Tenet Reports Loss in Quarter
A slew of restructuring charges and a $54-million payment to resolve allegations of medical fraud at a Northern California hospital drove Tenet Healthcare Corp. to its worst quarterly performance in six years.
The nation’s second-largest hospital chain Thursday reported a second-quarter loss of $195 million, or 42 cents a share -- a dramatic contrast to the profit of $242 million, or 48 cents, that Santa Barbara-based Tenet posted in the same period a year earlier.
The company’s quarterly revenue dropped 1.5% to $3.38 billion from $3.42 billion. That included a steep decline in special Medicare collections that had been a big profit generator for Tenet.
Still, analysts noted that there were no negative surprises in the earnings report. Investors also took comfort in the company’s settlement Wednesday with the Justice Department over accusations that doctors at Tenet’s Redding Medical Center performed unnecessary heart surgeries. The case had cast a pall over the company, but the $54-million settlement ended the criminal and civil investigations of Tenet and Redding Medical Center in the matter.
On Thursday, Tenet’s stock jumped nearly 12%, its biggest one-day percentage jump in eight months. The shares rose $1.52 to $14.57 on the New York Stock Exchange.
“Overall, they were just fine,” said Andreas J. Dirnagl, analyst with Harris Nesbitt Gerard in New York, referring to the second-quarter earnings. “Today’s numbers can give everyone a little more confidence that their guidance numbers are achievable. All anyone cares about is going forward.”
Much of the loss in the latest quarter was due to more than $320 million in restructuring costs, including expenses for job reductions and a write-down of the value of seven hospitals, which company executives declined to identify. Tenet operates 114 hospitals nationwide, including 40 in California.
Without those charges, analysts said, Tenet’s net income in the quarter would have amounted to $127 million, or 27 cents a share -- about half of its second-quarter profit a year earlier.
For Tenet, one of the most positive aspects of the report was the continued increase in patient volume. Admissions at its hospitals nationwide that have been open at least a year were up 3% during the second quarter.
“Our numbers have been consistently strong through this period, and we’re grateful for that,” acting Chief Executive Trevor Fetter said in a conference call with analysts.
Fetter said his team was focused on maintaining patient volumes while cutting costs and working to cooperate with investigations and reaching settlements quickly when appropriate. “The near term will continue to be difficult, but we are making progress on several fronts,” he said.
Government investigators are still looking into the way some of Tenet’s hospitals recruit doctors and the company’s Medicare billing practices. Tenet said Thursday that it was spending $2 million to $3 million each month for legal fees and other costs related to investigations and lawsuits.
The government’s probe prompted Tenet in January to voluntarily revamp its method of billing Medicare for hospital charges for the sickest patients. Medicare officials have accused the company of collecting inappropriately large amounts of these “outlier” reimbursements, which plummeted to $16 million in the second quarter from $223 million a year earlier.
The company also said Thursday that its board is expected in September to name a new chief executive and that Fetter is one of the candidates.
Frank Morgan, an analyst with Jefferies & Co., who has a “hold” on the stock, said things appeared to be looking up for the company. “If they manage all the outstanding issues, they could get this company turned around next year,” he said.
