- Tenet's profit more than tripled to $88 million for the second quarter despite a pandemic that has strained the healthcare industry, thanks to $523 million of income from federal relief funds, along with various cost-cutting initiatives, Tenet disclosed Monday.
- The Dallas-based hospital operator beat Wall Street expectations on earnings but missed on revenue for its second quarter, generating revenue of $3.6 billion. That's 20% lower than the second quarter of 2019.
- The company did not issue an updated forecast for the year after pulling its guidance in April due to the uncertainty brought on by the novel coronavirus. Its stock was down slightly in morning trading Tuesday on the results.
Despite patient volume nearly falling off a cliff in April — the month the industry was hit hardest by the virus — Tenet reported volume shot back up to near normal in June to finish out the second quarter.
In fact, hospital surgeries were just shy (90%) of pre-COVID-19 volumes in the month of June. It's quite the turnaround from April when hospital surgeries were down to 45% of expected volume, and surgeries at Tenet's outpatient surgery unit, USPI, were nearly wiped out altogether, though they were back up to 80% of pre-COVID-19 levels by July.
Despite an improving picture, overall same-hospital admissions declined about 20% year over year in the second quarter.
Tenet was particularly exposed to the effects of the virus as its outpatient branch USPI operates 264 ambulatory surgical centers, along with dozens of imaging centers and surgical hospitals. That unit reported operating revenue fell nearly 30% to $368 million for the quarter. Same-facility surgical cases fell nearly 42% year over year.
CEO Ron Rittenmeyer previously said he viewed May as the "beginning of the recovery" for hospital operations. The characterization has largely played out as procedures and volumes have rebounded in the following months even as some areas of the country have seen increasing cases that threaten to slow elective volumes.
Tenet's hospital footprint is concentrated in 10 states — Alabama, Arizona, California, Florida, Illinois, Massachusetts, Michigan, South Carolina, Tennessee and Texas — many of which are currently experiencing surging COVID-19 cases.
Brian Tanquilut, an analyst with Jefferies, noted that investors are cautiously optimistic as the rebound does provide optimism but is also mitigated by the fact that Tenet has significant exposure to hotspots, especially south Florida, San Antonio and Phoenix.
"Our volumes in July have generally held steady or improved compared to June despite the spike of COVID cases in July in many of our markets," CFO Dan Cancelmi said during Tuesday's call with investors.
Tenet's lower expenses also bolstered the surge in net income. Expenses for salaries, wages, and benefits were 13% lower in the second quarter compared to the prior-year period. Supply expenses were down almost 19%.
Despite the pandemic, Tenet and its peers for-profit hospital operators have seen profits buoyed by federal relief funds, sparking significant criticism amid a historic pandemic that's thrown an estimated 50 million Americans off their jobs and shuttered the doors of many smaller practices.
Nashville-based HCA's second quarter net income surged 40% compared with the prior-year period. Community Health Systems reported net income of $70 million after posting a substantial loss of $167 million the prior-year period. UHS also posted a bump in its second quarter net income thanks in large part to relief funds.
As of Monday, Tenet has received $1.5 billion in advanced Medicare loans, which must be paid back by April next year, and more than $850 million in grants from congressional relief packages.