Tenet Healthcare Corp. said Tuesday it expects to beat analysts' estimates for the fiscal fourth quarter because admissions rose at hospitals owned by the second-largest U.S. hospital chain.
The Santa Barbara company said it will report higher profit from operations than the current 61 cents-a-share estimate of analysts. Analysts surveyed by First Call/Thomson Financial expected the company to earn an average of 62 cents a share in the quarter ended May 31.
Tenet, usually the first hospital company to report earnings, said admissions increased 5.2% at hospitals owned for more than a year. The company also said it controlled costs, got higher payments from insurers and had lower interest expenses. The announcement heartened analysts worried that insurers might begin pressuring hospitals to cut prices, jeopardizing profits.
"My sense is most of the industry is having a pretty good quarter," said Merrill Lynch & Co. analyst Albert Rice. "It's still going pretty well for the major hospital players in their negotiations [with insurers]. It should be a pretty good volume period for most of these companies."
Tenet earned 51 cents in the year-ago quarter. The company will report fourth-quarter and full year financial results on July 25.
Tenet shares rose $2.20 to close at $49.82 on the New York Stock Exchange. The shares have almost doubled in the last 12 months.
Rice said Tenet benefited from higher Medicare payments that began April 1. Congress raised hospital reimbursements by about $11 billion over five years for the U.S. government health-insurance program for the elderly and disabled.
The company has announced five acquisitions that would add about $500 million in revenue in the next fiscal year, he said.
Tenet's results may be better than its competitors' because the company has cut costs more and because admissions were little changed in the year-ago quarter, said Credit Suisse First Boston Inc. analyst John Hindelong.
Tenet has exited 77% of its physician practices and expects to exit another 5% to 10% by Dec. 31.