The Tenet Healthcare Corporation this week reported adjusted earnings of $203 million for the third quarter of 2010, a decrease of $37 million, or 15.4 percent, compared to $240 million for the third quarter of 2009.
"The soft economy continued to challenge our volume growth and exerted pressure on our operating margins," said Trevor Fetter, Tenet's president and CEO. "We also had expected the revenues associated with the California provider fee plan to be recognized in the third quarter; it is now expected the recognition will occur in the fourth quarter pending CMS's anticipated approval of the managed care portion of the plan before year end."
Dallas-based Tenet Healthcare is one of the largest for-profit healthcare delivery systems in the nation with 49 acute care hospitals in 11 states.
Tenet's net income attributable to common shareholders for the third quarter of 2010 was $932 million, or $1.68 per diluted share, compared to a net loss of $3 million, or $0.01 per diluted share, for the third quarter of 2009. The company raised the lower end of its outlook range for 2010's adjusted EBITDA to a new range of $1.050 billion to $1.100 billion.
"In response to the continued adverse impact of a soft economy on our volumes, we took aggressive actions on our operations," said Biggs Porter, Tenet's chief financial officer. "As a result of these actions, our adjusted EBITDA was essentially flat after excludingthe impact of certain items. Last year's third quarter benefited from the recognition of $20 million in favorable items, including favorable cost report adjustments, HMO distributions, and pension adjustments."
Porter said Tenet's third quarter adjusted EBITDA this year was reduced by $16 million as a result of the aggregate net impact of discount rate effects on malpractice and workers' compensation expense related to the declining interest rate environment, incremental costs related to healthcare IT initiatives and net of favorable, but lower, cost report adjustments.
Tenet's third quarter 2010 adjusted EBITDA performance was adversely impacted by the continuing effects of the recession, including declining commercial enrollment and the deferral of elective procedures reflecting economic uncertainty and an increase in patient copays and deductibles. Admissions and outpatient visits declined by 3.5 percent and 2.0 percent, respectively. Adjusted admissions declined by 1.8 percent.
The hospital company's net operating revenues were $2.262 billion, unchanged compared to net operating revenues in the third quarter of 2009. Tenet's total controllable operating expenses increased by $43 million, or 2.4 percent. Healthcare IT initiative expenses increased by $4 million compared to the third quarter of 2009.
Porter said Tenet's bad debt expense declined by $6 million, or 3.1 percent. The ratio of bad debt expense to net operating revenues declined to 8.3 percent, a decline of 20 basis points compared to 8.5 percent in the third quarter of 2009.
Tenet's uninsured admissions and outpatient visits declined by 5.9 percent and 2.7 percent, respectively. However, charity admissions and outpatient visits grew by 16.0 percent and 11.5 percent, respectively, contributing to a $4 million increase in the estimated costs of providing care to charity and uninsured patients to $133 million, an increase of 3.1 percent.