Tenet Reports Narrower Loss
Hospital chain Tenet Healthcare Corp. said Tuesday that its second-quarter loss was narrower than Wall Street expected, as surgeries and emergency room visits rose, offsetting a decline in admissions to its hospitals.
Tenet -- which moved its headquarters from Santa Barbara in January and has recently sold several hospitals in California -- lost $21 million, or 4 cents a share, in the three months ended June 30, compared with a loss of $426 million, or 91 cents, a year earlier.
Losses from continuing operations narrowed to $3 million, or less than a penny a share. Analysts surveyed by Thomson Financial had expected a loss of 3 cents a share.
Revenue dipped 3% to $2.42 billion from $2.51 billion a year earlier.
Tenet faces a range of challenges, including tough competition in Texas and Florida and a Securities and Exchange Commission investigation that delayed Tuesday’s report.
Company executives and analysts struggled to explain the 1.4% decline in admissions at hospitals open at least a year. The declines were most dramatic in Tenet’s most profitable business, commercial managed-care patients, and concentrated in Texas and Florida, where surgical centers and other new competitors have sprouted.
“When people don’t show up in your hospitals, it’s hard to know why they don’t show up,” said Trevor Fetter, the chain’s president and chief executive.
Tenet has been trying to control costs, which rose sharply when the company was profitable, and to raise prices.
Some insurers, however, have balked at the price increases. A few small insurers in Florida canceled contracts with Tenet hospitals. Other negotiations went to the brink of cancellations, Fetter said.
Those disputes could explain part of the decline in hospital admissions, said Fetter. He said some doctors scheduled patients’ elective surgeries at rival hospitals out of fear that insurers wouldn’t pay them for procedures at Tenet.
Fetter said volume growth remained Tenet’s biggest challenge and top priority. He said the company had resolved most of its previous disputes with insurers and was trying a number of other strategies to boost admissions by improving relationships with doctors.
Tenet said admissions at its 18 core hospitals in California rose more than 3%. Also, surgeries in hospitals open a year gained 2% from a year earlier.
“They are making progress, although it’s slower than I and many investors would like,” said Joseph Chiarelli, an analyst with Oppenheimer & Co. “But you’re not seeing anything out of the ordinary. Nearly everyone [in the hospital business] is having volume issues, and we just don’t know why.”
The second-quarter report was delayed two weeks ago when a former employee told the SEC that Tenet might have made improper allowances for managed-care contracts at three California hospitals at least into 2001.
Tenet directors have asked the company’s outside lawyers to check the former employee’s charges and determine whether similar problems occurred at other hospitals. The case caused Tenet to delay filing a quarterly report with the SEC on Tuesday, although the company said the inquiry wouldn’t have a material financial effect on its 2004 or 2005 operating results.
Tenet shares rose 64 cents, or about 5%, to $12.82.