Tenet Profit Misses Analysts’ Estimates as Hospital Company Pays Down Debt

Tenet Healthcare Corp. (THC), the third- largest U.S. hospital operator, reported fourth-quarter earnings that missed analyst estimates after expected reimbursement settlements weren’t received.

Profit excluding some items was 10 cents a share, missing by 4 cents the average estimate of 16 analysts compiled by Bloomberg. The net loss was $76 million, or 17 cents a share, compared with net income of $74 million, or 14 cents, a year earlier, the Dallas-based company said in a statement today. The results included $117 million in costs to retire debt early.

Tenet said last month that settlements with payers would help overcome charges for accounting changes and interest rate declines in the quarter. Talks with payers are continuing, the company said. This year’s forecast for adjusted profit was raised to $1.23 billion to $1.35 billion because the payments are still expected, Tenet said.

“People had factored those settlements into their expectations,” said Sheryl Skolnick, an analyst with CRT Capital Group in Stamford, Connecticut with a “buy” rating on the company. “Am I surprised it that they didn’t happen? No. It’s Tenet -- things never go their way.”

Tenet won’t disclose the payers involved in the settlement discussions because the talks are confidential, Rick Black, a spokesman, said in a telephone interview.

The company rose 1.1 percent to $5.71 at the close of New York trading. The shares have lost 20 percent in the last 12 months.

Acquisition Plans

Chief Executive Officer Trevor Fetter said last month that the company is trying to build and acquire businesses to have stronger negotiating power with commercial insurers.

Tenet is one of the “worst-positioned” to negotiate payment rates because it has on average only about 7 percent of the market share in its primary markets, Citigroup said last month. The company has disputed the report, saying on Jan. 9 that their hospitals on average have a 20 percent market share in their primary service area.

The company faces cuts in reimbursement from public health plans and new mandates from the U.S. health-care overhaul signed in 2010, expected to trim $157 billion in U.S. payments to hospitals through 2019.

The reduced payments may be offset by an estimated 32 million potential patients who are expected to gain insurance coverage under the law after 2014. The company operates in several markets with high proportions of patients who are currently uninsured, Fetter has said.

Money-saving Americans avoided going to the doctor after the recession as the unemployment rate hovered near 9 percent. Tenet saw more patients than the company expected in 2011, signaling that as the economy improves, volumes may recover. Admissions increased less than a percent in the quarter, with emergency department visits increasing 3.1 percent.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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