August 6, 2013 / 12:21 PM / 4 years ago

UPDATE 3-Tenet cuts outlook as patient admissions decline; shares fall

* Earnings, excluding items, miss Wall Street estimate
    * Shares slide 4.2 percent in morning trading

    By Susan Kelly
    Aug 6 (Reuters) - Hospital operator Tenet Healthcare Corp
, which is buying smaller rival Vanguard Health Systems
Inc, reported a deeper second-quarter loss as it
admitted fewer patients to its facilities, and the company cut
its full-year outlook. 
    Its shares fell 4.2 percent.     
    Admissions to hospitals have slumped across the country this
year as consumers who lack health insurance or who face higher
deductibles on their health plans are staying away from the
    "Healthcare utilization remains very soft," Tenet Chief
Executive Trevor Fetter said on a conference call. 
    Tenet, the third-largest for-profit U.S. hospital chain,
said its inpatient admissions fell 3.5 percent in the latest
quarter, offsetting a 2.5 percent rise in outpatient visits. The
combined figure, called adjusted admissions, declined 0.7
    "The admissions trends that Tenet saw in the quarter were
comparable to what were reported by others in the hospital
group," said Susquehanna Financial Group analyst Chris Rigg.
"The high-deductible plans are having an impact, as well as the
economy, but it's hard to isolate one factor as the cause of the
    Tenet expects patient admissions to improve only modestly in
the second half of the year, Fetter said. 
    However, the company expects admissions will grow and its
uncollected bills from treating uninsured patients will decline
when more Americans become eligible for insurance starting in
2014 through exchanges being set up under President Obama's
healthcare reform law.
    "The exchange market we think will be important for us next
year," Fetter said.
    Dallas-based Tenet reported a net loss of $50 million, or 49
cents a share, for the second quarter, compared with a loss of
$6 million, or 6 cents a share, a year earlier. 
    Income from continuing operations, excluding one-time items,
was 66 cents a share. On that basis, analysts had expected 69
cents, according to Thomson Reuters I/B/E/S.
    Net operating revenue rose 6.9 percent to $2.42 billion.
    Uncollected bills increased by $17 million to $207 million
as a result of treating uninsured patients.
    For the full year, Tenet said it now expects earnings before
interest, taxes, depreciations and amortization, excluding
special items, of $1.25 billion to $1.30 billion, below its
previous forecast of $1.33 billion to $1.43 billion.
    The forecast excludes any impact from the Vanguard
acquisition, which is expected to close before year-end, Tenet
    Tenet in June announced it would buy Vanguard for $1.73
billion, partly to gain more leverage in negotiations with
managed care companies and drug and device suppliers. Pressure
on healthcare providers to reduce costs is incressing under the
reform law. 
    In a regulatory filing on Tuesday, Tenet said the U.S.
Department of Justice had decided not to intervene in a
previously disclosed whistleblower lawsuit. Ralph Williams, a
former chief financial officer for hospital chain Health
Management Associates, has accused Tenet and HMA of
paying kickbacks to medical clinics in Georgia for referring
pregnant women who were in the country illegally to the
companies' hospitals.  
    The state of Georgia is trying to recover money it paid for
Medicaid claims related to the referrals. Tenet, in the filing,
said it would vigorously defend the matter.
    Shares of Tenet fell $1.87 to $42.79 in morning trading on
the New York Stock Exchange.
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