still people that live there, need access, get very sick and go to their hospitals. And we have a, very important to us, transfer program strategy that is willing and able to receive all patients from these outlying locations when there are needs, and importantly, return them to their home communities as appropriate as early as possible as well.

And our ability operationally to have built these successful partnerships have been sustainable, we found, over a number of years. I mean in the end, if you're a good partner to more rural and smaller suburban communities, they remember that, and you're reliable and you take their patients when they need it and you return their patients to them when appropriate. They remember that. And those relationships that have been built through the back end of COVID and all the way into today, are an important part of our strategy.

And look, we also have built a better expertise than the market in taking care of high-acuity patients and transfers because it's the heart of our strategy. We save intensive care unit capacity for these types of patients. We're very good at stepping people down out of the intensive care unit when their care is safe in that manner in order to create that capacity. And we also have emergency department, contracts and physicians that understand we take this obligation to these communities very seriously. And therefore, we create and save capacity for those patients in the emergency environment as well.

So it's a comprehensive approach that we don't think is very easy to replicate, in terms of what we have put in place. And yes, it's an important driver of our -- in the end, to simplify our high acuity strategy.

Operator

Our next question comes from the line of Ben Hendrix with RBC.

Benjamin Hendrix

Just wanted to follow up on some of the joint procedure momentum discussion. And I realize that the strength you're seeing reflects the high acuity focus, service line initiatives, share capture, et cetera. I was just hoping to get a sense of some of the underlying demand trends in your market. I think one of your peers had talked about a lull in high-acuity ortho with clinic and imaging volume not necessarily converting to procedures. Wanted to see kind of what degree you're seeing delays build and if that's informing your growth expectations for '27.

Saumya Sutaria

Yes. I mean obviously, we've thought a lot about this, this year, and in various forums have kind of made comments about it. Again, I think what I said today was like it's not a gangbusters environment. On a differentiated basis, we're performing well, and I think that's good.

And I think secondarily, as I said, the commitment we have in USPI is to build and grow the revenues and earnings of the business and to be strategic rather than just kind of catchers of what's in the market. And I think being strategic has consistently helped us over the last few years in terms of how we've built the business. And so look, we anticipate continuing to do both.

I think as the coverage environment settles, maybe this demand environment will -- when I say settle, it will at least become more predictable as we look ahead. And hopefully, that in combination with settling some of the uncertainty around the election will also help settle 2027.

And from our standpoint, as we've gone through our planning process to date, we couldn't see anything visible that suggested that we shouldn't be able to deliver another, as I called it, consistent year ahead at USPI. And then on top of that, our -- I think I indicated our M&A environment is tracking towards the raised guidance for this year that we gave earlier this year in terms of our ability to have more affiliates -- more affiliated centers that at USPI. So we're looking forward to 2027 from the perspective of ambulatory surgery.

Operator

And our last question comes from the line of Benjamin Rossi with JPMorgan.

Benjamin Rossi

Great. I guess I'll end with following up on some of the surgical comments. So Saum, you've discussed OR productivity a good deal in framing your high acuity strategy. Just with surgical growth in negative territory across segments year-to-date, can you give us an update on how OR dynamics and throughput are working, how clinics are managing through anesthesia coverage and how you're approaching things like OR scheduling and physician recruitment as you take on these longer-duration cases?

Saumya Sutaria

Yes. Well, I think I've indicated before, I mean, one of the sort of just simple operational benefits of longer case times in higher acuity surgery is productive OR capacity utilization. Like anything else, it's a fixed asset. And in the case of ambulatory surgery centers, it's a fixed asset that's only open for a certain number of hours every single day or at least every week day generally. And so the importance of that OR utilization as a driver of our revenue growth is something that we track very, very carefully. And to the point I think you're making, the improvements in those areas are helpful to us.

Look, there are still operational areas that we are working on improving. Some of the new tools that we're working with trialing in patient outreach, including agentic solutions with respect to improving case cancellations and reminders could be important drivers over time. Some of the analytics that we're learning from with some of these new tools that help us think about how to organize better operating room schedules to maximize the utilization, short cases versus long cases, turnover times, what generates efficiency.

I mean some of these things, in the past, you would have to rely on the intuition of center leaders who've just been [ experienced doing ] it. Now with the availability of analytics tools, you can actually put a lot of that retrospective data into algorithms that will help you decide better how to manage your OR scheduling even from that perspective. So we're trying all of that stuff in the spirit of being better ASC operators and the way in which this organization embraces the use of many of these AI-based technologies. And we'll see what works looking forward. But I hope that those things, in partnership with our doctors, continue to help us improve the efficiency and accuracy with which we run our operating rooms.

The other things that happen in that environment, of course, are all of the things related to accurately capturing charges, preparing preauthorization. I mean all of those areas have opportunity for technology to benefit the way that we're doing those things.

I think your last question or part of your question in there that I'll wrap with here is on the anesthesia side. I think largely that market, which hasn't been a favorable line item from an expenditure standpoint, has somewhat stabilized. And I think it's well known in the industry that we focus our work with a preference on in-network anesthesia, and we do our best to make that clear across the board.

Operator

Thank you. And ladies and gentlemen, we have reached the end of the question-and-answer session. And this also concludes today's conference. And you may disconnect your lines at this time. We thank you for your participation. Have a great day.