Dive Brief:
- Tenet Healthcare reported hospital patient revenue of $3.6 billion for the first three months of 2018, a 6.7% year-over-year increase.
- Total admissions for the quarter slightly increased by 0.3% year-over-year for the quarter to 179,208. Higher acuity services contributed to positive volume growth at the chain's hospitals.
- The company increased its 2018 guidance, citing an increase in net income in continuing operations year-over-year for the quarter. It also slowly chipped away at its debt.
Dive Insight:
Tenet has been working to pare down a heavy debt load as it adapts to industry-wide pressures on admissions and reimbursement. It announced in January the company will restructure and lay off 2,000 employees. That move has made the company "more agile and more decisive and shortened the time frame from idea to action," CEO Ron Rittenmeyer said on an earnings call.
Tenet's long-term debt is $14.2 billion as of March 31, down from $14.8 billion at the end of 2017.
Tenet has seen its struggles with shareholders, including a push by its largest shareholder to more aggressively cut costs. In addition, former long-time CEO Trevor Fetter announced he would resign and stepped down sooner than expected.
Wall Street applauded the results, sending Tenet’s shares up by at least 20% in mid-afternoon trading. Analysts noted the expected bump from the severe flu season driving higher acuity cases, but also noted operational changes to cut costs.
The company has also trimmed its number of hospitals to 69, a net loss of seven hospitals compared to a year earlier.
Those moves did remove some debt but also contributed to a 4.1% decrease in net operating revenue in hospital operations ($3.9 billion). Tenet cited the divestitures and a decline in health plan revenues as the reasons.
The operator saw a 9.5% increase in its ambulatory segment, producing $498 million in net revenue.
The trends highlight how hospitals, while still reliant for the bulk of their profits on inpatients, are seeing rising growth in outpatient care.
"We gained more confidence on HCA & THC, which have been adapting aggressively to the lower cost ambulatory setting," Ana Gupte, a Leerink Partners analyst, wrote in an April 11 note after a roundtable with CEOs and C-suite types.
During the first quarter of 2018, the chain's revenue cycle management arm Conifer saw revenue increase 0.5% to $404 million, up from $402 million in the first quarter of 2017. Income available to shareholders was $98 million for the quarter, compared to a net loss of $52 million during the same time period last year.
The company has been making changes like exiting markets and de-emphasizing services that are under-utilized in its facilities.
Tenet completed the sale of Chicago-area Loyola Medicine in March and is interested in selling its remaining Chicago hospitals. The company also is looking to sell Golden State Health Plan in California, which Rittenmeyer anticipates will be sold in Q2.
On Tuesday, the Dallas-based company announced it completed the sale of Des Peres Hospital in St. Louis.
At the same time, a large push is being made on surgical and urgent care facilities. Last week, Tenet purchased the remaining 15% in United Surgical Partners International, increasing its ownership to 95%.
It also launched its 100th urgent care facility. The latest, in El Paso, Texas, is its sixth in that market. Rittenmeyer said the El Paso facility is co-branded with the other urgent care markets in the area, which will be a strategy moving forward as Tenet builds out lower acuity care settings.