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Tenet benefits from reform, higher volume in second quarter


By Beth Kutscher
Posted: August 4, 2014 - 6:45 pm ET
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Tenet Healthcare Corp. joined the chorus of publicly traded hospital operators that have seen a benefit from healthcare reform in their second-quarter earnings.

The Dallas-based chain reported a smaller loss and higher operating revenue as it treated more patients, improved its contracts with insurers and benefited from growth in its revenue-cycle-management arm, Conifer. Its bad debt also declined as more patients gained insurance coverage.

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Like its peers, Tenet said it now expects its full-year financial performance to be better than earlier projections.

In total, Tenet reported a net loss of $26 million on $4 billion of net operating revenue for the second quarter compared with a loss of $50 million on $3.9 billion in revenue during the same period last year.

After several quarters of falling volume, its same-hospital admissions increased 2.8%, or 4% when adjusted for outpatient activity. The number of paying admissions increased 4.4% on a same-hospital basis, and its bad debt declined 18.2%, representing 7.3% of revenue compared with 9% in the year-ago period.

The change was starkest in its five Medicaid expansion states, where uninsured and charity admissions declined 54.3% while Medicaid admissions increased 22.9%.

Tenet also identified 2,700 admissions and more than 24,000 outpatient visits that were covered by a health plan purchased from an exchange—about triple what it saw in the first quarter.

However, while healthcare reform provided a boost, a number of one-time items dragged down the bottom line. Among these was the additional interest expense that it has to pay as part of the financing of last year’s acquisition of Vanguard Health Systems.

In addition, it lost $87 million in revenue from the Arizona Medicaid program after the state significantly downsized its managed-care contract. Finally, like all California providers, it is waiting for the CMS to approve an extension to the state’s provider fee program, which expired Dec. 31. The program contributed $66 million in the second quarter of 2013.

Nevertheless, Tenet was able to hold its expenses to just a 0.7% increase per adjusted admission. Revenue from Conifer also increased 30.1%.

Tenet now expects its 2014 earnings before interest, taxes, depreciation and amortization to be in the range of $1.85 billion to $1.95 billion, an increase from the $1.8 billion to $1.9 billion it forecast earlier this year.

Follow Beth Kutscher on Twitter: @MHbkutscher


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