Tenet Healthcare Corp. suffered a large loss in the third quarter as the company struggled to collect hospital bills from uninsured patients and health insurers.
The nation's second-largest for-profit hospital chain, which is the subject of several federal and state investigations, had warned last month that there would be an earnings shortfall in the quarter.
On Monday, Tenet said it lost $308 million, or 66 cents a share, compared with a profit of $328 million, or 66 cents a share, in the same period a year earlier.
One investigation, by the U.S. attorney's office, is looking into whether unnecessary heart surgeries were performed at three medical centers owned by the Santa Barbara-based hospital chain, including Daniel Freeman Memorial Hospital in Inglewood. According to an internal Tenet memo issued last week, the company plans to close down the heart center at that hospital effective Dec. 5.
On Monday, Tenet executives insisted that closing the Freeman heart center had nothing to do with the investigation and said the services would be consolidated at nearby Centinela Hospital.
"This has been planned for more than a year," said Tenet spokesman David Langness. Tenet is trying to create "centers of excellence" at certain hospitals, he said, rather than offer all types of medical care at all of its centers.
Tenet has cut its earnings estimates four times since disclosing a year ago that it raised prices to bring in higher payments for very sick Medicare patients, touching off federal investigations. Since then, Tenet's shares have lost about 75% of their value.
Revenue in the third quarter fell 6% to $3.3 billion from $3.52 billion. The company took a $73-million charge related to several hospitals it is selling as part of a reorganization.
In the quarter, Tenet saw its Medicare patient revenue drop by $223 million from a year earlier. In addition, managed-care insurers are disputing some hospital charges and scaling back what they are willing to pay in the future.
"The company is having to pay for what they've done in the past," said Fulcrum Global Partners analyst Sheryl Skolnick, who has a "sell" rating on the stock and doesn't own shares. "They are getting less money from managed care per patient."
Tenet also said its bad debt rose by $212 million in the quarter, primarily from uninsured patients, according to its Securities and Exchange Commission filing.
In addition, the company's litigation expenses swelled to $327 million in the quarter, mostly from a California appeals court decision last month that awarded $253 million to co-founder John C. Bedrosian because Tenet failed to honor his compensation contract a decade ago.
Excluding costs for bad debt, legal costs, losses on hospitals it has sold and costs related to facility sales, Tenet's quarterly profit would have been 10 cents a share, according to the filing. On that basis, analysts surveyed by Thomson First Call expected 5 cents a share, though estimates ranged widely from a loss of 20 cents to a profit of 23 cents after Tenet cut its forecast last month.
In the quarter, Tenet said, patient admissions grew 1.6% at hospitals the company owned for at least a year.
Revenue per admission, an indication of a hospital company's ability to raise prices, fell 9.5%.
However, Skolnick said, the chain's immediate future looks grim because it no longer can raise prices or attract new physicians because of its tarnished reputation.
"I think they are out of options," Skolnick said. And, she said, "it doesn't look like it will get better real soon."
Tenet released its results after the stock markets closed.
Tenet's shares fell 16 cents Monday to close at $13.25 on the New York Stock Exchange.
Bloomberg News was used in compiling this report.