U.S. hospital chains see health reform boost to third quarter earnings
By Susan Kelly (Reuters) - U.S. hospital operators Tenet Healthcare Corp and Community Health Systems Inc on Monday said their third quarter results were helped by the effects of President Barack Obama's healthcare law. Patient admissions improved, and Tenet, the third-largest U.S. for-profit hospital chain, treated fewer patients for which it was uncompensated and more patients covered by the Medicaid program for the poor than it did in the preceding quarter. "We drove an accelerating contribution in the third quarter from healthcare reform," said Tenet Chief Executive Trevor Fetter. The company raised the lower end of its 2014 earnings forecast range. Hospitals are benefiting from the extension of insurance coverage to more Americans under the Affordable Care Act, even as the government looks to curb Medicare and Medicaid spending. Tenet and Community Health, the No. 2 U.S. hospital chain, both made sizable acquisitions to position themselves for the changes, with Tenet buying Vanguard Health Systems last year and Community completing the purchase of Health Management Associates earlier this year. Dallas-based Tenet said third-quarter adjusted admissions, which include both inpatient and outpatient figures, at its facilities operated for at least one year jumped 4.9 percent from the same period a year ago. Franklin, Tennessee-based Community Health said its adjusted admissions were flat in the third quarter compared with a year ago, an improvement from the first and second quarters when admissions declined. "The broader trend of improving utilization is pretty evident," said Jefferies analyst Brian Tanquilut. Tenet posted a lower third-quarter net profit due to substantially higher interest expense related to its Vanguard acquisition. Net profit fell to $9 million, or 9 cents a share, from $28 million, or 27 cents a share, a year ago. Earnings before interest, tax, depreciation and amortization, and excluding special items, climbed 59 percent to $459 million from a year ago. Tenet also raised the lower end of the range of its forecast for full-year adjusted EBITDA, and is now predicting a profit of $1.90 billion to $1.95 billion. Community Health trimmed the top end of its 2014 adjusted EBITDA projection, forecasting a range of $2.83 billion to $2.9 billion, compared with its previous forecast of $2.83 billion to $2.98 billion. Community Health said third-quarter net profit rose to $62 million, or 54 cents per share, from $4 million, or 4 cents per share, a year earlier, when earnings were reduced by expenses stemming from a Department of Justice investigation into short-stay admissions at its hospitals. Adjusted EBITDA increased 73 percent to $663 million in the latest third quarter, compared with a year ago. Community Health also said Monday it had reached an agreement in principle and is setting aside a reserve of $75 million to settle a separate DOJ probe into whether its three New Mexico hospitals improperly submitted claims for federal funds through the state’s Medicaid programs. (Reporting by Susan Kelly in Chicago and Vidya L Nathan in Bangalore; Editing by Cynthia Osterman)
