Becker's Hospital Review

30 CFO / FINANCE Tenet shrinks loss to $5M, plans new $200M cost-cutting drive By Ayla Ellison D allas-based Tenet Healthcare saw its rev- enue slide in the fourth quarter of 2018, but its net loss narrowed year over year. e for-profit hospital operator ended the fourth quarter of 2018 with revenues of $4.62 billion, down from $4.98 billion in the same period a year earlier. Tenet said the decline was primarily due to hospital divestitures and a 76 percent year-over-year decrease in net revenues from the California Provider Fee program. CMS approved the program in December 2017, which resulted in full-year 2017 revenues being recognized in the fourth quarter of that year. Excluding California Provider Fee revenues, patient revenues climbed 4.6 percent on a same-hospital basis from the fourth quarter of 2017 to the same period of 2018. When ad- justed for outpatient activity, same-hospital admissions were down 0.8 percent year over year in the fourth quarter of 2018. Aer factoring in operating expenses and one-time costs, Tenet reported a net loss at- tributable to shareholders of $5 million in the fourth quarter of 2018, compared to the $229 million net loss the company recorded in the same period a year earlier. "We delivered strong results in the fourth quarter and beat consensus expectations for revenue, Adjusted EBITDA and Adjust- ed EPS," Ronald A. Rittenmeyer, executive chairman and CEO of Tenet, said in an earn- ings release. Looking at full-year 2018 results, Tenet re- ported net income of $108 million on reve- nues of $18.3 billion. e company posted a net loss of $704 million on revenues of $19.2 billion in 2017. In December 2017, Tenet expanded a previous- ly announced enterprisewide cost reduction initiative to $250 million. A presentation pub- lished with the company's fourth-quarter financial results said Tenet realized $195 mil- lion of cost savings from the initiative in 2018 and expects an additional $55 million benefit in 2019 from annualizing the cost savings achieved by the end of last year. Tenet is continuing its cost-cutting efforts this year by launching a new $200 million cost reduction initiative. e company ex- pects to realize $50 million of savings from the new initiative in 2019, according to the earnings presentation. "2018 was a year of significant change for the company," Mr. Rittenmeyer said. "We mean- ingfully improved our financial results and made significant progress to create a more efficient, agile enterprise with new leadership helping to reshape strategy and drive consis- tency in execution. We expect to make addi- tional progress in each of our business seg- ments in 2019 in line with our plan to deliver long-term sustainable growth." n Tax-exempt hospitals to get an IRS checkup on federal law compliance By Kelly Gooch S enate Finance Committee Chairman Chuck Grassley, R-Iowa, sent a letter to the IRS asking the agency for information about nonprofit, tax-exempt hospitals and whether they are meeting statutory requirements under federal law, the senator's office announced Feb. 25. In his letter to IRS Commissioner Charles Rettig, he asked for an update on agency reviews of nonprofit hospital compliance with requirements for tax-exempt status. Mr. Grassley said he wants data on the number of hospitals that are compliant with section 501 of the Internal Revenue Code stipulating that nonprofit, tax-exempt hospitals meet requirements regarding community health needs assess- ment, financial assistance policy, charges billed to patients and billing and collection. The senator also asked about the status of IRS reviews of noncompliant hospitals. "Making sure that tax-exempt hospitals abide by their com- munity benefit standards is a very important issue for me. As chairman of the Senate Judiciary Committee, I oversaw an investigation into the billing practices of the [St. Joseph, Mo.-based] Mosaic Life Care hospital. That investigation resulted in debt relief of almost $17 million for thousands of low-income patients. This issue is still just as important to me now that I am chairman of the Senate Finance Com- mittee," Mr. Grassley wrote. This is not the first time Mr. Grassley has probed compliance of nonprofit hospitals. About a year ago, the senator and then-Senate Finance Committee Chairman Orrin Hatch of Utah asked the IRS for information about how the agency reviews nonprofit hospital compliance with section 501. Mr. Grassley said the agency provided information on that process, and he now seeks the agency's help in his efforts "to ensure the Internal Revenue Code is enforced vigilantly." n

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