Hospital operator Tenet Healthcare Corp.'s first quarter earnings fell 20.5% reflecting mainly higher bad debt expenses, despite an estimated 2% rise in revenues.
Higher salary and other expenses caused four of Dallas-based Tenet's 50 hospitals to underperform, and the company is taking actions to improve results at those facilities, Tenet President and CEO Trevor Fetter said on a conference call with analysts.
U.S. hospitals have struggled in the weak economy as patients who lost jobs and health insurance put off medical treatments. But the number of patients seeking treatment on an outpatient basis is rising, which lifted Tenet's adjusted admissions figure by 2.8% in the quarter.
According to Fetter, "Our solid first quarter performance allowed us to raise our 2012 outlook for adjusted EBITDA by an additional $25 million. This was our second outlook increase this year."
Total admissions slipped 0.1% as a result of a mild flu season, but emergency room visits increased 5.2%, and surgeries were up 6.6%. Expense for bad debt, or bills not expected to be paid, rose 6.0% to $193 million. The company said supply costs were well controlled.
"While bad debt expense remains elevated as you would expect in the soft economic environment, it remains stable and within our anticipated range," Fetter said.
Tenet operates 50 hospitals and more than 100 outpatient centers. It maintained its 2012 outlook for adjusted EBITDA in the range of $1.25 billion to $1.375 billion, which it had raised in April. The company said it anticipates a payment from the state of California and one for a national healthcare information technology initiative to boost profit in the fourth quarter.
Hospitals across the sector have reported relatively stable patient volumes, with the economic recovery still attempting to take hold, said Jefferies analyst Art Henderson. Uncertainty over what aspects of President Obama's health care reform program may survive a U.S. Supreme Court ruling on the law in June is also casting a pall over the hospital sector, he added.