Tenet Posts Wider Loss, Gets New Subpoena

Tenet Healthcare Corp. (THC), a hospital operator that is the target of civil and criminal investigations, on Tuesday said its quarterly loss more than doubled, hurt by unpaid patient bills and special charges.

Tenet, whose shares were down 5 percent, also said it had received a subpoena regarding its hospitals in New Orleans and that its chief financial officer intends to leave the company after just a year and a half on the job.

The second-quarter net loss widened to $426 million, or 91 cents per share, from $195 million, or 42 cents, a year earlier. It was Tenet's sixth consecutive quarterly loss.

The latest quarter included one-time charges totaling 78 cents a share, divided evenly between continuing operations and discontinued operations.

Revenue fell 3.3 percent to $2.57 billion.

Sheryl Skolnick, an analyst at Fulcrum Global Partners, said Tenet's operating results deteriorated because the company did not attract enough paying patients. Tenet has a significant presence in Texas and Florida, where a large proportion of residents do not have health insurance, she said.

However, Joseph Chiarelli, an analyst at Oppenheimer who has a "buy" rating on Tenet, said the company's turnaround is on track with rising revenue per patient and its results should improve as the year progresses.

Tenet has about $1.2 billion in cash following a debt offering in June. Analysts say the $1 billion debt offering improved the company's liquidity.

Tenet's regulatory and legal difficulties include an investigation into how it billed Medicare, lawsuits alleging that two doctors performed unnecessary heart surgeries at a hospital Tenet used to own, and an indictment against a Tenet hospital and two of the hospital's executives alleging violations of laws against "kickback" payments.

Tenet's provision for doubtful accounts, or patient bills unlikely to be collected, was $499 million in the second quarter, including $204 million for patients' account balances after insurance payments. In the second quarter of 2003, the provision was $236 million.

Tenet announced plans earlier this year to dispose of 27 hospitals as it tries to return to profitability and extricate itself from regulatory difficulties.

Tenet in a filing with the Securities and Exchange Commission (search) said the federal prosecutor in New Orleans issued a subpoena on July 30 requesting documents regarding physician relationships and financial arrangements at three hospitals.

E. Peter Urbanowicz, Tenet's general counsel, told a conference call the subpoena is part of the government's examination of hospital-physician relationships across the country and an offshoot of an investigation into an HMO that Tenet partly owns.

Tenet also said Chief Financial Officer Stephen Farber was resigning to resume his career on Wall Street. Farber, in a statement, said the company's plan to move its headquarters to Dallas from Santa Barbara, Calif., early next year played a role in his decision.

Farber renegotiated Tenet's credit agreements and launched plans to divest more than 40 hospitals.

Tenet shares were down 55 cents to $10.63 in afternoon trade on the New York Stock Exchange (search), where they were among the most active issues. The shares fell as low as $9.99 earlier in the session.