Tenet reports $366M loss, plans to cut 1,300 jobs

Dallas-based Tenet Healthcare ended the third quarter with a net loss, but the 77-hospital chain is launching a $150 million cost reduction plan with an aim of improving its financial picture.

According to a preliminary earnings statement released Friday, Tenet anticipates revenues of $4.59 billion in the third quarter of 2017, down from revenues of $4.85 billion in the same period of the year prior.

Tenet said revenues from the Texas Medicaid Waiver program were $8 million lower than expected in the third quarter of this year, and revenues from Florida's Medicaid program were $2 million lower than expected due to changes with the Low Income Pool program. The company also took an estimated $30 million hit from hurricanes Harvey and Irma. The hurricanes caused Tenet to incur additional expenses and miss out on revenues.

Tenet reported a net loss from continuing operations of $366 million in the third quarter of 2017, compared to a net loss from operations of $9 million in the third quarter of 2016. However, the company said it is taking steps to improve its financial position.

"We are moving quickly and decisively to improve financial results and returns for our shareholders," said Ronald A. Rittenmeyer, executive chairman and CEO, who was appointed to lead Tenet after longtime CEO Trevor Fetter stepped down Monday. 

As part of Tenet's turnaround plan, the company is launching a $150 million enterprisewide cost reduction initiative, which will involve renegotiation of contracts with suppliers and vendors, as well as significant headcount reductions. Tenet said it anticipates eliminating approximately 1,300 positions, including contractors. 

Although the company will realize some savings from actions within its ambulatory care and Conifer business segments, about 75 percent of the savings will come from Tenet's hospital operations, including the elimination of a regional management layer.

Tenet expects to incur pre-tax restructuring costs of about $40 million in the fourth quarter of this year in conjunction with the cost reduction initiative, with substantially all of the costs related to employee severance payments.

The cost cutting plan and workforce reduction are Tenet's latest moves to improve performance and tackle its $15 billion debt load. The company also began a board refreshment process in August, which it moved forward with this week with the appointment of James Bierman to the board as an independent director. Tenet's board now has 10 directors, nine of whom are independent.

Tenet is evaluating strategic options, but it is unclear what those options include. In August, the Wall Street Journal reported Tenet hired banking advisors to assess several strategic options, including the sale of the company. However, two sources familiar with the matter told Reuters Thursday the company called off the sale process to allow it to focus on securing a permanent CEO.

On Friday, Tenet said it is still pursuing several options, but did not specify whether selling the company is still on the table. "We have and will continue to review, analyze and pursue all options to enhance shareholder value," said Mr. Rittenmeyer.

More articles on Tenet:  

Shareholders push for changes at Tenet and CHS: 6 things to know
Moody's: Shareholder pressure may lead Tenet to make drastic changes
Tenet CEO Trevor Fetter steps down

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