Tenet posts 1Q loss, adjusted results beat view

The company said Tuesday that its loss amounted to 6 cents per share in the three months ended March 31 compared with a profit of $75 million, or 16 cents per share, a year earlier.

But excluding a charge to cover the cost of litigation over employment issues and other items, the company would have earned 4 cents per shares, beating Wall Street expectations.

Analysts, who exclude items from their forecasts, had expected the Dallas-based company to earn a penny per share, according to a survey by Thomson Financial.

Revenue rose to $2.37 billion from $2.22 billion a year ago, and slightly higher than the $2.35 billion that analysts had expected.

But Tenet shares fell 35 cents, or 5.4 percent, to $6.12 in afternoon trading. Some analysts discounted earnings related to previous quarters, while others said Tenet's results beat expectations no matter how the items were counted.

Tenet has spent millions to upgrade equipment in its hospitals and has lobbied doctors to send their patients to its hospitals.

In the first quarter, admissions at hospitals open at least a year rose 1 percent, the second straight quarterly gain after a long string of declines, and they continued to rise in April.

But admissions numbers were mixed. Much of the gain came from Medicare and Medicaid managed-care patients, while admissions from more-lucrative employer-sponsored managed care fell 3.7 percent.

Outpatient visits fell 1.1 percent on a same-hospital basis, which the company blamed on increasing competition from physician-owned facilities.

Until late last year, admissions to Tenet hospitals had fallen for more than three years after the company endured investigations and lawsuits over patient care and overbilling Medicare.

The company's legal problems are not over. Most the charge for litigation costs in the first quarter was to cover estimated liability for wage and hour lawsuits and other employment issues.

Like other hospital operators, Tenet is also dealing with an increase in patients who lack health insurance and often can't pay their bills. Bad debt jumped 12 percent, to $149 million, the company said.

Officials said, however, they weren't seeing signs of a weakening economy. They noted a decline in plastic surgery, which is typically not covered by insurance, but they weren't sure whether patients were putting off such procedures or just going to other providers.

Chief Executive Trevor Fetter said among patients covered by managed-care insurance, business was stronger with those who came in through the emergency room rather than non-ER patients who might be able to delay treatment.

"But patient credit quality is even with last year, and more of our uninsured patients are employed now than they were a year ago; that's up by 10 points to nearly 70 percent," he said.

"This was a terrific quarter," said Sheryl Skolnick, an analyst with CRT Capital Group. "They're making obvious progress toward the turnaround any way you look at it."

Skolnick said the company was generating more cash, raising patient volumes and carrying momentum into the second quarter. The only negative, she said, was the decline in commercial managed-care admissions.

But Gary Taylor, a Citigroup analyst, said one-time items helped the company. He called Tuesday's results "on track in a flu-aided quarter."

Tenet has sold off many poorly performing hospitals and bought new equipment for its remaining ones, yet it's unclear whether that investment is paying off.

Fetter said the new equipment and improved quality ratings from insurers have helped Tenet's reputation and given it more leverage in negotiating higher prices and lower malpractice-insurance premiums. And Tenet has negotiated clauses in several recent contracts that raise payments for hospitals that achieve high quality ratings.

But Fetter acknowledged disappointment that the ratings haven't done more to boost admissions.