Tenet Healthcare Corp., a Dallas-based national health care group, expects to continue feeling the burden of high bad debt levels as long as the U.S. unemployment rate remains high, according to Trevor Fetter, Tenet's chief executive officer.
"As long as jobs are lost and patients have financial stresses causing them not to pay their bills, that will put upward pressure on that bad debt," Fetter said this week at the Reuters Health Summit in New York.
Bad debt is a trailing indicator of the economy's health because as people lose their jobs they have the option of continuing insurance under Cobra plans, he says
The company operates 50 hospitals nationwide - concentrated in California, Florida and Texas. It reported that its bad debt rose to 8.5% of net revenues in the third quarter. The level is up from a year earlier but was lower than management had expected, Fetter says.
"This is about the highest that it has been in most people's experience in this industry over a very long time," he added. "It falls in the category of one of those unsustainable trends in health care. There is just upward pressure on it all the time."
Tenet last week reported a 50% rise in adjusted earnings before interest, taxes, depreciation and amortization to $240 million for all its hospitals in the third quarter, compared with $160 million a year ago, according to a CCR Newsline story last week.
The company reported a net loss of $3 million for the third quarter ended Sept. 30, compared with net income of $104 million during the same period a year ago. Operating income increased 90% to $133 million, compared with $70 million last year.
"Our strategies drove a significant enhancement in earnings through the first three quarters of 2009, making this the second consecutive quarter in which we've generated year-over-year adjusted EBITDA growth of 50% or better," according to Fetter.