(Reuters) - Community Health Systems Inc (CYH.N) shares fell 12 percent after hours on Monday on weaker-than-expected first-quarter results, while rival Tenet Healthcare Corp (THC.N) traded higher after posting an increase in patients receiving care at its hospitals.
Investors have been watching for signs of a pickup in demand for healthcare services after growth slowed in the second half of last year.
The slowdown followed a busy period for doctors tied to the creation of insurance marketplaces and expansion of Medicaid coverage for the poor under President Barack Obama’s healthcare reform law, known as the Affordable Care Act.
“Last year, investors became concerned that the tailwinds of the ACA were diminishing. That has not switched into headwinds. We still have tailwinds,” Tenet Chief Executive Trevor Fetter said in an interview.
“We are just continuing to grow our business in our local markets and generating solid growth,” Fetter said.
Tenet, the third-largest U.S. for-profit hospital chain, said its adjusted admissions, which include both outpatients and people who stay in the hospital overnight, climbed 2.2 percent in the first quarter from a year ago.
No. 2 U.S. hospital operator Community Health said its adjusted admissions rose 1.3 percent. But inpatient admissions alone fell 2 percent.
“The volume trends were pretty good at Tenet at a time when a lot of investors coming into this year were a little skeptical about the hospital industry,” said Jefferies analyst Brian Tanquilut. “Community’s adjusted admissions numbers were not bad, but the flow through to earnings did not show up.”
Community’s earnings before interest, tax, depreciation and amortization, or EBITDA, excluding special items, were $633 million in the quarter, down from $715 million a year ago.
Analysts had expected EBITDA of $704 million, according to Thomson Reuters I/B/E/S.
Community’s shares fell to $13.87 after hours from their New York Stock Exchange close of $15.74.
Mizuho Securities analyst Sheryl Skolnick said Community struggled with higher expenses for both supplies and labor.
Tenet reported a net loss of $59 million, or 60 cents a share, compared with net income of $47 million, or 47 cents, a year ago, hurt by higher legal expenses. It increased litigation reserves to $407 million from $238 million to cover an offer to settle a Justice Department investigation into services provided to Hispanic patients referred to four of its hospitals.
Tenet reiterated its full-year EBITDA outlook of $2.4 billion to $2.5 billion excluding special items, helping send its shares up 5.9 percent after hours.
Reporting by Susan Kelly in Chicago; Editing by Dan Grebler and Peter Cooney