Dive Brief:
- Tenet Healthcare beat Wall Street expectations on revenue in the third quarter due to cost control measures and sustained revenue growth at its facilities.
- The for-profit operator’s ambulatory care and hospital segments both experienced volume growth, with both divisions' earnings coming in “well above” Tenet’s expectations, said CFO Dan Cancelmi during a call with investors on Monday.
- Executives raised the lower end of Tenet’s full-year revenue guidance. The operator now expects to capture between $20.3 billion and $20.5 billion this year.
Dive Insight:
Tenet posted $5.1 billion in net revenue for the third quarter, up from $4.8 billion in the prior year period. Profit was $101 million, down from $131 million in the same period last year.
This is the third time this year Tenet Healthcare has raised its financial projections, Cancelmi told investors. Tenet’s peers HCA Healthcare and Community Health Systems both announced they would downwardly revise their lower-bound guidance for the year following third quarter earnings.
The Dallas, Texas-based health system’s portfolio includes ambulatory service centers operated by United Surgical Partners International, acute care and specialty hospitals, imaging centers, ancillary outpatient facilities, micro-hospitals and physician practices.
Same-facility patient revenues in its ambulatory care footprint grew 7.9% year over year in the third quarter. Same-hospital net patient revenue per adjusted admission increased 3.2% year over year.
Admissions grew in Tenet’s ambulatory and hospital footprint. Same-facility, system-wide ambulatory surgical cases increased 4.1% from the prior year period. Same-hospital admissions increased 0.6% year over year, with non-COVID-19 admissions up 5%.
Tenet CEO Saum Sutaria attributed its third quarter earnings performance to its mixed portfolio, as well as its cost containment strategy which was first announced last year.
Tenet is the latest for-profit to call out the impact of rising physician fees following the implementation of the No Surprises Act, which prevents patients who unknowingly receive out-of-network care from being stuck with large bills. Physician staffing firms have asked for extra payments to offset their inability to balance bill, pressuring hospitals.
Sutaria told investors that the operators has already implemented strategies to contain the problem.
“We understand that these fees are going up. But all year long and going into next year, we're planning them in the way we issue guidance,” Sutaria said. “We continue to manage cost pressures from medical fees… while [they were] higher than last year, [they] remained relatively flat from Q2 to Q3 '23.”
Tenet’s medical fees were $34 million higher in the third quarter than the same period last year, Sutaria reported, which was “consistent” with expectations. Overall, the costs were up 15% year-to-date. However, they may have been higher had the hospital not taken proactive measures to address rising physician fees, Sutaria said.
“Through the pandemic, we began a process of restructuring our staffing contracts market by market, which includes decisions on in-sourcing services where that is most beneficial. This has helped to mitigate the magnitude of expense increases in our business,” the CEO said.
Tenet also reported progress on its labor agenda. The CEO said Tenet's recruitment and retention efforts had yielded a “substantial reduction” in contract labor usage. Now, Tenet spends just 3.1% of its consolidated salaries, wages and benefits expenses on contract labor — “which is the high end of pre-pandemic levels,” according to the CEO.
