August 6, 2013 / 2:21 PM / in 4 years

Tenet cuts outlook as patient admissions decline; shares fall

(Reuters) - Hospital operator Tenet Healthcare Corp (THC.N), which is buying smaller rival Vanguard Health Systems Inc VHS.N, 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 doctor.

“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 percent.

“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 pressures.”

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 said.

    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 increasing 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 HMA.N, 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.

    Reporting by Susan Kelly in Chicago; Editing by Gerald E. McCormick, Lisa Von Ahn and John Wallace

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