Tenet Healthcare Announces Fourth-Quarter Loss
California-based Tenet Healthcare on Monday announced a fourth-quarter net loss of $954 million, or $2.05 per share, down from a net loss of $31 million, or six cents per share, a year earlier, the Wall Street Journal reports. Tenet's revenue declined 8.9% to $3.18 billion in this year's fourth quarter from $3.49 billion a year earlier. The decline in revenue in part reflects a decrease in Medicare outlier payments to $21 million in the fourth quarter from $135 million a year earlier, the last quarter before Tenet revised its outlier payment policy. Outlier revenue for 2003 declined to $140 million from $750 million in 2002. However, Tenet in fourth quarter 2003 posted a one-time positive adjustment of $70 million relating to its Medicare outlier payments (Rundle, Wall Street Journal, 3/16). The company also posted a $1.45 billion charge in the fourth quarter, including a $500 million dollar write-down of the value of its hospitals, the Los Angeles Times reports (Girion, Los Angeles Times, 3/16). The charge is related in part to plans the company announced in January to sell 27 hospitals, and it includes "other charges that together offset some favorable adjustments and gains," according to the Journal. For the fourth quarter, the company posted $118 million in cash from operations, down from $350 million a year earlier. Fourth-quarter capital expenses were $269 million (Wall Street Journal, 3/16). Tenet had $425 million cash on hand at the end of the fourth quarter. Excluding the charges, Tenet "appeared to beat Wall Street's expectations of a profit of about two cents a share," according to the Times. Sheryl Skolnick, an analyst with Fulcrum Global Partners, said, "Earnings from continuing operations before all the one-time and unusual items was seven cents, which is better than anyone thought." Skolnick noted, "The quarter itself is almost impossible to tell whether it's good or bad." Tenet President and CEO Trevor Fetter said, "This was a tough quarter made even tougher by rising bad debt from the growing number of uninsured patients we treat, and our increased difficulties in collecting amounts owed us by our managed care payers," adding, "We have taken ... strong actions to address these and other challenges, but positive results take time."
Company officials expect spending to exceed revenue by $500 million to $600 million in 2004, but Tenet Chief Financial Officer Stephen Farber said the company has a "good chance" of reaching break-even cash flow in 2005 (Los Angeles Times, 3/16). In addition, some analysts say that it could cost the company more than $1 billion to resolve lawsuits and government investigations (Wall Street Journal, 3/16). In August, Tenet officials agreed to pay $54 million to settle allegations that two Redding, Calif.-based physicians performed unnecessary heart surgeries and defrauded Medicare at Redding Medical Center. Since October 2002, the Senate Finance Committee, the Securities and Exchange Commission, the HHS Office of Inspector General, the Department of Justice and the Federal Trade Commission have launched separate investigations into Tenet related to alleged Medicare fraud and other issues. The company also faces an investigation by the Florida Medicaid Fraud Control Unit. The U.S. attorney's office in Los Angeles has requested documents related to coronary procedures and billing practices at three Los Angeles-area hospitals. Most recently, the California Department of Health Services announced it will audit billing practices at all 40 Tenet-owned hospitals in the state, after finding that Redding overcharged state programs by nearly $12 million (California Healthline, 11/25/03). "It looks like the company has enough liquidity to make it through normal operations," Andreas Dirnagl, an analyst at Harris Nesbitt Gerard, said. Dirnagl added, "I think the question is what happens if things get worse? What happens if there is a substantial fine or settlement? That's where you're getting a lot of nervousness on the street" (Los Angeles Times, 3/16).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.