Tenet Says Its Profit More Than Doubled
Despite the rising number of Americans without health insurance, persistent nursing shortages and widespread pressures to hold down health-care costs, Tenet Healthcare Corp. reported another strong quarter and showed few signs of slowing.
The nation’s No. 2 hospital operator said Wednesday that profit more than doubled in its quarter ended Aug. 31, and the Santa Barbara-based company boosted its outlook for the coming year.
Tenet has reported eight straight quarters of earnings growth of 25% or more. The company, which operates 114 hospitals, including 40 in California, continues to enjoy solid gains in admissions, higher payments from insurers and improvements in such areas as debt collection.
In particular, Tenet executives said the company is generating higher revenue by treating older patients and those with acute conditions--a cornerstone of Tenet’s long-term strategy. The company said it is spending $1 billion this year for capital improvements, much of it for specialties such as cardiology.
Based on such trends, Tenet estimated that earnings for the 2002-03 fiscal year would grow by at least 25%. Analysts said that was realistic, but perhaps a little conservative.
Robert Mains, a health-care analyst for Advest Inc., a brokerage in Saratoga Springs, N.Y., said Tenet and other publicly traded hospitals now have an advantage. Most of their competitors are not-for-profit hospitals, and many of them are struggling and do not have the cash or access to capital to invest and grow.
Tenet and other hospital chains are facing greater risks from the rising number of uninsured, reported this week by the Census Bureau, which could affect many consumers’ ability to pay their hospital bills. But compared with its peers, Tenet has done a better job of collecting bad debt, with some room for improvement, said Sheryl Skolnick, a managing director at Fulcrum Global Partners, which provides investor research.
Skolnick said pressures to keep a lid on health insurance rate increases could result in a push to cut payments to hospitals, but she doesn’t see that happening soon. Skolnick said Tenet is well-positioned because its strategy is to be a dominant player in its market. “Concentration in discrete markets seems to be working,” she said.
Jeffrey C. Barbakow, Tenet’s chairman and chief executive, said labor is the company’s biggest concern. He noted that California’s new nurse-to-patient ratio requirements will add to the chronic nursing shortage, but he also said the company was doing a better job of retaining nurses.
For its fiscal first quarter, Tenet earned $338 million, or 68 cents a share, up from $155 million, or 31 cents. Revenue rose 12% to $3.7 billion, from $3.3 billion.
Tenet’s shares rose $1.45 on Wednesday, or 3%, to $51.55 on the New York Stock Exchange.
