Alan Condon on For-Profit Health System Trends and Emerging Mergers

Summary

Becker’s Healthcare Podcast Summary Episode: Alan Condon on For-Profit Health System Trends and Emerging Mergers
Release Date: July 24, 2025

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Introduction

In this insightful episode of Becker’s Healthcare Podcast, host Scott Becker engages in a comprehensive discussion with Alan Condon, a regular contributor who delves into the latest trends and financial dynamics within the U.S. healthcare industry. The episode, released on July 24, 2025, zeroes in on the performance of for-profit health systems and the emerging patterns in mergers and acquisitions that are shaping the future of healthcare.

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For-Profit Health Systems Q2 Performance

Alan Condon kicks off the conversation by highlighting the recent Q2 financial report from Tenet Healthcare, marking it as the first among the major for-profit health systems—including HCA, CHS, UHS—to disclose their quarterly results.

Key Highlights from Tenet Healthcare’s Q2 Report:

• Operating Income and Margin: Tenet reported an $832 million operating income, translating to a 15.6% operating margin, a slight increase from 14.9% in Q2 2024. [00:55]

• Revenue Growth: The company saw an uptick in revenue across both its hospital and outpatient segments. Notably, significant investments have been channelled into Ambulatory Surgery Centers (ASCs), reflecting a strategic pivot towards outpatient care.

• Hospital Divestitures: Tenet has been actively divesting hospitals in certain markets nationwide, thereby reducing the size and scope of its hospital portfolio while simultaneously investing heavily in its ASC and outpatient services.

• Revenue Outlook Raised: Impressively, Tenet has raised its 2025 revenue outlook from approximately $20 billion to $21.6 billion, signaling robust financial health and confident growth projections.

Alan emphasizes, “Overall really, really strong second quarter from Tenet, performing quarter over quarter with fantastic leadership and operating performance despite numerous challenges” ([00:55]).

However, Alan notes a word of caution from Tenet's CEO, Sam Sutaria, regarding the “big beautiful bill”—a significant legislative piece whose final passage remains uncertain and could impact future quarters ([00:55]).

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Emerging Mergers and Regional Expansion

Beyond Tenet, Alan sheds light on broader trends among for-profit health systems, particularly focusing on regional expansion and multi-state mergers.

Notable Trends and Examples:

• Regional Approach: Health systems are increasingly adopting a regional strategy, seeking to expand their footprint beyond state lines through mergers and acquisitions with like-minded entities.

• ChristianaCare and Virtual Health Potential Merger: A prime example is ChristianaCare, a four-hospital system based in Newark, Delaware, which is exploring a potential merger with Virtual Health of New Jersey. Though still in the early stages (signing a non-binding letter of intent), this merger could unite over 40 ambulatory surgery centers, multiple freestanding emergency departments, and a substantial urgent care portfolio across 10 counties in four states (Delaware, New Jersey, Maryland, Pennsylvania).

• Economic Impact: Should the merger proceed, the combined entity would boast approximately $6 billion in annual revenue and a workforce of around 30,000 employees.

• Other Examples: Similar consolidation efforts are observable with Advocate Health, Sanford Health, and Marshall Clinic, illustrating a nationwide movement towards forming larger, more versatile health systems capable of leveraging economies of scale and expanding service reach.

Alan comments, “We’re seeing more health systems look to combine with like-minded systems, expanding their reach beyond their current states to form larger networks” ([04:30]).

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CMS Hiring and Policy Implementation

Shifting focus from health systems performance and consolidation, Alan discusses recent developments within the Centers for Medicare & Medicaid Services (CMS), highlighting their strategic hiring and policy initiatives.

Key Points:

• Recruitment Surge: CMS is embarking on a significant hiring spree, aiming to recruit approximately 100 new employees specifically for the CMS Innovation Center ([06:21]).

• Focus Areas: The new hires will concentrate on implementing new payment policies, including the physician fee schedule, inpatient rule, and outpatient rule. These policies are part of CMS’s broader strategy to innovate payment models, anticipating changes in the healthcare landscape by 2026 and beyond.

• Context of Hiring: This recruitment follows mass layoffs at agencies like HHS and CDC, attributed to organizational shifts and budgetary constraints, notably during the administration of President Doge ([06:21]).

• Policy Development: Current efforts are in the proposal phase, with CMS actively seeking feedback from hospital medical groups and physicians to refine these payment models before implementation ([06:21]).

Alan observes, “CMS is looking to hire around 100 employees for the CMS Innovation Center to ensure new payment policies are effectively implemented and up to speed” ([06:21]).

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Conclusion

The episode provides a nuanced exploration of the current state and future trajectory of for-profit health systems in the U.S. Alan Condon offers valuable insights into Tenet Healthcare's robust Q2 performance, the strategic trend of regional mergers among health systems, and the pivotal role of CMS in shaping healthcare payment models through targeted hiring and policy implementation.

For listeners seeking to stay abreast of the dynamic changes in healthcare finance and system operations, this episode underscores the importance of monitoring financial reports, merger activities, and federal policy developments that collectively influence the industry’s landscape.

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Notable Quotes:

• “Overall really, really strong second quarter from Tenet, performing quarter over quarter with fantastic leadership and operating performance despite numerous challenges.” — Alan Condon ([00:55])

• “We’re seeing more health systems look to combine with like-minded systems, expanding their reach beyond their current states to form larger networks.” — Alan Condon ([04:30])

• “CMS is looking to hire around 100 employees for the CMS Innovation Center to ensure new payment policies are effectively implemented and up to speed.” — Alan Condon ([06:21])

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This comprehensive overview ensures that even those who haven't listened to the episode can grasp the essential discussions and takeaways from Alan Condon's expert analysis on the Becker’s Healthcare Podcast.

Transcript

[A]

Exciting things are happening at Beckers Healthcare Stay ahead of industry trends with the new Beckers CFO plus Revenue Cycle Podcast your go to source for insights from top healthcare finance leaders. Tune in wherever you get your podcasts and don't miss the 10th annual Health IT Digital Health RCM Conference happening September 30 to October 3, 2025 in Chicago. Join thousands of executives, engage with industry leaders and explore the future of healthcare innov. Learn more about our upcoming [e-mail] See you there.

[B]

This is Scott Becker with the Becker's Healthcare Podcast. We're joined today by Alan Condon. Alan joins us regularly to talk about some of the trends he's watching in healthcare, some of the key issues, key financial trends, and more. Alan, let me tee it up for you. What are some of the things you're watching closely currently?

[C]

Yeah, always good to be back on the podcast with you Scott. So I think first and foremost this week after the first time we're reporting on the for profit health systems Q2 report. So the first out of those big four big five to report. When we think about Tenet HCA, CHS, UHS, Tenet Healthcare is the first to report their Q2 results. So really strong eye focus on what we're seeing there as it relates to Q2, what potentially you might be able to expect for the next couple of quarters and for the other big for profit health systems as I mentioned. So just a couple of quick takeaways from what we've reported on from tenants Q2 this morning. Overall really really strong second quarter from tennis which is performing quarter over quarter. Really fantastic leadership, fantastic operating performance despite a lot of these operating challenges, financial challenges we're seeing across the board for Q2. Tennant reported 832 million operating income. That's 15.6% margin and operating margin to give a bit of perspective there, up from 14.9% in the same quarter in 2024. Revenue for that quarter is up in its hospital segment. Revenue from that quarter in the second quarter is also up on its outpatient arm of course USPI significant investments being pumped into ASCs, the outpatient setting there for the last couple of years simultaneously Tenet no cheaper to you any of our listeners, has been a lot of hospital divestitures in for some some certain markets across the country as well. Really whittling down the size and the scope of its hospital portfolio but at the same time pumping a lot of a lot of investment, a lot of money, a lot of capital into its ASC its outpatient portfolio. I think the last thing I'd mention here is Tenet actually raised its 2025 outlook. So in terms of annual revenues for the year, it's expected to drive up to $21.6 billion in annual revenue across the entire country this year, raising its initial outlook from around about $20 billion, which it went into the year looking at. So really, really strong second quarter for tennis. But I will flag that their CEO Sam Sutaria did of course caution that there is still a lot of uncertainty remaining around the passage of the one big beautiful bill, what that may mean for the for the coming quarters and other health systems, but nonetheless a really, really strong quarter from tennis and keeping another eye on the other for profit systems later this week when they report the results.

[B]

Thank you so much. I mean, sort of fascinating to hear those positive results here. So much negativity, but good to at least hear some positivity there. Alan, what else are you watching closely currently besides Tenet and some of the for profits? Are there other for profits that have reported so far too?

[C]

We're Tenet, the first one that we've reported for Q2. I think later on this week we'll have HCA. We'll also have CHS next week and a couple so keeping a close eye on the other big systems to see are they seeing the same trends in terms of their operating revenues of some of their volumes and whatnot? Of course, be great to get some insights from from those earnings calls as well from some of those leaders. But in terms of other big stories we've been following closely, I think one of the trends that we've followed quite closely over the last couple of years is more and more health systems taking more of a regional approach, expanding out of state. A lot of these multi market, multi state mergers. The latest example of this is a really interesting one from ChristianaCare 4 hospital system, I believe, headquartered in Newark, Delaware, exploring a potential merger with Virtual Health which is headquartered in New Jersey. So nothing completely in the works here, just signing a non binding letter of intent to explore what this regional nonprofit system might look like. Just to give you a brief little kind of takeaway. And some of those stats, if they were to combine, it would be an aid hospital system, more than 40ambulatory surgery centers, multiple freestanding EDs, significant urgent care portfolio as well. And that would be over more than 10 counties across four different states. That would be Delaware, that would be New Jersey like we mentioned, where those two systems are headquartered. It would also operate in Maryland, in Pennsylvania and a workforce of potentially 30,000 employees. If these two systems were to decide to combine work through those regulatory hurdles would be a system of around about 6, $6 billion in annual revenue. But just an interesting trend as we start to see whether you're on the east coast, the Midwest, on the west coast, more health systems really looking to combine with like minded systems, expand their reach beyond their current states, larger systems. When I think about what Advocate Health has done, when I think about what Sanford Health and Marshall Clinic have done, a lot of these mergers that we're seeing popping up in different pockets across the country. But just another example of an interesting trend that we're seeing across the country there.

[B]

Thank you very very much. So the for profit is doing well, seeing more of these combinations. If you're looking at combination of serious mid sized systems as well, you know, and anything else that's top of mind, I mean we've talked so much about the one beautiful bill, big beautiful bill, so much about tariffs, about Medicaid. The latest thing I saw was over the course of a decade the CBO projects that 10 million people may lose insurance coverage. Anything else that's top of mind. And we've talked about a bunch and you guys are covering so much. Anything else that you're thinking about?

[C]

Absolutely, yeah. I mean certainly no shortage of healthcare news at the moment. But I think the last thing I would flag here, Scott, is just CMS looking to go on a straight A hiring spree at the moment after of course you saw those mass layoffs at hss, affected cms, the cdc, those federal layoffs we've been talking about over the last few months as a result of Doge and whatnot. CMS now looking to hire around about 100 employees specifically for the CMS Innovation Center. Essentially it's looking for folks placing a big emphasis on implementing new payment policies. We saw the physician fee schedule, we saw the inpatient rule earlier this year, the outpatient rule, a few other new payment models that CMS is looking to implement later on this year as we think about 20, 26 and beyond, looking to hire some folks to really make sure that those policies, those payment plans are up to speed and getting over the line. Of course they're just in the proposal phase now with hospital medical group physicians of course commenting on to CMS on what some of those payment models look like, but just something else to keep an eye on in the midst of everything going on in the healthcare finance world. Those are some of the top stories that we're following today, Scott.

[B]

No, Just fascinating to watch. Alan, thank you as always for your coverage. Just fascinating. I love getting a chance to visit with you. Thank you very much for joining us today on the Beckers Healthcare podcast. Thank you very, very much.

[C]

Thank you so much, Scott.