Hospital operator Tenet Healthcare Corp. (THC) on Tuesday reported a loss for the first quarter, reflecting a decline in patient admissions that more than offset pricing increase. Meanwhile, the prior-year quarter's results benefited from an industry-wide Medicare payment settlement. Looking ahead, the company reiterated its adjusted earnings outlook for fiscal 2013.
Weak admission rates continue to be a cause of concern for healthcare providers. Earlier in the month, healthcare services provider HCA Holdings Inc. (HCA) detailed soft revenue outlook for the first quarter, citing "a slowdown in the growth rate of admissions and weakness in outpatient volumes." Smaller rival Health Management Associates Inc. (HMA) had also provided lackluster earnings and revenue outlook for the first quarter.
Tenet Healthcare's first-quarter adjusted earnings before interest, tax, interest, depreciation and amortization or EBITDA declined 12 percent to $274 million from $310 million in the previous-year period. The prior-year quarter's results included $75 million from an industry-wide Medicare inpatient prospective payment settlement or the "Rural Floor" settlement.
Excluding this non-recurring item, adjusted EBITDA for the latest quarter increased by 17 percent.
Trevor Fetter, president and chief executive officer of Tenet Healthcare said, "Tenet generated strong earnings growth by rapidly adjusting costs in a soft volume environment in the first quarter. Adjusted EBITDA grew by almost 17 percent, after excluding a non-recurring item which contributed to last year's first quarter, and exceeded the mid-point of our Outlook range."
Excluding items, adjusted income from continuing operations was $34 million or $0.33 per share. This compares to adjusted income from continuing operations of $13 million or $0.15 per share, excluding the Rural Floor settlement, among others.
Tenet said its adjusted patient admissions for the quarter declined 2.5 percent in the quarter, as 2.2 percent growth in outpatient visits offset by a 4.0 percent decline in inpatient admissions.The increase in outpatient visits was primarily driven by the company's outpatient center acquisition program.
About half of the admissions decline was related to the loss of a Leap Year day and the observance of the Easter and Passover holidays in the latest quarter. The admissions decline also included a 2.8 percent decline in uninsured and charity admissions. Total emergency department visits increased 3.1 percent.
Total net patient revenue per adjusted admission was $11,884, up 1.6 percent from last year, or 5.1 percent excluding the 2012 Rural Floor settlement. These pricing increases was led by improved terms in the company's contracts with commercial managed care payers and higher Medicare reimbursement rates.
Tenet's first-quarter net loss was $88 million or $0.85 per share, compared with net income of $58 million or $0.53 per share in the prior-year period. On average, eighteen analysts polled by Thomson Reuters expected the company to report earnings of $0.30 per share for the quarter. Analysts' estimates typically exclude special items.
Net operating revenue for the quarter rose 4 percent to $2.39 billion from $2.30 billion in the year-ago period. Analysts had a consensus revenue estimate of $2.47 billion.
Excluding the Rural Floor settlement from the year-ago period, the increase in net operating revenues was 7.5 percent in the quarter.
Looking ahead to the second quarter, Tenet forecasts adjusted EBITDA in a range of $325 million to $375 million. The outlook includes expected contributions to EBITDA of $54 million on the anticipated approval of the managed care portion of the 30-month California Provider Fee program and $31 million from the recognition of HIT incentives.
For fiscal year 2013, Tenet reiterated its outlook for adjusted EBITDA of $1.325 billion to $1.425 billion. The company forecasts net operating revenues for the year between $9.80 billion and $10.10 billion. Analysts expect the company to report revenues of $9.98 billion.
In Tuesday's regular session, THC is trading at $44.16, up $0.32 or 0.73 percent on a volume of 16,189 shares.
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