(Reuters) - Shares of Tenet Healthcare Corp (THC.N) fell 5.5 percent on Monday after the third-largest for-profit U.S. hospital operator reported quarterly earnings that fell short of estimates, partly due to higher-than-expected costs to settle a federal probe into patient referrals.
Tenet also said it had reached an agreement in principle with the U.S. Department of Justice to pay $514 million to settle the previously disclosed investigation into alleged kickbacks for referring primarily undocumented pregnant Hispanic women for labor and delivery services at four of its hospitals in Georgia and South Carolina.
The company said it increased its reserve from $407 million to $516 million for the settlement, and expects to make the payment as early as the third quarter.
“Half a billion dollars is a surprise,” said Mizuho Securities analyst Sheryl Skolnick.
The Dallas-based company reported a net loss from continuing operations of $44 million, or 44 cents a share, compared with a net loss of $60 million, or 60 cents, a year ago.
Earnings before interest, taxes, depreciation and amortization (EBITDA), excluding special items, were $617 million, less than the $624.1 million analysts had expected in a Thomson Reuters/I/B/E/S poll.
Tenet affirmed its full-year EBITDA estimate of $2.4 billion to $2.5 billion, excluding special items.
The company estimated a 2016 net loss from continuing operations in a range of $65 million to $30 million, or a per share loss in a range of 66 cents to 30 cents, on revenue of $19.5 billion to $19.8 billion.
Tenet said its adjusted admissions, which include both outpatients and people who stay in the hospital overnight, rose 0.5 percent in the second quarter from a year ago.
Hospitals are seeing softer demand for medical services in some markets, following a surge tied to the expansion of insurance coverage under President Barack Obama’s healthcare reform law, the Affordable Care Act.
No. 1 U.S. hospital chain HCA Holdings Inc (HCA.N) last week reduced its full-year EBITDA outlook slightly after reporting patient admissions were slower than expected in the second quarter.
Reporting by Susan Kelly in Chicago; Editing by Richard Chang and Leslie Adler