UPDATE: Tenet Swings To 3Q Loss On Items, Raises Ebitda View
By Dinah Wisenberg Brin, Of DOW JONES NEWSWIRES
Tenet Healthcare Corp. (THC) swung to a third-quarter net loss on discontinued
operations and various charges, while earnings excluding items exceeded Wall
Street views.
The urban hospital operator, which has been working to gain its footing after
years of legal and financial troubles, raised its full-year forecast based on
stronger-than-expected third-quarter results.
Tenet showed promising patient volume and pricing trends; however, the effects
of the recession and associated unemployment and loss of health insurance also
are evident in the company's results, including patient mix.
Admissions were about flat and outpatient visits were up. Lucrative commercial
managed-care admissions, which reflect patients with private health care,
declined notably, and patient bad debt increased to 8.5% of revenue from 7.6% a
year earlier. Outpatient visits by paying patients were up solidly.
"I feel very good about the progress that we have made this year. We are
heading into the final quarter of 2009 with significant positive momentum,"
Chief Executive Trevor Fetter said.
Despite the continued economic weakness affecting hospital operators, Tenet
generated solid revenue growth and is controlling costs as well as or better
than planned, Fetter said. Tenet also improved pricing, which was evident in the
rise in revenue from commercial managed-care patients despite lower admissions
among that group.
Bad-debt expense "has come in much lower" this year than Tenet forecast,
Fetter said. While commercial managed-care admissions were down, they were less
so than in the second quarter, the CEO said.
"This is how to turn around a company," said Pali Capital analyst Sheryl
Skolnick, noting that Tenet guided to better-than-expected 2009 Ebitda.
"Yes, bad debt was up ... but, frankly, so what? THC managed around it, with
cost controls," significant improvement in paying outpatient volumes, flat
admissions and more than a 4% increase in high-margin commercial managed-care
revenue.
Tenet's third-quarter strength "came from running the business right no matter
what twists the recession threw at it," said Skolnick.
Tenet posted a net loss of $3 million, or 1 cent a share, compared with a
profit of $104 million, or 22 cents a share, a year earlier. The year-earlier
result included $140 million in pretax gains on sales of investments.
Excluding discontinued operations and such items as write-downs, restructuring
and early debt-extinguishment charges, Tenet posted earnings of 3 cents a share,
exceeding the average Thomson Reuters analyst projection of a 2-cents-a-share
loss. Revenue rose 5.7% to $2.26 billion, surpassing the average analyst view of
nearly $2.25 billion.
Same-hospital admissions were slightly higher in the period, although
admissions of paying patients decreased slightly. Tenet posted a healthy 4.8%
increase in outpatient visits, including a 5.3% rise in insured, or paying,
patients. Surgical procedures rose 2.2%.
The company posted a 4.5% decrease in commercial managed-care admissions,
while commercial managed-care outpatient visits were flat.
Operating income in the quarter increased to $133 million from $70 million a
year earlier. Adjusted Ebitda increased 50% to $240 million, with the adjusted
Ebitda margin rising 310 basis points to 10.6%.
Tenet now expects adjusted earnings before interest, taxes, depreciation and
amortization of $925 million to $975 million this year, a $25 million forecast
increase. It projects a profit of $66 million to $130 million.
Tenet shares recently traded up 1.5%, or 8 cents, to $5.38. Shares have more
than quadrupled this year, as the company has improved operations and hospital
companies generally have benefited from cost controls and investor anticipation
that efforts to broaden health coverage will translate into more paying
patients.
-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@
dowjones.com
(END) Dow Jones Newswires
11-03-091301ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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