Tenet Healthcare posts $414M profit in 4th quarter

Tenet Healthcare beat Wall Street expectations Tuesday as it posted a profit of $414 million, or $3.86 per share, in the final quarter of a year of historic challenges.

The fourth-quarter earnings are a jump from a loss of $3 million, or three cents per share, in the same quarter of 2019. The Dallas-based health system reported revenue was up 2.2% at $4.9 billion for the quarter from fourth-quarter revenue in 2019.

Wall Street analysts projected earnings of $1.20 a share on revenue of $4.84 billion.

The results come in a year when the company "has been experiencing operational and financial challenges associated with COVID," officials said in their Securities and Exchange Commission filing. 

That fourth-quarter balance sheet included the benefit of $339 million after-tax grant income, including funding from the $2.3 trillion spending bill passed by Congress in December that included $900 billion in stimulus relief.

“In 2020, we along with so many others faced challenges we had never experienced in the history of our company,” CEO Ronald Rittenmeyer said in a statement. “Our ability to perform under such challenging and constantly evolving circumstances underscores the strength of all of our colleagues within the Tenet enterprise and the positive impact of our multi-year turnaround.”

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For the year, the health system posted a profit of $399 million, or $3.75 a share, up from a loss of $226 million, or $2.19 a share, for the year in 2019. That, too, was partially bolstered by federal relief funding. 

During 2020, the company took an after-tax loss of $240 million, or $2.26 per diluted share, from early retirement of debt transactions. That loss was partially offset by a change in tax accounting method during the third quarter of 2020 of $119 million, or $1.12 per diluted share. It was also offset by a favorable income tax benefit of $88 million, or $0.83 per diluted share, due to an increase in the deductibility of interest expense for income tax purposes as a result of the Coronavirus Aid, Relief and Economic Security Act passed in the spring.

Rittenmeyer said the company continued to improve performance in each of its operating segments, completed a “transformational” ambulatory transaction and continued pivoting toward higher-growth, lower cost-of-care settings amid the challenges posed by the pandemic. In December, Tenet sold its urgent care business for $80 million in a bid, it said at the time, to pivot toward ambulatory care.

The company also improved the level of margin performance at its revenue cycle management company Conifer, Rittenmeyer said. 

The company reported cash and cash equivalents of about $2.5 billion. The company said the cash is $2.184 billion higher than at the end of 2019 in order to ensure sufficient liquidity due to the pressures and uncertainty presented by COVID-19.

The liquidity would also be needed since the company would begin to repay Medicare advances this year. The company received approximately $1.5 billion of Medicare advance payments from the Centers for Medicare & Medicaid Services in 2020.

Tenet said it will begin repaying the advance payments in April 2021 and expects to fully repay the advances before interest starts to accrue in September 2022.

Tenet also announced Tuesday it plans to retire $478 million of 7% senior unsecured notes due in 2025 using available cash on hand. Tenet expects its annual cash interest payments will be lowered by about $33 million as a result.

"Our resilience as an organization was tested, and we outperformed, delivered on our commitments and continued building a framework for our future growth and success,” Rittenmeyer said.