Here are six things to know about the issues CHS and Tenet are facing.
1. Tenet and CHS both reported significant losses in the second quarter of this year. Tenet ended the second quarter of 2017 with a net loss of $56 million, compared to a net loss of $44 million in the same period of the year prior. CHS recorded a net loss of $137 million in the second quarter of this year. Although an improvement from the $1.4 billion net loss the company posted in the second quarter of 2016, the $137 million deficit marked the fifth consecutive quarter the company has posted a loss.
2. Both companies have financial turnaround plans in place and are working to refine their portfolios. However, investors are anticipating another weak quarter from Tenet and CHS after Nashville, Tenn.-based HCA Healthcare’s preliminary financial results fell below expectations. HCA’s net income was down 31 percent year over year in the third quarter of this year, largely due to the effects of this year’s hurricanes.
3. John Morrow, a managing director at Franklin Trust Ratings who analyzes the healthcare industry, told Bloomberg investors “are losing faith” in Tenet and CHS. He said the companies “are probably past their day. I don’t think the Street is going to put up with them any longer.”
4. Investors in CHS and Tenet are hopeful activist shareholders will bring about change at the companies. In August, Tenet’s largest shareholder, Glenview Capital Management, ended an agreement that prevented it from joining efforts by other investors to oust Tenet’s management or force a sale of the company. Tenet shares rallied after the hedge fund ended the pact, according to Bloomberg.
5. Glenview Capital Management may try to replace Tenet’s board as soon as January, a person familiar with the matter told Bloomberg. The company’s longtime CEO Trevor Fetter stepped down this week.
6. CHS shares also surged after its largest shareholder, Shanda Media Limited, boosted its stake in the company to 22.1 percent in August. According to Bloomberg, the investor may want a seat on CHS’ board.
More articles on healthcare finance:
Los Angeles hospital to close, lay off 638 employees
HCA reports $140M hit from hurricanes, expects 31% drop in Q3 profit
Florida hospital to suspend all services as it seeks capital
At the Becker's 11th Annual IT + Revenue Cycle Conference: The Future of AI & Digital Health, taking place September 14–17 in Chicago, healthcare executives and digital leaders from across the country will come together to explore how AI, interoperability, cybersecurity, and revenue cycle innovation are transforming care delivery, strengthening financial performance, and driving the next era of digital health. Apply for complimentary registration now.