Tenet Posts $408-Million Loss as Admissions Fall
Hurricane Katrina, which damaged six Tenet Healthcare Corp. hospitals, also battered the company’s third-quarter earnings, contributing $151 million to a $408-million loss the company posted Tuesday.
That amounted to a loss of 87 cents a share and compares with a loss of $70 million, or 15 cents a share, a year earlier. Revenue declined nearly 2%, to $2.39 billion from $2.43 billion.
Hurricane and other one-time expenses aside, the loss was 16 cents -- far worse than the 5-cent loss that analysts, on average, had predicted. Tenet shares, which have declined 25% this year, fell 18 cents to $8.24.
Although the third quarter was bad for the hospital industry in general, analysts said it was a perfect storm for Tenet. The company operates 73 hospitals in 13 states, including 22 in California, its biggest market. It has reported losses for nearly three years since becoming embroiled in several government investigations and lawsuits.
The basic problem, Tenet executives said, is that admissions declined, particularly among patients with insurance plans that pay well. At the same time, charity admissions were up 20%.
One reason admissions are down, said Chief Executive Trevor Fetter, is the company’s inability to make a deal with the government. The legal cloud has hurt its reputation among doctors, who are sending their patients to other hospitals.
Also hurting admissions, Fetter said, is that the company has delayed capital investments in hospitals to stockpile cash to pay a hoped-for government settlement. This has put some facilities at a competitive disadvantage.
Tenet’s legal woes got worse when Louisiana authorities opened an investigation on the discovery of 45 bodies at one of Tenet’s New Orleans hospitals in the wake of Katrina. The state attorney general recently issued subpoenas for 73 employees of that hospital after CNN reported that one of its doctors heard others discussing the idea of mercy killings.
All the bad news “is really amazing,” said Stephens Inc. analyst Nancy Weaver. “You kind of think they are due for some good luck.”
Industry-wide problems with rising numbers of uninsured patients hit Tenet harder than similar companies because its corporate overhead is outsized in comparison with the number of hospitals it operates, said Fulcrum Global Partners analyst Sheryl Skolnick. Industry leader HCA Corp. has nearly three times as many hospitals as Tenet but half its administrative expenses, she said.
“That tells the story of why things that might give HCA a bruise give Tenet a heart attack,” Skolnick said.
Still, she said, with $1.5 billion in cash, Tenet can muddle on, even in the face of a huge loss.
Analysts said they would be watching for a verdict in San Diego, where a trial is wrapping up over criminal charges that Tenet’s Alvarado hospital bribed physicians to refer patients.
The outcome is expected to influence the course of similar investigations around the country.
