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Tenet rebounds in Q2, buoyed by volume recoveries

Dive Brief:

  • Tenet posted a $120 million profit in the second quarter of this year, up from $88 million during the same time last year, following HCA as the second for-profit system to post a rebound, according to financial results released Wednesday.
  • The Dallas-based hospital chain beat Wall Street expectations on earnings and revenue, posting $4.95 billion in revenue, up from $3.65 billion during the second quarter of 2020. As a result, Tenet upped full-year guidance for the second time this year, citing volume growth and operational improvements as well as federal bailout income.
  • The first half of the year has been “better than expected on many fronts,” CEO Ron Rittenmeyer told investors Thursday, but added: “Please realize we’re not claiming any victory, and we’re not relaxing.”

Dive Insight:

It’s still unclear how long it will take for hospital volumes to fully recover after what was hopefully the worst of the pandemic, especially as vaccinations slow and a new delta variant of COVID-19 is on the rise.

But hospital operators like Tenet and HCA are best positioned to ride the tailwinds of a material volume backlog expected in 2022, Goldman Sachs analysts said.

Tenet is getting there, posting inpatient admissions at 91% of pre-COVID-19 levels in the second quarter, and outpatient hospital visits at 95% of pre-COVID-19 levels.

Emergency room visits in the second quarter were at 87% of pre-COVID-19 levels, and hospital surgeries were at 96%. Volumes at its ambulatory surgery centers are at 100% of pre-COVID-19 levels.

Even as hospitals recover with the restart of electives this year, cases and hospitalizations are rising in much of the country, with cases up more than 171% over the last two weeks, according to the New York Times.

“Clearly the variants coupled with the unvaccinated individuals has resulted in an uptick in certain parts of the country,” Rittenmeyer said. “Our COVID inpatient numbers remain low, roughly 4% of our total cases as of now, and while we’ve seen increases in selected markets, given our experience we really are able to manage through this like we did when we were hit with other waves earlier last year.”

The company has shifted its focus away from hospitals and to ambulatory surgery centers where it can perform procedures like knee replacements at a lower cost.

In the second quarter Tenet announced plans to sell five Miami area hospitals to Steward Health Care for $1.1 billion. It also completed the sale of its urgent care platform to Fastmed for $80 million in April.

As of June 30, the chain operated 65 hospitals and 317 ASCs across the country.

Tenet’s hospital segment brought in $4.09 billion in revenue in the second quarter, compared to $3.08 billion during the same time last year. Its ambulatory segment revenues reached $664 million, up from $368 million during the same time last year.

And Tenet’s revenue cycle management arm, Conifer, brought in $319 million in revenue, compared to $305 million during the same time last year.

Expenses though in the quarter rose by 19.6%, driven in part by labor costs and other operating expenses.

Tenet also included $24 million pre-tax in COVID-19 grant income in the second quarter, compared to $523 million during the same quarter last year.

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