Tenet Reports Higher Than Expected First-Quarter Loss
Officials for Santa Barbara-based Tenet Healthcare, the nation's second-largest for-profit hospital chain, on Tuesday reported a first-quarter net loss of $122 million, or 26 cents per share, compared with a net loss of $20 million, or four cents per share, a year earlier, the Los Angeles Times reports. In a preliminary announcement last week, Tenet said that it expected to post a first-quarter loss of $117 million. Company officials attributed the higher-than expected loss to the "after-tax effect" of an $8 million damage settlement it paid to an HMO after losing a legal dispute, according to the Times (Girion, Los Angeles Times, 5/5). First-quarter operating revenue decreased 2.9% to $2.67 billion from $2.75 billion a year earlier. Tenet reported a "modest decrease" in bad debts expense to $293 million from $303 million in fourth-quarter 2003. Bad debts expense for first-quarter 2003 was $227 million, Dow Jones/Wall Street Journal reports. Tenet reported charges totaling 31 cents per share for the quarter, including the "unexpected" one cent per share charge for the HMO settlement; a 21 cent per share charge from discontinued operations; a charge of eight cents per share for "impairment and restructuring costs"; and a one cent per share charge for legal expenses and the cost of investigations, Dow Jones/Journal reports (Dow Jones/Wall Street Journal, 5/4). Currently, Tenet is trying to settle a series of civil and criminal investigations into its business practices and patient care (California Healthline, 4/28).
Tenet Chief Financial Officer Stephen Farber confirmed that the company will have negative cash flow of as much as $600 million in 2004, the Orange County Register reports. Tenet CEO Trevor Fetter said additional cost restraints will be "a main focus" of the company, the Register reports. "The operating results suggest ongoing weakness on a number of fronts, both in terms of revenue and in controlling expenses," UBS Securities analyst Kenneth Weakley said, adding, "Managing costs in an environment where your revenues are declining becomes paramount, and there's only so much they can do" (Orange County Register, 5/5). Tenet officials said they were "encouraged by progress in controlling costs in a difficult revenue environment," Dow Jones/Journal reports. They added that efforts to improve pricing and increase volume "by their nature will take more time to visibly impact [the company's] results," according to Dow Jones/Journal (Dow Jones/Wall Street Journal, 5/4). Fetter said the first-quarter results were an indication that the company's "turnaround plan" would succeed, the Times reports (Los Angeles Times, 5/5).
Separately, Tenet on Tuesday in a filing with the Securities and Exchange Commission raised its capital expenditure estimate for 2004 to about $600 million from an earlier estimate of between $500 million and $550 million. Tenet estimated that capital expenditures for 2005 would total about $500 million. In its annual report filed in March, the company estimated 2005 capital expenditures of between $400 million and $500 million. Tenet also reported requests for information from the U.S. attorney's office in Los Angeles regarding Tenet's Inglewood-based Centinela Hospital and Allied Homecare Consultants, an independent contractor that refers patients to providers of in-home care services, as well as Desert Regional Medical Center in Palm Springs, which is operated by Salick Health Care under a contract with Tenet (Dow Jones/Wall Street Journal, 5/4).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.