Tenet posts surprise $99M profit after expanding cost-cutting plan

Dallas-based Tenet Healthcare, which operates 69 hospitals, saw its financial picture significantly improve in the first quarter of 2018.

The for-profit hospital operator ended the first quarter of 2018 with revenues of $4.7 billion, down slightly from $4.8 billion in the same period of the year prior.

On a same-facility basis, Tenet's ambulatory segment revenue climbed 2.7 percent year over year. Tenet's surgical business, which represents the majority of revenue in the ambulatory segment, saw same-facility revenue grow 2.3 percent year over year, while non-surgical business revenue increased 11.8 percent. Tenet said strong growth in urgent care visits due in part to the severe flu season helped fuel the non-surgical business revenue growth.

Tenet reported a 0.5 percent year-over-year increase in revenue attributable to its business services subsidiary, Conifer Health Solutions. Tenet is exploring the sale of Conifer, and the company is expected to decide whether to sell the business during the first half of this year.

After factoring in operating expenses and one-time costs, Tenet reported net income attributable to shareholders of $99 million, which surpassed the company's expectations and was up significantly from a net loss of $53 million in the same period a year earlier.

"The actions we have taken to be a more efficient, agile and decisive organization have resulted in stronger financial performance," Ronald A. Rittenmeyer, executive chairman and CEO of Tenet, said in an earnings release. "We are continuing our focus on improving quality, growth and financial results and will be exploring additional opportunities to enhance margins and shareholder returns."

After reporting a net loss in the third quarter of 2017, Tenet launched a $150 million enterprisewide cost reduction initiative, which involved renegotiation of contracts with suppliers and vendors, as well as the elimination of about 1,300 jobs. In December, Tenet expanded the cost-cutting plan to $250 million. The company said the plan involves divesting hospitals in non-core markets and cutting 2,000 jobs, or about 2 percent of the company's workforce.

Tenet's hospital divestiture plan is expected to yield more than $1 billion of proceeds. A presentation published with the company's first-quarter financial results said Tenet received approximately $550 million from divestitures in the first quarter of this year.

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