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INDIANAPOLIS — A debt swap and expense reductions helped push Tenet Healthcare Corp. to a first-quarter profit, but the hospital operator said Tuesday the slumping economy nibbled at patient admissions.
Dallas-based Tenet lowered contract labor and malpractice costs, among other expenses, during the quarter. But total admissions and the number of patients covered by private insurance both fell slightly.
Private insurance is generally more lucrative than government forms of coverage like Medicaid or Medicare.
Tenet's figures offer some "early warning signs" for the hospital industry, according to Leerink Swann analyst Jason Gurda. He said in a research note that commercial admissions will fall sharply for the industry heading into 2010, due to job losses.
"However, (Tenet) has made some encouraging operating improvements and strengthened its financial outlook ahead of this, in our view," he wrote.
Tenet Chief Executive Trevor Fetter said he was pleased with many trends he saw during the quarter, and his company's balance sheet is stronger than it was at the start of the year. But he said he would "be the last person to declare victory" due to a patient volume decline that followed steady gains last year.
"And with the stock price where it is, I am far from satisfied," he said.
Tenet shares dipped below $1 earlier this year. They closed at $2.52 on Tuesday, up 2 cents from Monday.
Tenet said it earned $178 million, or 37 cents per share, compared with a loss of $31 million, or 6 cents per share, during the same period a year ago. Revenue rose 5 percent to $2.28 billion.
Excluding a one-time gain, the company earned 8 cents per share.
Analysts polled by Thomson Reuters expected, on average, a profit of 3 cents per share on revenue of $2.32 billion.
Tenet saw same-hospital admissions drop less than 1 percent in the first quarter compared with the same quarter last year, which had an extra day due to leap year.
Admissions of patients covered by private insurance fell a leap-year adjusted 2 percent to 34,468.
Fetter noted that as unemployment rises, the number of jobs and companies offering health benefits declines. That leads to fewer patients with private insurance coming to their hospitals.
"All those things together conspire to put downward pressure on the commercial admissions," he said.
Bad debt rose 4 percent to $153 million from $147 million in the same quarter last year. Tenet cited decreased collection rates from uninsured accounts, higher pricing and higher patient insurance deductibles behind the change.
Tenet also noted that employee turnover dropped 22 percent compared to last year, and the hospital operator spent much less on contract labor. Fetter said that was partially due to the economy as well.
Staff members were requesting more work, which cut down on the need to hire from expensive staffing agencies.
"The tough economy has a silver lining in that our labor force is more stable, more productive and eager to work more hours," he said.
Tenet also reported a $19 million reduction in malpractice expenses, which Fetter said was driven by care improvements.
"We're just making fewer errors that lead to fewer malpractice claims," he said.
First-quarter results include a $134 million gain on Tenet's exchange of debt. Tenet offered in January to swap up to $1.6 billion worth of notes due in 2011 and 2012 for new debt due in 2014 and 2019, in a bid to postpone debt obligations and preserve cash amid a tight credit environment.
Tenet also bumped up its full-year outlook. It said Tuesday it expects net income attributable to shareholders to range between a loss of $50 million and an $80 million profit. The company said last month it expected that range to be between a loss of $55 million to a $75 million profit.
Analysts on average expect a loss of 12 cents per share. The company does not provide a per-share outlook.
Tenet, which operates 50 hospitals in 12 states, released some of the results in a preliminary announcement two weeks ago.
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AP Business Writer Damian Troise in New York contributed to this report.
