01—Abstract
Summary
Summary of the 10-K filed February 24, 2009. Cited figures are marked; the original filing is the authoritative source.
Tenet Healthcare Corporation, an investor-owned health care services company, operates general hospitals and related facilities.
At December 31, 2008, its subsidiaries operated 53 general hospitals (including three held for divestiture in discontinued operations), a cancer hospital and a critical access hospital, with 14,352 licensed beds in 12 states. Net operating revenues rose to $8.663 billiona in 2008 from $8.167 billion in 2007, and the company reported net income of $25 million, compared with a net loss of $89 million in 2007. Income from continuing operations was $62 million, or $0.13 per diluted share, versus a loss of $53 million in 2007.
Operating income was $300 million, and shareholders' equity improved to $103 millionb from $54 million. The company continues to face significant industry headwinds. Same-hospital commercial managed care admissions declined 3.0% in 2008, the provision for doubtful accounts rose to $632 million, and the self-pay collection rate fell to approximately 33% from 35%.
Cash flow from operations was $208 millionc, down from $326 million, and the company had total long-term debt of approximately $4.8 billion. Management also disclosed that it reported losses from continuing operations for 2003 through 2007 and is executing a turnaround strategy. Key risks include regulatory and Medicaid funding pressures in California and Florida, union organizing activity, and nursing shortages.
Near-term actions include the February 10, 2009 definitive agreement to sell USC University Hospital and USC Kenneth Norris Jr. Cancer Hospital to the University of Southern California, targeted for completion by March 31, 2009, and an open offer to exchange up to $1.6 billiond of notes maturing in 2011 and 2012 for new senior secured notes maturing in 2015 and 2018, with higher interest rates. The company also closed Irvine Regional Hospital and Medical Center on January 15, 2009, plans to close Community Hospital of Los Gatos on April 10, 2009, and is relocating its headquarters to downtown Dallas in the fourth quarter of 2009.
02—Key points
Key Highlights
- Net operating revenues increased to $8.663 billion in 2008 from $8.167 billion in 2007.
- Net income was $25 million in 2008, compared with a net loss of $89 million in 2007; income from continuing operations was $62 million, or $0.13 per diluted share.
- Same-hospital commercial managed care admissions declined 3.0% in 2008, while managed care net patient revenue rose to $4.6 billion.
- Provision for doubtful accounts increased to $632 million from $561 million, and the self-pay collection rate declined to approximately 33% from 35%.
- Cash provided by operating activities was $208 million in 2008, down from $326 million in 2007; long-term debt was approximately $4.8 billion at year-end.
- A definitive agreement to sell USC University Hospital and USC Kenneth Norris Jr. Cancer Hospital was reached on February 10, 2009, targeted to close by March 31, 2009.
- An open exchange offer of up to $1.6 billion of 2011 and 2012 notes for new senior secured notes maturing in 2015 and 2018 could increase interest expense.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 24, 2009Financial Statements
| Operating Income | $311.00M |
| Interest Expense | $418.00M |
| Net Income | $25.00M |
| EPS (Basic) | $0.05 |
| EPS (Diluted) | $0.05 |
| Shares Outstanding (Basic) | 476.35M |
| Shares Outstanding (Diluted) | 478.61M |
05—Questions
Frequently Asked Questions
How did Tenet's financial performance change in 2008?
Net operating revenues grew to $8.663 billion from $8.167 billion, and the company returned to net income of $25 million from a net loss of $89 million in 2007. Operating income rose to $300 million from $260 million, and shareholders' equity increased to $103 million from $54 million.
What are the main operating pressures facing Tenet?
The filing cites declining patient volumes, particularly commercial managed care admissions (down 3.0% same-hospital), a high level of uninsured and underinsured patients, rising bad debt (provision for doubtful accounts of $632 million), labor cost pressures from union activity and nursing shortages, and supply cost increases.
How much debt does Tenet carry and what refinancing is underway?
Long-term debt, net of current portion, was $4.778 billion at December 31, 2008. In early 2009 Tenet offered to exchange up to $1.6 billion of notes maturing in December 2011 and June 2012 for new senior secured notes maturing in 2015 and 2018. The filing states the new notes will carry higher interest rates, increasing interest expense.
What divestitures and hospital closures did Tenet announce?
Tenet agreed on February 10, 2009 to sell USC University Hospital and USC Kenneth Norris Jr. Cancer Hospital to the University of Southern California, with completion targeted by March 31, 2009. It closed Irvine Regional Hospital and Medical Center on January 15, 2009 and plans to close Community Hospital of Los Gatos on April 10, 2009.
What legal and regulatory matters could affect Tenet's results?
The filing describes a wage and hour settlement in California with liability between $62 million and $85 million, subject to final approval on May 5, 2009, and an ongoing review by the Office of Inspector General and the Department of Justice of inpatient rehabilitation admissions. It also notes potential Medicaid reductions in California and Florida and proposed changes to Medicare payment rules.
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