Tenet posts strong net income in first quarter of 2018
(Updated May 1)
Tenet Healthcare Corp.'s stock price spiked more than 15% Tuesday morning following a strong first-quarter earnings report released after the previous day's market close.
Dallas-based Tenet reported net income of $191 million in the quarter, up significantly from $36 million in the first quarter of 2017. Adjusted earnings before interest, taxes, depreciation and amortization was $665 million in the first quarter of 2018, up 26% from $527 million during the same time in 2017 and well ahead of the company's own expectations.
Tenet CEO Ron Rittenmeyer characterized the performance as a "very solid start to the year" in an earnings call Tuesday.
"In order to be successful, we need to be in a constant state of improvement," he said. "Status quo cannot be the basis for great success at Tenet."
Tenet's total revenue rounded out the first quarter of 2018 at $4.7 billion, down 2.4% from $4.8 billion in the first quarter of 2017.
Despite lower revenue, Tenet beat its own expectations around net income attributable to its shareholders in the quarter. That was $99 million, compared with a projection of up to $70 million. Tenet reported a $52 million net loss to shareholders from continuing operations in the first quarter of 2017.
On Tuesday's call, Tenet executives emphasized improved performance by the company's revenue-cycle management subsidiary, Conifer Health Solutions, which saw revenue increase by 0.5% in the quarter to $404 million and $98 million in adjusted EBITDA. Rittenmeyer attributed Conifer's improved performance to changes in the company's cost structure focused on cutting unnecessary work.
Tenet is moving ahead to sell Conifer, a decision the company announced in December, Rittenmeyer said. The revenue-cycle management company's improved performance did not seem to dampen Rittenmeyer's enthusiasm for selling Conifer. Rather, he emphasized on the call that its first-quarter results underscore its value.
"At the end of the day, it's about maximizing the return for what we do," he said. "We're proving that we've got a valuable asset, and we've got to hit a number that makes sense, otherwise it would be inappropriate for me to push it."
Total admissions at Tenet's 69 hospitals inched up slightly by 0.3% in the first quarter of 2018 compared with the first quarter of 2017. Factoring in the additional seven hospitals the company has divested since the first quarter of 2017, admissions declined 7.4% during the same time period.
Emergency department visits at those 69 hospitals climbed nearly 5% during the quarter, likely the product of a severe flu season.
Outpatient visits dropped 1% among the 69 hospitals, but those visits drop by nearly 10% during the same time period when factoring in all 76 hospitals.
Patient revenue jumped 6.7% year-over-year to about $3.6 billion when factoring in the 69 hospitals. Looking at all 76 hospitals, however, patient revenue dropped 2.3%.
Revenue from Tenet's ambulatory segment jumped 9.5% year-over-year to $498 million, compared with $455 million in the first quarter of 2017. That beat expectations from analysts with Zacks Investment Research, who predicted Tenet's ambulatory revenue would increase 7% to reach $486 million.
Revenue per case dipped 0.5% in Tenet's ambulatory sector, but grew 2.8% in the company's surgical sector, which Tenet wrote in a news release reflects the growth in higher acuity surgical procedures. Tenet also announced Tuesday it completed the sale of Des Peres Hospital in St. Louis to St. Luke's Hospital. Divestitures have resulted in cash proceeds of about $600 million since the beginning of the year, Rittenmeyer said.
Tenet also continues to pursue the sale of its overseas ambulatory segment, Aspen Healthcare, and its health plan, Rittenmeyer said.
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