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Moody's affirms Tenet Healthcare's rating, changes outlook to stable

Moody's affirmed Tenet Healthcare Corp.'s corporate family rating at B2 and changed the outlook to stable from negative.

The rating agency's outlook reflected improving operating performance driven by early benefits of the Dallas-based healthcare services provider's $250 million cost-reduction plan, a modest recovery in patient volumes and favorable pricing, driven by a mix shift toward higher acuity procedures.

Moody's said the stable outlook also shows that Tenet will deleverage throughout 2018 and 2019 and will be able to reduce debt/EBITDA to about 6.5x by end of 2018 and toward 6.0x by the end of 2019. As of March 31, the adjusted debt/EBITDA stood at 6.8x.

The agency said the ratings could be upgraded if the company is successful in its cost-reduction and operating initiatives, repay debt and the debt/EBITDA declines toward 5.0x.

Moody's said the ratings could also be downgraded if the company faces operational challenges or fails to achieve its targeted $250 million of annual cost savings.

The downgrade could also occur if the company divests its healthcare management solutions business Conifer Health Solutions without debt repayment, the pursuit of a share buyback plan or shareholder distributions.