DALLAS (AP) - Hospital operator Tenet Healthcare Corp., trying to turn
around after years of battling financial and legal troubles, lost $31 million in
the first quarter but showed it may be reversing a long slide in patient
admissions.
The company said Tuesday that its loss amounted to 6 cents per share in the
three months ended March 31 compared with a profit of $75 million, or 16 cents
per share, a year earlier.
But excluding a charge to cover the cost of litigation over employment
issues and other items, the company would have earned 4 cents per shares,
beating Wall Street expectations.
Analysts, who exclude items from their forecasts, had expected the
Dallas-based company to earn a penny per share, according to a survey by Thomson
Financial.
Revenue rose to $2.37 billion from $2.22 billion a year ago, and slightly
higher than the $2.35 billion that analysts had expected.
But Tenet shares fell 35 cents, or 5.4 percent, to $6.12 in afternoon
trading. Some analysts discounted earnings related to previous quarters, while
others said Tenet's results beat expectations no matter how the items were
counted.
Tenet has spent millions to upgrade equipment in its hospitals and has
lobbied doctors to send their patients to its hospitals.
In the first quarter, admissions at hospitals open at least a year rose 1
percent, the second straight quarterly gain after a long string of declines, and
they continued to rise in April.
But admissions numbers were mixed. Much of the gain came from Medicare and
Medicaid managed-care patients, while admissions from more-lucrative
employer-sponsored managed care fell 3.7 percent.
Outpatient visits fell 1.1 percent on a same-hospital basis, which the
company blamed on increasing competition from physician-owned facilities.
Until late last year, admissions to Tenet hospitals had fallen for more than
three years after the company endured investigations and lawsuits over patient
care and overbilling Medicare.
The company's legal problems are not over. Most the charge for litigation
costs in the first quarter was to cover estimated liability for wage and hour
lawsuits and other employment issues.
Like other hospital operators, Tenet is also dealing with an increase in
patients who lack health insurance and often can't pay their bills. Bad debt
jumped 12 percent, to $149 million, the company said.
Officials said, however, they weren't seeing signs of a weakening economy.
They noted a decline in plastic surgery, which is typically not covered by
insurance, but they weren't sure whether patients were putting off such
procedures or just going to other providers.
Chief Executive Trevor Fetter said among patients covered by managed-care
insurance, business was stronger with those who came in through the emergency
room rather than non-ER patients who might be able to delay treatment.
"But patient credit quality is even with last year, and more of our
uninsured patients are employed now than they were a year ago; that's up by 10
points to nearly 70 percent," he said.
"This was a terrific quarter," said Sheryl Skolnick, an analyst with CRT
Capital Group. "They're making obvious progress toward the turnaround any way
you look at it."
Skolnick said the company was generating more cash, raising patient volumes
and carrying momentum into the second quarter. The only negative, she said, was
the decline in commercial managed-care admissions.
But Gary Taylor, a Citigroup analyst, said one-time items helped the
company. He called Tuesday's results "on track in a flu-aided quarter."
Tenet has sold off many poorly performing hospitals and bought new equipment
for its remaining ones, yet it's unclear whether that investment is paying off.
Fetter said the new equipment and improved quality ratings from insurers
have helped Tenet's reputation and given it more leverage in negotiating higher
prices and lower malpractice-insurance premiums. And Tenet has negotiated
clauses in several recent contracts that raise payments for hospitals that
achieve high quality ratings.
But Fetter acknowledged disappointment that the ratings haven't done more to
boost admissions.
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