THC Biomed (CSE:THC)
Historical Stock Chart

From May 2019 to May 2024

Tenet Healthcare Corp. (THC) swung to a first-quarter profit, helped by cost controls, a smaller decline in admissions and debt- and tax-related gains, and reiterated the 2009 outlook that it boosted last month.

The hospital concern said it achieved its highest operating margin in six years and is standing up well in the recession, although it remains cautious regarding the potential for increasing pressure from the softer economy.

"The quarter demonstrated that we are in a business that is really not discretionary, so while you see retailers and other businesses that sell consumer products with sales that are down year over year 30%...ours were essentially flat in terms of patient volume," Chief Executive Trevor Fetter told Dow Jones Newswires Tuesday.

Trends in total admissions and outpatient visits were stronger in April than in the first quarter, although profitable commercial managed-care admissions last month were lower than expected, Tenet said.

The urban hospital operator saw a 0.1% year-over-year decrease in same-hospital paying and total admissions in the first quarter, including a 2% decline in commercial managed-care admissions, adjusting for an extra weekday in the earlier period because of Leap Year. Outpatient visits and surgeries increased.

Tenet shares recently were up 4 cents, or 1.6%, to $2.54. They have more than tripled since the 52-week low of 78 cents reached on March 6.

The results suggest that Tenet could be starting to see some benefit from its struggle to gain its footing after settling government probes in 2006 over past pricing plans. It has over the past few years changed management, shed hospitals and made improvements that earned it good-quality ratings from the U.S. Department of Health and Human Services.

"I think this demonstrates we are very far along" in the turnaround, Fetter said, noting that Tenet has more than doubled its underlying earnings margin, or Ebitda margin, in the past couple of years to 12%, although the company remains behind hospital-operator peers. Tenet must drive profit and cash flow to levels in line with peer companies, "and we're getting very close to that," he said.

If policymakers succeed in enacting health-reform legislation that extends health-insurance coverage to all Americans, he said, "that's a really great thing for us." Tenet's profits come from the 27% of patients who have commercial managed-care coverage; it breaks even on Medicare patients, and loses money, to varying degrees, on patients with Medicaid coverage, self-paying uninsured and those who qualify as charity cases, Fetter said.

Tenet's collection rate, specifically, the percentage of billings collected, has been slipping in the past nine months, he said.

Tenet swung to a profit of $178 million, or 37 cents a share, from a year-earlier loss of $31 million, or 6 cents a share. Its April view was for earnings of 37 cents, including a net 29 cents in gains related to taxes, legal costs and debt extinguishment. Analysts surveyed by Thomson Reuters expected per-share earnings of 3 cents.

Revenue increased 4.6% to $2.3 billion, in line with the company's February estimate, which was below analysts' views at the time.

Hospitals have struggled for years with tepid volumes of commercially insured patients and large numbers of uninsured patients who can't pay their medical bills. Now, the credit crisis has prompted many hospitals to delay capital spending and the recession threatens to further erode business.

Same-hospital adjusted earnings before interest, taxes, depreciation and amortization, the industry benchmark used to track the financial performance of those hospitals under a company's wing for more than a year, rose 28%.

-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@dowjones.com

(Mike Barris contributed to this report.)