Tenet beats expectations despite dip in admissions, revenue
- Tenet Healthcare beat Wall Street expectations Monday, reporting net operating revenues of $3.73 billion for the second quarter of 2018, a 8.6% year-over-year decrease. On a same-hospital basis, net patient revenues increased 3.2% year-over-year to $3.43 billion.
- Total admissions for the quarter decreased by 2.3% year-over-year to 168,453. However, revenue per adjusted admission increased 3.5%, representing higher acuity rates.
- The company once again boosted its 2018 guidance, increasing net income expectations from $115 million to $186 million and revenue from $17.9 billion to $18.3 billion.
Tenet faces a strong headwind in Detroit and Chicago, which leadership said on an earnings call has offset some of the growth the company experienced in other markets. Detroit specifically has been facing lower patient volumes despite heavy investment in that market.
CEO Ron Rittenmeyer said the Dallas-based system has decided to dilute certain service lines in Detroit based on volume, reimbursement rates and growth potential. "These decisions clearly had an impact on our growth," Rittenmeyer said, adding that "these are not systemic issues. We are actively bringing these to a conclusion."
As for its presence in Chicago, Tenet recently signed an agreement to sell its three remaining hospitals in that market to Pipeline Health and TWG Partners, a Chicago-based healthcare investment firm. That deal, which will bring Tenet $70 million, is expected to close in the fourth quarter of this year, subject to regulatory approvals.
Divestitures are helping Tenet pare down its heavy debt load as the system continues to adapt to industry pressures on admission and reimbursement. The company is facing $14.2 billion in long-term debt, down from nearly $14.8 billion at the end of last year. Leadership said on the call Tuesday morning that Tenet plans on bringing in $100 million from divestitures for the year.
The system's healthcare management subsidiary, Conifer Health Solutions, has been eyed by a number of players in the industry, most recently UnitedHealth. Conifer accounted for about 8% of Tenet’s overall revenue in 2017, bringing in $1.6 billion.
In Q2 of 2018, Conifer segment revenues decreased 3.5% to $386 million, down from $400 million in the second quarter of 2017. Tenet attributes this slide to its own divestitures and those made by customers.
Rittenmeyer stressed the fact that Conifer generated $91 million of Adjusted EBITDA in Q2, up 51.7% from $60 million in the second quarter of 2017. "The fact is, look, if the price is right, we'll sell the company," he said. "[But t]he reality is, we've improved the performance of Conifer."
The operator once again saw success with ambulatory segment revenue, posting same-facility revenue growth of 6.9% and net operating revenue of $531 million for the quarter, compared to $472 million in the second quarter of 2017.
- Tenet Health Tenet Reports Results for the Second Quarter
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