Tenet Healthcare raised its annual earnings forecast on Monday after second-quarter financials beat Wall Street expectations due to a rebound in surgical procedure volumes and a decrease in contract labor costs.
The Dallas-based for-profit system posted $123 million in net income and a revenue of $5.1 billion in the quarter.
Tenet is the third for-profit hospital to raise its revenue forecast for the year following its second quarter performance. Last week, Tenet rivals HCA Healthcare and UHS both upwardly adjusted revenue predictions after similarly beating Wall Street expectations.
Tenet reported same-hospital admissions grew 3% in the quarter compared with the same period last year, including a 5% growth in non-COVID patients. Ambulatory surgical cases grew almost 7%.
Demand for low-acuity and outpatient surgical procedures was a main driver of growth in the quarter, Tenet CEO Saum Sutaria told investors on a Monday call, echoing comments from other for-profit hospitals.
Tenet saw particular growth in orthopedic and gastrointestinal volumes, according to Sutaria.
Tenet expects the trend to continue through the end of the year as patients elect to receive services they deferred during the pandemic, and continue to develop a preference for “more convenient access to procedural care,” Sutaria said.
Tenet upwardly revised expectations for total surgical volumes, with management telling investors on the call that the company now expects 5% to 6% growth compared to its prior forecasts of 3% to 4% growth.
Tenet plans to continue expanding its ambulatory services footprint to meet expected patient demand, Sutaria said.
Tenet’s United Surgical Partners International subsidiary added 12 ambulatory centers to its platform in the quarter, and Tenet has 30 centers in development or under construction, the CEO said.
Tenet’s contract labor costs dropped to 4.3% of salaries, wages and benefits in the second quarter, compared with 6.2% in 2022, CFO Daniel Cancelmi said on the call.
Tenet is the latest healthcare system to report that the cooling healthcare labor market has resulted in favorable financial results. Last week, HCA CEO Sam Hazen told investors that HCA’s contractor labor expenses and turnover were declining.
Overall, Tenet’s operating expenses rose compared to last year, with salaries up close to 8%, supplies up 10% and other net operating costs up 12% — something that analysts said they anticipated after seeing earnings from HCA and UHS.
The costs didn’t appear to spook investors — on Tuesday, the market opened with Tenet’s stock trading approximately 2% higher than at close.