Tenet Reports Loss for Quarter
Tenet Healthcare Corp. posted a wider first-quarter loss Tuesday than it had previously signaled after losing a legal dispute with a health maintenance organization.
Tenet, based in Santa Barbara, reported a $122-million net loss, or 26 cents a share, on revenue of $2.67 billion. Tenet reported a net loss for the same quarter a year ago of $20 million, or 4 cents a share, on revenue of $2.75 billion.
The nation’s second-largest hospital chain had pre-announced unofficial earnings a week ago, anticipating a first-quarter loss of $117 million. The company attributed the difference to the after-tax effect of an $8-million arbitration award it had to pay to the HMO.
The company plans to shed a third of its facilities by the end of the year, leaving it with 69 of its healthiest hospitals. It blamed losses related to the hospitals earmarked for divestiture for first-quarter charges of 31 cents a share. Without those items, Tenet would have made a profit of 5 cents a share, beating the Wall Street consensus of 3 cents, according to Thomson First Call.
Tenet reported a “modest decline” in uncollected hospital bills compared with the fourth quarter of 2003. This bad-debt expense -- a residual of the economic slump -- emerged as an industrywide problem in the last year.
“It’s been a while since we’ve had good news to report to investors,” Chief Executive Trevor Fetter told analysts in a conference call.
Indeed, Tenet has had bad news since late 2002 when it was revealed that the company had deployed a questionable scheme to boost Medicare billings for its sickest patients, known as outliers. At about the same time, allegations of unnecessary heart surgeries came to light at Tenet’s hospital in Redding. The company, facing several federal probes, has been cooperating with investigators.
Fetter said the first-quarter results indicated that the company’s turnaround plan would eventually succeed.
“We’ve got a long road ahead,” he said. “But I’m confident we are moving in the right direction.”
Analysts said they were pleased with the results but were waiting for more evidence that the company is on the right course.
“Things seem to be getting better,” said Maryann Hennessey, an analyst with Criterion Research Group. The research firm was remaining “neutral” on Tenet’s stock for now, she said, because the company still has “a long way to go operationally,” among other issues.
Analyst Sheryl Skolnick of Fulcrum Global Partners also stayed neutral, saying, “I worry, long term, that the valuation and the expectations for this management team are too high.”
Tenet shares rose 20 cents to $12.10 on the New York Stock Exchange. They have lost 22% in the last year.