Tenet posts $97M in profit in Q1 as hospitals 'exceeded expectations'

Tenet Healthcare posted a $97 million profit in the first quarter of the year thanks to better than expected patient service revenue and a robust performance in its ambulatory surgical division.

The $97 million in net operating income reported on Wednesday was slightly above the $94 million Tenet generated in the first quarte of 2020, right as the pandemic started to accelerate in the U.S.

“Nearly all of our hospital markets exceeded our expectations,” said Daniel Cancelmi, Tenet’s chief financial officer, during an earnings call Wednesday. “Our hospitals are performing more consistently month to month.”

The system’s net patient service revenue per adjusted admission was up 19% on a same-hospital basis compared to the first quarter of 2020.

Overall, Tenet Wednesday reported $3.9 billion in revenue for the hospital segment, up by nearly 3% from the $3.8 billion in the first quarter of 2020. Patient service revenue was also $3.6 billion in the first quarter compared with $3.5 billion in the first quarter of 2020.

“The increase in revenues was primarily due to higher patient acuity and commercial payer mix, which more than offset lower patient volumes as a result of COVID,” Tenet said in its earnings report. “The higher patient acuity resulted from the combination of reduced lower-acuity cases driven by the pandemic and the company’s on-going strategic focus on higher-acuity services.”

Tenet’s patient volumes continue to be down compared to pre-pandemic levels in 2019, as the lingering impact from the pandemic continues to affect the hospital.

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The chain’s hospital admissions in the first quarter were 85% of what they were compared to the same period in 2019. That is slightly below 2020 figures, where admissions were 89% of what they were in the first quarter of 2019.

Emergency room volumes continue to be down, with Tenet reporting only 73% of the admissions that it saw in the 2019 period. During the second quarter of 2020, when hospitals first started to feel the brunt of the pandemic, ER admissions were down to 64% of what they were in 2019.

Tenet also posted adjusted earnings before interest, taxes, depreciation and amortization of $740 million excluding any relief funding for COVID-19.

“The results in Q1 were driven by our continued strong business fundamentals throughout the company,” said CEO Ronald Rittenmeyer in a statement.

Another bright spot for Tenet was the performance of its ambulatory surgical business, which the system greatly bolstered last year by the acquisition of up to 40 surgery centers.

The ambulatory segment’s revenue per surgical case was up nearly 5% compared to 2020, Tenet reported.

Rittenmeyer said that in the first quarter United Surgical Partners International, Tenet’s ambulatory surgery subsidiary, reported 16 new service lines that include total joint, spine and robotic-assisted surgeries.

“By every measure, USPI had a great quarter,” he added.

The pandemic has accelerated the trend of hospital systems buying up ambulatory surgery centers because of the savings they can provide.