Tenet Healthcare Profits Sink 32 Percent in Q3, Although Revenue Rises

Andrew Klips |

Hospital operator Tenet Healthcare Corp. (THC) reported a 32-percent slide in third-quarter profit to come up shy of analyst expectations as expenses rose, putting a veil on rising revenue.  Driven higher in the last year as investors expect changes in the U.S. healthcare system to bolster sales and profits for hospitals and insurers, Tenet delivered guidance that surprisingly came up shy of Wall Street predictions.

For the quarter ended September 30, the Dallas, Texas-based company reported revenue of $2.41 billion, up by 8.4 percent from $2.22 billion in the third quarter last year.  Net income was $28 million, or 27 cents per share, versus $40 million, or 37 cents per share, in the year prior quarter.  Income from continuing operations, not counting one-time charges such as acquisition costs, impairments and restructuring charges, was $46 million, or 45 cents per share, compared to $35 million, or 33 cents per share, in last year’s quarter.

Analysts were expecting adjusted income from continuing operation of 45 cents per share on revenue of $2.39 billion.

Net revenue benefited by $6 million more than year earlier quarter from the California Provider Fee program.  Total net patient revenue per adjusted admission was $11,928; up by 3 percent from last year, reflecting better terms with commercial manage care payers and incremental Medicaid revenues in California and Texas.

Commercial managed care sales rose by 2.3 percent per admission, 3.4 percent per patient day and 3.7 percent per outpatient visit.

The company’s Conifer Health Solutions, a business process solutions company for health care providers serving more that 700 hospitals and clients, reported a 50 percent increase in adjusted EBITDA to $36 million, bolstered by business acquisitions.

Salaries, wages and benefit expenses grew by 11.6 percent to $1.17 billion from $1.05 billion.  Supplies also cost more, rising 2.9 percent to $387 million.  Bad debt expense increased by $4 million to $210 million in the third quarter, equaling 8 percentage of revenue, which was a decline of 50 basis points compared to last year’s quarter.

“We achieved another solid earnings increase in the third quarter as we continued to control costs and drive significant revenue growth,” said Trevor Fetter, president and chief executive at Tenet.  “We delivered strong growth in outpatient visits, emergency department volumes, and total surgeries in the quarter, all of which are areas of strategic focus.

During the quarter, Tenet, which operates 77 hospitals and 176 outpatient centers in the U.S., bought back 2.64 million shares for an aggregate amount of $108 million.  The company still has $100 million left in its current $500-million repurchase plan.

Looking ahead, Tenet sees fourth-quarter adjusted EBITDA in the range of $400 million to $500 million.  Wall Street was expecting $482 million.

Shares of THC closed trading on Monday ahead by 2.3 percent at $48.26.  Shares gave some back in extended trading following the report, slipping to $47.50.  Through Monday’s close, shares were up about 48 percent.

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Symbol Name Price Change % Volume
THC Tenet Healthcare Corporation 13.24 -0.36 -2.65 3,650,777 Trade
FRTHF China Fortune Holdings Ltd n/a n/a n/a 0


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