While Tenet Healthcare Corp. on Tuesday touted an earnings bump for its revenue cycle subsidiary Tuesday, it didn't divulge new details on the ongoing process to offload that business.
Tenet's Conifer Health Solutions generated $99 million in adjusted earnings before interest, taxes, depreciation and amortization in the first quarter of 2019, which ended March 31, up 1% compared to the prior-year period, the company announced Monday. Revenue in the segment, however, plunged 13.6% to $349 million in the quarter due to divestitures by Tenet and other clients.
Dallas-based Tenet announced in February it had entered exclusive talks over a potential deal. On the company's earnings call Tuesday, Tenet CEO Ron Rittenmeyer said the discussions continue, but did not share an estimated date for an announcement.
"I'm as bullish on that as I was in the past," he said.
Not counting $10 million in customer termination fees, Tenet reported Conifer's EBITDA grew 12.5% in the quarter.
Tenet pulled in $4.54 billion in revenue in the quarter, just squeaking by the $4.53 billion estimate from analysts at Zacks Investment Research. That's compared with $4.7 billion in the prior-year period, a 3.3% decline. The company said a similar 2.2% operating revenue decline in its hospital segment was because of divestitures. On a same-hospital basis, net patient service revenue grew 1.9% year-over-year during the quarter, the company said.
Tenet's earnings per share of $0.26 per diluted share fell below Zacks' estimates, which pegged earnings per share at $0.30 in the quarter. That metric was down from $0.95 in the prior-year period.
Tenet's share price was down roughly 4% Tuesday afternoon following the company's earnings call.
Tenet's adjusted earnings before interest, taxes, depreciation and amortization was $613 million in the first quarter, down 7.8% from $665 million in the prior-year period. Tenet wrote that the decline was due to a $38 million increase in malpractice expense, $11 million in losses generated by a risk-based contracting business in California and the $7 million divestiture of the company's former operations in the U.K., Aspen Healthcare.
Tenet's same-hospital adjusted admissions increased 0.6% in the quarter year-over-year, while admissions declined 0.1%.
Revenue per adjusted admission to Tenet's hospitals increased 2.4% in the quarter year-over-year. That puts it ahead of fellow for-profit chain Universal Health Services, which last week posted a 0.4% decline in revenue per adjusted acute-care admission in the quarter.
Dan Cancelmi, Tenet's CFO, said on Tuesday's call that revenue per adjusted admission was in line with expectations from a pricing perspective. He noted the metric was negatively affected by "incredibly strong" acuity in the first quarter of 2018.
UHS' CFO, Steve Filton, similarly said last week that high acuity at the beginning of 2018 negatively affected UHS' revenue per acute-care admission in the recently ended quarter.
Tenet reported a net loss from continuing operations of $27 million in the first quarter of 2019, compared with $98 million in net income in the prior-year period. A number of factors contributed to the loss, including a $47 million pre-tax loss from the early extinguishment of debt. The company said the prior-year-period's figure was inflated from the sale of MacNeal Hospital and other operations.
A.J. Rice, an analyst with Credit Suisse, remarked on the company's earnings call Tuesday that as Tenet sells hospitals, the buyers don't seem to be keeping Conifer as their revenue-cycle provider.
"I would assume if it's doing a good job, you'd have a better chance at holding on to it," he said.
Cancelmi responded that some buyers are more comfortable using their own internal revenue cycle processes.
"It sort of cuts both ways," he said.
Tenet paid $21 million in the first quarter of 2019 to settle various medical malpractice claims, contributing to a $65 million year-over-year decline in EBITDA in its hospital segment.
Raymond James analyst John Ransom pointed out on Tenet's earnings call that the company seems to pay out more in malpractice claims than other for-profit hospital chains.
"I know you can't speak to your peers, but it does stand out as something Tenet struggles with a bit more than the other guys," he said.
The amounts paid out in a quarter depend on whether Tenet decides to resolve large cases rather than proceed to trial, Cancelmi said, adding that some of Tenet's markets are more challenging from a litigation perspective than others.