Tenet’s Earnings Rise 18% as Hospital Chain Expands

Tenet Healthcare Corp., the second-largest U.S. hospital chain, said Wednesday that its fiscal first-quarter profit rose 18% on an increase in patient admissions at its hospitals.

Santa Barbara-based Tenet said profit rose to $136.6 million, or 44 cents a diluted share, from $116.2 million, or 38 cents, a year earlier. Revenue rose 9.5% to $2.55 billion during the quarter ended Aug. 31, from $2.33 billion.

The health-care provider has continued buying hospitals and holding down costs as its admissions rise.

“They saw weakness in the spring, but this is a rebound from that,” said Nancy Weaver, an analyst with Stephens Inc. “The same-hospital admission number is excellent.”

Tenet was expected to earn 43 cents a share, based on the average estimate of analysts polled by First Call Corp.

Tenet shares fell $1.31 to close at $27.50 on the New York Stock Exchange.

“We’ve worked hard to capture market share and hold the line on overhead costs in order to mitigate the effect of significant Medicare cuts,” Chairman and Chief Executive Jeffrey Barbakow said in a statement.

Barbakow said the company’s strategy was to build coordinated networks of hospitals and health-care services in specific markets, allowing it to cut excess overhead costs and realize economies of scale.

Tenet’s same-hospital admissions--those at hospitals open more than a year--rose 3.6%, and overall admissions increased 6.6%.

Tenet was the high bidder last week for eight Philadelphia-area hospitals in a bankruptcy hearing for the Allegheny Health Education and Research Foundation. Tenet will pay $345 million for the hospitals if the agreement goes through.

Weaver said the purchase of the Philadelphia hospitals presents Tenet with an opportunity to increase revenue for a low purchase price. But because of the owner’s financial problems, Tenet must quickly improve the hospitals’ performance, she said.

“It’s a great opportunity, but it adds a lot of risks,” Weaver said.

Tenet operates 122 hospitals in 18 states. Only Columbia/HCA Healthcare Corp. operates more facilities in the U.S.