* Expects to treat more patients with insurance under reform
* Says signed first contracts for insurance to be sold on
* Q4 profit 45 cts/shr vs loss 70 cts/shr year ago
* Reiterates 2013 EBITDA outlook; says budget cuts factored
* Shares up less that 1 percent
By Susan Kelly
Feb 26 Tenet Healthcare Corp said on
Tuesday it expects the U.S. healthcare reform law to have a
positive impact on its earnings in 2014 as uninsured patients
start to obtain coverage through the new health insurance
Tenet, the No. 3 for-profit U.S. hospital chain, also
reported a fourth-quarter profit versus a year-ago loss as
outpatient visits to its hospitals increased.
The Dallas-based company said it has traditionally treated
more uninsured patients than other publicly traded hospital
chains due to the markets it is in, including Texas, where a
quarter of the state's population is uninsured.
This burden is expected to diminish as those patients obtain
insurance through the exchanges, beginning in 2014.
"Everything about health reform should help alleviate some
of the pressures on us," Tenet Chief Executive Trevor Fetter
said in a telephone interview.
Tenet anticipates a positive impact on its earnings even if
states such as Texas do not participate in a planned expansion
of the Medicaid program for the poor.
"We see a lot of upside in our markets," Fetter said on a
conference call. The company expects to have more details on how
health reform will affect its business in the next few months,
An estimated 26 million people are expected to obtain
coverage through the health insurance exchanges being set up
under the U.S. Patient Protection and Affordable Care Act. But
some Republican-led states have rejected both the exchanges and
the Medicaid expansion.
Tenet recently signed its first contracts with three Blue
Cross and Blue Shield plans for health insurance to be sold to
individuals through the exchanges, covering about 30 percent of
its hospitals, Fetter said. The plans have a structure similar
to its commercial contracts, but with a modest pricing discount
of less than 10 percent from current rates, he said.
"Where we have accepted any discount at all, it is for
additional market share," Fetter said.
Tenet posted fourth-quarter earnings of $49 million, or 45
cents a share, compared with a loss of $76 million, or 70 cents
a share, a year earlier, when the company took a large charge
for the early retirement of debt.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) increased 16.7 percent to $336 million.
Net operating revenue rose 7.3 percent to $2.33 billion.
Tenet reiterated its outlook for 2013 EBITDA of $1.325
billion to $1.425 billion.
The outlook includes an expected reduction to Tenet's
revenue and earnings of $45 million this year if automatic U.S.
budget cuts, known as sequestration, go into effect.
"We have expected for a long time that it would happen and
have planned for that," Fetter said.
In the fourth quarter, Tenet said adjusted patient
admissions, which include both inpatient and outpatient volumes,
rose 2.9 percent, with outpatient visits up 7.3 percent and
outpatient surgeries climbing 13.9 percent. Total admissions
were flat, while emergency room visits increased 8.6 percent.
"All things considered, it was a decent quarter," said
Jefferies & Co analyst Brian Tanquilut.
Uninsured and charity admissions rose 1.1 percent. Bad debt
expenses as a percentage of revenue was 7.9 percent, up from 7.7
percent from a year ago, as more uninsured patients sought
treatment, Tenet said.
Tenet, which last week announced plans to acquire Emanuel
Medical Center in Turlock, California, is gaining a greater
appetite for hospital acquisitions, after focusing on acquiring
physician practices and outpatient centers in recent years,
company executives said on a conference call with industry
Tenet shares were up 0.5 percent to $37.82 in Tuesday
afternoon trading on the New York Stock Exchange.