Tenet Healthcare Corp. took a financial hit during its third quarter because of its ongoing exit from the physician practice business.
In spite of 23% earnings growth from operations during the quarter ended Feb. 29, the Santa Barbara, Calif.-based company reported a 69% decline in total net income, primarily because of charges related to terminating physician contracts.
During the quarter, Tenet recorded a one-time pretax charge of $232 million. Of that, $177 million was related to unwinding 440 contracts with physician practices the company hopes to end within the next 18 months (See related story, p. 18).
Before Tenet announced it was getting out of the physician business, the company owned or managed about 1,000 practices, Tenet spokesman Harry Anderson said.
"We're not able to forecast what additional charges there may be, but this certainly represents the most significant charge we would expect to take," he said.
Tenet also took a $55 million charge related to the closure of City Avenue Hospital, one of eight Philadelphia area hospitals Tenet bought in November 1998, and the sale of property in Worcester, Mass., where the company has built a replacement hospital.
Tenet's net income from operations was $152 million, a 23% increase over the year-ago quarter's $124 million.
But including the one-time physician-related charges and a $51 million gain from the sale of investments, Tenet's total net income sank 69% to $38 million for the quarter from $124 million in last year's third quarter. The company's net operating revenue rose to $2.85 billion from $2.82 billion, despite the company's divestiture of 18 hospitals during the year.
Tenet has 112 acute-care hospitals in 17 states.