Becker's Hospital Review

34 FINANCE 34 Tenet Posts Unexpected $59M Loss in Q1 By Ayla Ellison D allas-based Tenet Healthcare reported a net loss of $59 million in the first quarter of fiscal year 2016, down from a net profit of $47 million in the same period a year prior. Tenet recorded revenue of $5 billion in the first quarter, up 14 percent from $4.4 billion in the same period the year prior. Fueled by 2.2 percent growth in adjusted admissions, same-hospital patient revenue grew 6 percent year over year. The hospital operator posted strong results in its ambulatory segment in the first quarter of FY 2016. On a pro forma basis, Tenet said net operating revenue increased to $429 million, up 45.4 percent from $295 million in the first quarter of the year prior. "I am delighted with Tenet's very strong start to 2016," said Tenet Chairman and CEO Trevor Fetter. "Our hospitals and outpatient centers generated strong growth, and the benefits of our diversified strategy are becoming increasingly evident." However, after accounting for an increase in operating expenses and litigation reserves, Tenet ended the quarter in the red. The for-profit hospital operator previously disclosed it is the subject of a criminal investigation by the Department of Justice. The criminal lawsuit arose out of a civil lawsuit filed under the qui tam provision of the False Claims Act. The suit alleges four Tenet hospitals paid illegal kickbacks to clinics that referred undocumented pregnant patients to them for Medicaid-paid deliveries. Undocumented patients are not eligible for regular Medicaid coverage. However, they typically qualify for emergency medical assistance when they deliver their babies. In the first quarter of FY 2016, Tenet increased its reserve for the litigation from $238 million to $407 million. n Weak Flu Season, Lawsuits Take Toll on LifePoint's Bottom Line By Ayla Ellison A weak flu season and expenses tied to legal settlements caused Brentwood, Tenn.-based LifePoint Health's profit to fall 44.5 percent to $21.6 million in the first quarter of fiscal year 2016. The hospital operator saw revenue increase to nearly $1.6 billion in the first quarter, up 25.1 percent from revenue of $1.3 billion in the same period the year prior. LifePoint's revenue gains were partially offset by a 5.3 percent year-over-year decrease in same-hospital admissions. That was attributable to a weak flu season and the trend of lower acuity volumes moving from the inpatient to the outpatient setting, Executive Vice President and CFO Leif Murphy said in an earnings call. Flu-related emergency department visits were down 13.9 percent year over year in the first quarter, while all other emergency department visits were up 2.1 percent. The hospital operator also incurred a $24.7 million charge in the first quarter to settle cardiology-related lawsuits. LifePoint self-reported the matter to the Department of Justice after discovering two cardiologists conducted improper procedures in the cardiac catheterization laboratories at two hospitals: Vaughan Regional Medical Center in Selma, Ala., and Raleigh (W. Va.) General Hospital. "We are pleased with our first quarter performance, which demonstrates the strength of our strategic plan and our ability to deliver solid operational results," said LifePoint Health Chairman and CEO William F. Carpenter III. "When adjusted for certain one-time items, our financial performance was in line with our expectations." LifePoint ended the first quarter with net income of $21.6 million, down from $38.9 million in the same period the year prior. n Moody's Preliminary Numbers Show Nonprofit Healthcare Profitability Margins at Multi-Year High By Ayla Ellison T he nonprofit hospital annual median revenue growth rate increased to 7.4 percent in fiscal year 2015, surpassing the median expense growth rate for the second consecutive year, according to preliminary FY 2015 nonprofit and public hospital medians from Moody's Investors Service. e continued revenue growth supports Moody's stable outlook on the sector. e outlook is also supported by the median three-year revenue compounded annual growth rate of 5.6 percent. e revenue CAGR exceeded the three-year expense CAGR for the first time since 2011, according to Moody's. With a median operating margin of 3.4 percent and a median operating cash flow margin of 10.3 percent, preliminary profitability margins in the nonprofit healthcare sector are at a multi-year high. However, Moody's expects those margins to soen when the full-year medians are released later this year. e preliminary medians are based on an analysis of audited FY 2015 financial statement for 190 nonprofit healthcare organizations, including freestanding hospitals as well as single- and multi-state health systems. n

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