Tenet Posts Loss of $954 Million After Big Charge
Tenet Healthcare Corp. on Monday posted a $954-million net loss for the fourth quarter, partly because of write-downs for hospitals that the company plans to sell as it downsizes.
The nation’s second-largest hospital chain took a fourth-quarter charge of $1.45 billion, which included a $500-million write-down on the value of its aging hospitals.
Santa Barbara-based Tenet plans to sell 27 of its 100 hospitals in the next year.
Tenet is the target of numerous government probes into its business practices including Medicare billings and its financial relationships with doctors, and faces hundreds of civil suits over allegations of unnecessary heart surgeries at a hospital in Redding.
Tenet posted a fourth-quarter loss of $2.05 a share, compared with a loss of $31 million, or 6 cents, a year earlier.
Revenue fell 9% to $3.18 billion from $3.49 billion. Part of the slowdown reflects a drop in Medicare outlier payments to $91 million in the fourth quarter, from $135 million a year earlier.
Tenet reduced its charges to the government for care of the sickest patients, or outliers, a year ago amid an ongoing federal investigation into those billing practices.
“This was a tough quarter made even tougher by rising bad debt from the growing number of uninsured patients we treat, and our increased difficulties in collecting amounts owed us by managed-care payers,” Trevor Fetter, Tenet’s chief executive, said in a statement. “We have taken ... strong actions to address these and other challenges, but positive results will take time.”
Investors also are concerned about whether the firm has access to enough cash to weather what is shaping up to be another turbulent year, analysts said.
Tenet has $425 million in cash on hand, and analysts said Tenet appears to have spent $150 million more than it brought in during the fourth quarter.
“It looks like the company has enough liquidity to make it through normal operations,” said Andreas Dirnagl, an analyst with Harris Nesbitt Gerard. “I don’t think anyone doubts that. I think the question is what happens if things get worse? What happens if there is a substantial fine or settlement? That’s where you’re getting a lot of nervousness on the street.”
Tenet, which will hold a conference call with analysts today to discuss its results, expects spending to outstrip revenue by $500 million to $600 million this year.
Tenet’s Chief Financial Officer Stephen D. Farber said it had a “good chance” of reaching break-even in cash flow in 2005. But that estimate does not include the cost of any legal settlements.
Some analysts have estimated Tenet will have to pay more than $1 billion to settle all of its legal problems.
Analysts said the company’s legal issues represented a potentially huge drain that could hit at any time -- a concern that was reflected in stock trading Monday before the company issued its earnings report. Tenet shares sank 14 cents to $9.81 on the New York Stock Exchange, their lowest level since 1995. They fell as low as $9.20 early in the day.
The fourth-quarter report, released after markets closed, included many one-time items. Analysts said it was difficult to get a picture of what the company would look like under normal conditions.
Still, after analysts stripped away all of the extraordinary items, Tenet appeared to beat Wall Street’s expectations of an operating profit of about 2 cents a share.
For the quarter overall, it’s “almost impossible to tell if it’s good or it’s bad,” said Sheryl Skolnick, an analyst with Fulcrum Global Partners. “Earnings from continuing operations before all of the one-time and unusual items were 7 cents, which is better than anyone thought.”
Skolnick changed her position on Tenet stock from “sell” to “neutral.”
Skolnick and other analysts said they are eager to find out what Tenet’s finances would look like if it shrinks to a chain with 69 hospitals.
“Those 69 facilities, the company claims, have attractive margins and, more than that, have attractive potential,” Skolnick said. “Therefore at the end of the day, that’s where the company is placing its bets.”
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