Tenet Healthcare posts net loss as hospital admissions fall

Tue Apr 30, 2013 1:39pm EDT

(Reuters) - Tenet Healthcare Corp (THC.N) on Tuesday posted a first-quarter net loss on a decline in admissions, the latest U.S. hospital operator to report a slowdown in patient visits.

Hospital groups HCA Holdings Inc (HCA.N), Community Health Systems Inc (CYH.N) and Health Management Associates Inc HMA.N have all warned that admissions were weak in the first quarter.

The No. 3 for-profit U.S. hospital chain said it quickly adjusted staffing levels as patient visits weakened in February and March. Patient volumes rebounded in April, allowing the company to maintain its full-year earnings outlook.

"It was one of the industry's weakest volume quarters in memory," Tenet Chief Executive Trevor Fetter said on a conference call with analysts.

Tenet said its first-quarter earnings from continuing operations, excluding one-time items, more than doubled as it reined in costs, beating analysts' average forecast by 3 cents a share.

The hospital operator confirmed its outlook for full-year 2013 earnings of $1.33 billion to $1.43 billion before tax, interest, depreciation and amortization, and excluding special items.

Patients' hospital visits slowed across the industry in the first quarter as consumers continued to struggle with high unemployment and higher out-of-pocket expenses for healthcare coverage under private insurance in the soft economy.

TOWARD AFFORDABLE CARE

Fetter said the shift to high-deductible health plans is squeezing consumers, who have responded by reducing use of healthcare services. He defined a high-deductible plan as one in which an individual is responsible for co-payments and deductibles in excess of $1,200.

Some features of plans being sold today, including benefits offered, payment caps and deductibles, do not meet requirements of the Affordable Care Act, Fetter said.

"Changing these features at the beginning of 2014 is an important and underappreciated positive impact that the ACA will have on our ability to get paid for the services we provide," Fetter said.

Tenet has signed contracts with payers covering 60 percent of its hospitals for health insurance exchanges that are scheduled to go on line in 2014 under the ACA. Pricing for those contracts is running at more than 90 percent of typical commercial insurance rates, Fetter said.

Sheryl Skolnick, analyst with CRT Capital Markets, said Tenet's weaker-than-expected patient volumes mirrored a trend seen at other for-profit hospital operators in the first quarter. But she said Tenet's cost controls were strong enough to support a first-quarter EBITDA that was in line with analyst expectations.

Total surgeries rose 8.8 percent in the quarter as the company continued to shift to greater outpatient delivery of services, she noted.

"Tenet appears to be maturing into a consistent, well-managed reporter of results that are at or above its peers' trends," Skolnick said in a note to clients.

Tenet reported a first-quarter net loss of $88 million, or 85 cents a share, compared with year-earlier net income of $58 million, or 53 cents a share. Net operating revenue rose 3.7 percent to $2.39 billion.

Income from continuing operations, excluding restructuring and acquisition-related costs and a loss on early retirement of debt, was $34 million, or 33 cents per share. That is up from $13 million, or 15 cents per share, excluding a Medicare settlement payment and other one-time items, a year earlier.

On that basis, analysts had expected Tenet to report a profit of 30 cents per share, according to Thomson Reuters I/B/E/S.

First-quarter adjusted EBITDA was $274 million, a decrease of $36 million from a year earlier, when the company benefited from a one-time industry-wide Medicare payment settlement. Excluding this item, adjusted EBITDA rose 16.6 percent.

Inpatient admissions fell 4 percent, but the number of people treated on an outpatient basis increased 2.2 percent. The combined figure, called "adjusted admissions," declined 2.5 percent.

Shares of Dallas-based Tenet rose 2.51 percent to $44.94 in midday trading on the New York Stock Exchange.

(Reporting by Susan Kelly in Chicago; Editing by Chizu Nomiyama, Gerald E. McCormick, Lisa Von Ahn, Chris Reese and David Gregorio)