A strong first-quarter showing by Tenet Healthcare Corp.'s hospitals pushed the company to boost its 2021 earnings outlook.
Even though hospital admissions were still down from their pre-COVID-19 levels in the quarter ended March 31, Tenet's hospitals saw their earnings—measured as adjusted earnings before interest, taxes, depreciation and amortization—spike almost 20% year-over-year to $410 million. The Dallas-based health system now projects company-wide EBITDA of up to $3.2 billion by the end of the year, a projection that's now $100 million higher at the midpoint.
"We're very pleased with how our hospitals are performing, which gives us a lot of optimism as we think about the rest of the year and beyond," Dan Cancelmi, Tenet's chief financial officer, said on an investor call Wednesday.
Investor-owned Tenet, whose share price got a boost on Wednesday, is benefiting from the same tailwinds that lifted many hospitals' margins in 2020, especially the back half of the year. Patients tend to be sicker and they're more likely to have commercial insurance, which pays better. Net patient revenue per admission across Tenet's hospitals grew 19.3% on a same-store basis year-over-year.
Almost all of Tenet's hospital markets exceeded earnings expectations in the first quarter, Cancelmi said. He noted that the company's overall hospital segment margin in the quarter excluding stimulus grants was about 100 basis points higher than calendar year 2019, which preceded the pandemic.
Tenet's revenue came out to $4.8 billion on the quarter, up 5.8% from $4.5 billion in the first quarter of 2020. Expenses grew at a faster pace, spiking 7.9% year-over-year to almost $4.6 billion. Tenet's net income ticked up 4% year-over-year to $97 million in the recently ended quarter. Excluding COVID-19 stimulus grants, Tenet's EBITDA grew 26% year-over-year to $740 million.
The winter storm that killed more than 100 Texans in February hampered Tenet's operations there for about two weeks, CEO Ron Rittenmeyer said on Wednesday's call. Snow and ice affected power and water supplies in some areas, and some of Tenet's outpatient surgery centers in Texas and Oklahoma had to be shut down for a week.
"It was not insignificant, especially for those of us who lived and worked in the impacted areas," he said.
Over the past three quarters, COVID patients constituted between 10% and 12% of Tenet's admissions, with the highest rate in January, Cancelmi said. By March, that had declined to 5%.
Tenet has administered more than 327,000 COVID vaccine doses.
"For now, COVID does remain a real and ongoing threat, and we have learned to address it as part of what we do versus the exception," Rittenmeyer said.
Congress' decision to delay Medicare payment cuts for the rest of 2021 meant Tenet avoided what would have been a $46 million headwind this year, Cancelmi said. Tenet also recognized $37 million worth of Provider Relief Fund grants in the first quarter, despite not expecting to be able to record any grant income under prior guidelines. The company doesn't expect to record any additional COVID stimulus grants this year.