Link to former Tenet thread:
Tenet Shares Suffer Steep Decline
By Jesus Sanchez
Times Staff Writer
12:01 PM PDT, June 23, 2003
Shares of Tenet Healthcare, the nation's second-largest hospital chain, tumbled 25% today after the Santa Barbara-based company said its earnings for the second quarter and the remainder of the year would fall far below expectations.
Tenet's announcement came amid profit-taking and anxiety on Wall Street in advance of a possible interest rate cut coming out of the Federal Reserve's Open Market Committee meeting later this week. At about 11:30 a.m., the Dow Jones average was down 145.31-or 1.58%-to 9055.45, and the NASDAQ and S&P 500 were also in negative territory.
"It's a continuation of the profit taking that actually started last Wednesday," said Norm Wolff, market analyst AG Edwards. "The market has had a tremendous run up over the last several months, and we've been talking that it's due for a correction."
Tenet, which is the target of a federal probe into its Medicare billing procedures, blamed lower than forecast revenues, rising costs and past pricing practices for depressing earnings. Based on partial results, the company projected second quarter earnings per share of two cents, far below the more than 30 cents many industry analysts had been estimating.
The company's financial health will remain poor for the remainder of 2003 and well into next year, Tenet officials said. The company projected earnings of between 40 cents to 50 cents per share for the second half of 2003, which is a fraction of Wall Street's expectations.
"Tenet is navigating through a very challenging transitional period," said Trevor Fetter, president and acting chief executive officer, in a statement. "We are dealing with both industry issues and company-specific issues, most importantly past pricing practices that have placed the company in an especially difficult position. We also are facing lower-than-expected revenue trends and increasing cost pressures."
Fetter added that the company's lower profit projections do not include likely onetime charges related to a corporate restructuring and a review of the value of company assets. Tenet operates more than 100 hospitals nationwide, including 40 in California.
On the New York Stock Exchange, Tenet shares had recovered a bit from earlier lows but was still down $3.67 to $12.57 in heavy trading. Tenet shares have lost about three-fourths of their value since last fall, when a federal investigation was launched into the company's practice of boosting profit with special payments that Medicare makes for the sickest patients. In recent months, the company has stopped billing Medicare for the special fees, known as outlier payments, put a freeze on hospital charges and agreed to give uninsured patients the same discounted rates as insured.
In addition, doctors at the Tenet hospital in Redding, Calif. are being investigated amid allegations they performed unnecessary heart surgeries. The chief executive of a San Diego Tenet hospital has been indicted by a federal grand jury for allegedly violating anti-kickback laws by authorizing illegal payments to doctors to win more referrals of Medicare patients.
Last month, the company's mounting problems forced longtime chief executive Jeffrey C. Barbakow to resign.
Industry analysts said that Tenet's lower profit projections go beyond its Medicare billing problems and reflect new challenges, such as lower reimbursements from managed care and health maintenance organizations and difficulties in raising prices.
Other major hospital chains, in contrast, have been able to increase their managed care reimbursements by up to 6%, according to Robert M. Mains, a health care securities analyst for Advest.
"It isn't just the outliers ... they also have a pricing problem for their managed care reimbursements," Mains said. "Now they are expecting them to go down, in stark contrast to the rest of the industry."
Tenet Previews Second-Quarter Results and Comments on Longer Term Outlook
SANTA BARBARA, Calif.--(BUSINESS WIRE)--June 23, 2003--Tenet Healthcare Corporation (NYSE:THC) today previewed results for its second fiscal quarter ending June 30, 2003, and commented on its longer-term financial outlook.
"Tenet is navigating through a very challenging transitional period. We are dealing with both industry issues and company-specific issues, most importantly past pricing practices that have placed the company in an especially difficult position. We also are facing lower-than-expected revenue trends and increasing cost pressures," said Trevor Fetter, president and acting chief executive officer. "Based on results for April and May, and the recent completion by our new executive management team of a highly detailed, hospital-by-hospital budget review process, we now believe this transitional period will continue through at least the first half of 2004, and its impact on our financial performance will be more substantial than previously anticipated."