Tenet Healthcare Corp., which is attempting a turnaround amid myriad government investigations and malpractice lawsuits, said Tuesday that it expected to post a first-quarter net loss of $117 million, or 25 cents a share.
Revenue is expected to be down about $81 million, from $2.75 billion for the first quarter of 2003 to $2.67 billion for the first three months of 2004, Tenet said in an advance look at its earnings, which will be released Tuesday.
The Santa Barbara company sold 14 hospitals last year and plans to shed 27 by the end of this year.
Not including one-time charges which Tenet said totaled 30 cents a share associated with discontinued operations, restructuring costs, litigation and government probes, Tenet would have earned 5 cents a share in the first quarter. That beat analysts’ forecasts, and shares of the nation’s second-largest hospital operator rose 22 cents to $11.62 in New York Stock Exchange trading.
Tenet reported a net loss of $20 million, or 4 cents a share, for the first quarter a year earlier.
Tenet is attempting to resolve a bevy of civil and criminal investigations into its business practices and patient care.
The company also is trying to settle malpractice suits stemming from allegedly unnecessary heart procedures at its Redding hospital.
Analysts had feared government fines or jury verdicts might strap the company’s cash flow. But the company said it expected to report adequate cash flow.
Tenet also said that it expected to report a decline in bad debt compared with the fourth quarter of 2003, falling from 11.9% of revenue to 11%. Bad debt had grown significantly in the last year.
“While our earnings remain below peer performance levels, we are encouraged to see tangible evidence that we are on the right track and our turnaround strategies are focused on the right areas,” said Chief Executive Trevor Fetter.
“Though pricing and bad-debt expense remain significant operating challenges -- and it will take time to successfully address those issues -- our efforts are beginning to show results, particularly in the areas we control directly such as cost management, improved efficiency and our commitment to quality,” he said.
Analysts said they were encouraged, but remained wary.
“We had all these fears, and a lot of these fears did not become reality in this quarter,” said Nancy Weaver, an analyst with Stephens Inc. “And that’s good news.”
The company appears to have hit bottom, she said. “The question is: Is it going to bounce along the bottom, go up or hit a new bottom?”
Fulcrum Global Partners analyst Sheryl Skolnick gave the company credit for bringing down overhead costs more than expected, but said she was worried that supply costs were up 6.9% to $449 million.
The company blamed the increase largely on its conversion to drug-coated stents, supplies used for open-heart procedures and prosthetics.
“If it’s not one thing, it’s another,” Skolnick said. “That’s the problem with trying to turn around a business amid lots of volatility in the industry.”