Tenet Reports Wider Loss for 2nd Quarter
Tenet Healthcare Corp. reported a wider second-quarter loss Tuesday because of hefty restructuring charges and uninsured patients’ mounting bills and said subpoenas had been served regarding hospitals in Louisiana, Missouri and Tennessee.
The nation’s second-largest for-profit hospital company, which has been the target of civil and criminal investigations since 2002, also said that its chief financial officer, Stephen Farber, had decided to quit and return to work on Wall Street.
Tenet said its plan to move to Dallas from Santa Barbara played a role in Farber’s decision.
In early trading on the New York Stock Exchange, Tenet’s shares sank 11%, recovering to close at $10.81, down 3%.
The second-quarter loss was $426 million, or 91 cents a share, compared with a loss of $195 million, or 42 cents, in the same period a year earlier. The latest results reflected one-time charges totaling $543 million, or 78 cents a share, including a non-cash charge of $254 million, or 34 cents, to write down uninsured patients’ bills.
Revenue in the quarter fell 3.3% to $2.57 billion.
Sheryl Skolnick, an analyst with Fulcrum Global Partners, said Tenet’s performance worsened because the company failed to attract enough insured patients. In addition, she said, Tenet’s patient volume fell at 52 of its 69 core hospitals -- the institutions it doesn’t plan to sell.
The company announced plans this year to sell 27 hospitals as it attempted to return to profitability and work out its legal problems.
Prudential Securities analyst David Shove said in a research note that “the underlying fundamentals just weren’t that good” for Tenet in the quarter.
“Admissions were down, labor and malpractice costs were up. And the parade of government investigations continues,” he said.
Tenet Chief Executive Trevor Fetter said in a conference call with analysts that the company wasn’t “where I want it to be.” But he said Tenet made some progress, particularly in contract negotiations with managed-care firms.
In a Securities and Exchange Commission filing, the company said the federal prosecutor in New Orleans issued a subpoena July 30 requesting documents about physician relationships and financial arrangements at three hospitals. The hospitals are Memorial Medical Center, Kenner Regional Medical Center and St. Charles General Hospital. Tenet said it was cooperating with the government.
General counsel E. Peter Urbanowicz said in a conference call that the subpoena was related to a health maintenance organization that Tenet partly owned. He said it was part of a broader investigation into physician-hospital relationships taking place across the country.
Tenet also disclosed in an SEC filing that the buyer of two former Tenet hospitals, Twin Rivers Regional Medical Center in Kennett, Mo., and Harton Regional Medical Center in Tullahoma, Tenn., had received federal subpoenas. The Twin Rivers subpoena covers records from 1999 to 2003 pertaining to cardiac-care patients. The Harton subpoena seeks a variety of documents, mostly financial, from June 2000 to 2003.
Tenet owned the hospitals during the periods covered by the subpoenas and retained certain liabilities after the hospitals were sold to Health Management Associates of Naples, Fla.
The hospital chain’s problems include investigations into Medicare billing and physician recruitment. A San Diego hospital it owns, Alvarado Medical Center, was accused in an indictment of paying doctors kickbacks in return for patient referrals.
Last fall Tenet agreed to pay $54 million to settle Justice Department allegations that two cardiac doctors at the Redding Medical Center in Northern California billed Medicare and Medicaid for unnecessary procedures. The settlement ended the government’s civil and criminal probes in the matter, but the company faces civil suits filed by hundreds of former surgery patients. Tenet sold the hospital for $60 million in April.
