Tenet Healthcare Corp. lowered its financial outlook for its surgical center subsidiary United Surgical Partners International due to more spikes in COVID-19 cases.
The major hospital chain posted $131 million in net profits for the third quarter of the year and $4.8 billion in net operating revenue. The chain also announced Friday a $1 billion share repurchase program that will expire Dec. 31, 2024.
Tenet's stock sank 30% Friday after its earnings report. Bloomberg reported that stocks of hospital operators plunged Friday after earnings reports from Tenet and HCA Healthcare underwhelmed investors, wiping out more than $5 billion in market value across the group.
In the third quarter, the system worked to “recover from our cyber attack and dealt with a very active COVID spike among our employees, but our operating discipline across our business units allowed us to adapt to the environment and drive strong results,” said CEO Saum Sutaria in a statement.
The system increased its financial outlook for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by $25 million, at the midpoint of its financial range. However, the chain lowered the outlook for EBITDA for its outpatient business USPI by $75 million.
“In the third quarter, multiple things came together, and when performance did not meet our expectations subsequently, we decided now is the time to reduce our guidance in the segment,” Sutaria said during an investor call Friday.
He added that the impact on USPI is “mostly due to short-term disruption” and that Tenet isn’t shifting its long-term plans for the key subsidiary.
One of the obstacles USPI faced in the third quarter was disruptions caused by Hurricane Ian. The storm, which battered Florida and South Carolina, impacted 60 USPI centers, and there remain four that are still not fully operational, according to the company.
Another issue is lingering spikes from COVID-19 that have further strained staff and availability at doctors’ offices. Sutaria said that case cancelations spiked to 20% in July, above the normal cancelation rate of around 15%.
Sutaria added that there is likely to be a seasonal demand for healthcare services in the fourth quarter.
In the hospital segment, Tenet once again faced higher labor expenses as it relied on contract staff to plug vital holes caused by a spike in COVID-19 cases in July.
“Nearly 10% of our clinical staff were out at some point in the month due to COVID,” Sutaria said. “These dynamics led to compressed patient volumes in July and for us increased our procurement of contract labor staff.”
Tenet leaders noted that the chain has tried to be judicial in how it applies contract labor in order to negate the exorbitant cost in workers' rates.
However, the chain admitted that such rates did not go down as much as the chain expected back in February when the financial outlook was released.