Tenet Healthcare is pairing AI and automation with clinical process redesign as it works to protect hospital margins from payer mix shifts, professional fee growth and other operating pressures.
Tenet, a 50-hospital system headquartered in Dallas, said its hospital segment generated $762 million in adjusted EBITDA during the second quarter of 2026, up 22% year over year. The segment’s adjusted EBITDA margin reached 18%, even as exchange revenue fell 17%.
Company executives pointed to strong volume growth, disciplined cost management and benefits from growth initiatives as some of the key drivers behind Tenet’s second-quarter results.
“These drivers were ahead of our core assumptions and contributed meaningfully to our outperformance in the quarter,” Tenet Chair and CEO Saum Sutaria, MD, said during the company’s second-quarter earnings call. “Importantly, we continue to see attractive growth in our commercial managed care revenues.”
Dr. Sutaria said the company’s margin strategy extends beyond traditional expense cuts. Tenet began planning the initiatives in mid-2025 so it could begin executing them Jan. 1.
“Margin strength is supported by timely execution on our technology-enabled expense management plan,” Dr. Sutaria said.
Tenet’s playbook consists of three main components: traditional cost controls, clinical operations improvements and technology-enabled automation.
The first component around cost control includes productivity initiatives, purchased-services contract negotiations and supply standardization.
Dr. Sutaria described those efforts as familiar parts of Tenet’s operating “toolkit” that it is consistently executing on. But the company noted that these would not be sufficient on their own to support margins over the next several years.
“We really didn’t feel that category one would be adequate to sustain us through the next few years,” he said. “So we put increased effort into length of stay management, service level management — for example, in the emergency department — throughput in the hospital, scheduling efficiencies and better utilization of our operating room and cath lab assets, both in the hospitals and the ASC business.”
That clinical operations work requires significant changes in behavior and process design, but it is central to Tenet’s strategy. It has also improved service levels for patients and physicians, particularly in emergency departments, by making care easier to access, according to Dr. Sutaria.
Tenet is working to improve hospital throughput, scheduling efficiency and the use of procedural capacity across its hospitals and ASCs, which operated under its outpatient arm, United Surgical Partners International.
“The secondary benefit of that work is that it [supports] the service levels for patients and physicians — especially in the important emergency department area — so that it’s easier for them to gain access [to care],” he said.
The strategy reflects the connection between cost management and access. Inefficient throughput can increase labor expenses, constrain capacity and make it more difficult for patients and physicians to move through the system.
Clinical process redesign gives Tenet a way to improve margins without relying exclusively on broad staffing reductions.
The third component combines AI, automation and Tenet’s global business center.
Tenet has deployed these technologies both domestically and through the business center to improve productivity and reduce manual work.
“It helps to improve productivity,” he said. “It, in some cases, can literally automate or replace work.”
Tenet is beginning to see the effect in its underlying cost structure, according to Dr. Sutaria.
“Over time, we are seeing the benefit in our core cost structure in those areas, not just in the payments arena, but also in some of our support overhead structures at the facility or the corporate level,” he said.
Tenet did not identify individual AI applications or quantify how much of its second-quarter margin improvement came directly from the technology. Instead, executives described AI as one part of a broader operating model that also includes centralized capabilities, local execution and clinical workflow redesign.
That distinction is important as Tenet is not positioning AI as a standalone cost-cutting initiative; it is embedding the technology into existing operational and administrative processes.
“All three of those areas were things that we had planned or spent time planning last year,” Dr. Sutaria said. “I think the benefit we’re seeing is we were just able to hit the ground running on execution in January, and it has accrued into the business over these first two quarters.”
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