Tenet Healthcare Stays Ahead of the Curve

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Shares of Tenet Healthcare Corp. (NYSE:THC) closed Monday’s regular session up 3.09 percent at $48.32 after the hospital operator announced that it had signed an agreement with Aetna Inc. (NYSE:AET). The two-year contract extension provides members of Aetna’s commercial and Medicare Advantage health plans with covered services at Tenet’s entire network of hospitals and outpatient centers, as well as at Tenet Physicians, Inc., a physician contractor.

The good news didn’t stop there for Tenet on Monday — the company reported fourth-quarter and full-year results that came in just ahead of analyst expectations. Fourth-quarter net operating revenues increased 66.7 percent on the year to $3.88 billion, beating the mean analyst estimate of $3.87 billion. For the year, net revenue increased 21.7 percent to $11.1 billion, just ahead of the mean analyst estimate of $11.09 billion.

“An improving sequential-quarter volume trend and solid revenue growth contributed to a strong finish to 2013,” commented President and CEO Trevor Fetter in the earnings release. “We enter 2014 confident in our prospects. While we continue to face industry-wide inpatient volume headwinds, we are well-positioned to capture benefits from the evolving healthcare environment.”

Those volume problems were evident in Tenet’s data. Utilization of licensed beds was down 0.3 percent on the year in the fourth-quarter, and down 1 percent for the year. The number of licensed beds also fell by 0.3 percent and 0.1 percent, respectively. Adjusted patient admissions fell 0.5 percent for the fourth quarter and 1.1 percent for the year, although revenue per admission increased slightly.

The big news for Tenet in 2013 was its $1.8 billion acquisition of Vanguard Health Systems Inc., which pushed the number of hospitals Tenet operated from 49 at the end of 2012 to 77 at the end of 2013. Between this and the implementation of the Affordable Care Act, Tenet had a pretty good, if super volatile, year. Shares are up about 24.5 percent over the past 52-week period, but the stock chart looks like the profile of a jagged mountain range. The market hasn’t quite figured out what to think about a company like Tenet when the environment is changing so rapidly.

Looking ahead, though, Tenet is optimistic. The company provided EBITA outlook in a range between $1.8 billion and $1.9 billion, which compares against adjusted EBITA of $1.3 billion in 2013. For the coming year, analysts are expecting revenues to increase 45.6 percent to $16.16 billion and earnings to increase 55.7 percent to $2.71 per share.

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