DALLAS--(BUSINESS WIRE)--
Tenet Healthcare Corporation (THC) reported net income from continuing operations attributable to Tenet common shareholders of $108 million in 2018 compared to a $704 million net loss from continuing operations in 2017. In the fourth quarter of 2018, the Company reported a $5 million net loss from continuing operations attributable to Tenet common shareholders compared to a net loss of $230 million in the fourth quarter of 2017. Adjusted EBITDA was $2.560 billion in 2018, up 4.7 percent from $2.444 billion in 2017. In the fourth quarter, Adjusted EBITDA was $684 million compared to $840 million in the fourth quarter of 2017; timing differences associated with the California Provider Fee program impact year-over-year comparability in the fourth quarter but do not impact the comparability of full year results.
“We delivered strong results in the fourth quarter and beat consensus expectations for revenue, Adjusted EBITDA and Adjusted EPS,†said Ronald A. Rittenmeyer, Executive Chairman and CEO. “2018 was a year of significant change for the company. We meaningfully improved our financial results, and made significant progress to create a more efficient, agile enterprise with new leadership helping to reshape strategy and drive consistency in execution. We expect to make additional progress in each of our business segments in 2019 in line with our plan to deliver long-term sustainable growth.â€
Results for the Quarter Ended December 31, 2018
Hospital Operations and Other Segment
Net operating revenues in the Hospital Operations and other segment were $3.843 billion in the fourth quarter of 2018, down 8.4 percent from the fourth quarter of 2017. The decline in revenue was primarily due to hospital divestitures, partially offset by same-hospital revenue growth. The Company’s hospitals in California also faced a difficult comparison in the fourth quarter due to the California Provider Fee program: in the fourth quarter of 2018, the Company recognized $64 million of net revenues from the California Provider Fee program compared to $267 million recognized in the fourth quarter of 2017 due to CMS’ approval of program in December of 2017, which resulted in the full year 2017 revenues all being recognized in the fourth quarter of 2017.
On a same-hospital basis, net patient revenues after implicit price concessions were $3.561 billion in the fourth quarter of 2018, down 1.3 percent from the fourth quarter of 2017. After excluding California Provider Fee revenues in both periods, net patient revenue after implicit price concessions increased 4.6 percent. Adjusted admissions declined 0.8 percent on a same-hospital basis in the fourth quarter of 2018. Revenue per adjusted admission decreased 0.6 percent on a same-hospital basis and increased 5.4 percent after excluding California Provider Fee revenues in both periods.
Adjusted EBITDA in Tenet’s hospital segment was $352 million in the fourth quarter of 2018, a decrease of $186 million or 34.6 percent compared to $538 million in the fourth quarter of 2017. The $186 million decline was primarily due to the $203 million decrease in California Provider Fee revenues discussed above, partially offset by other items. After normalizing for the California Provider Fee program as well as other items that are outlined in an accompanying slide presentation, Adjusted EBITDA in the hospital segment increased by $1 million, or 0.3 percent, in the fourth quarter of 2018; for additional details, please see the investor presentation dated February 25, 2019 that will be accessible through the Company’s website at www.tenethealth.com/investors.
Tenet’s health plan business recognized no revenue or Adjusted EBITDA in the fourth quarter of 2018 versus $10 million of revenue and no Adjusted EBITDA in the fourth quarter of 2017. The revenue and expenses associated with the Company’s health plan operations are included in Tenet’s consolidated statements of operations; however, the results are excluded from Adjusted EBITDA in both periods.
Selected operating expenses in the Hospital Operations and other segment increased 3.5 percent on a per adjusted admission basis in the fourth quarter of 2018 and increased 2.2 percent excluding a $44 million increase in malpractice expense in the hospital segment. Salaries, wages and benefits increased 2.3 percent and supply expense increased 1.0 percent per adjusted admission in the fourth quarter of 2018. Other operating expenses increased 7.9 percent per adjusted admission in the fourth quarter of 2018 and increased 2.7 percent per adjusted admission excluding the increase in malpractice expense.
Ambulatory Care Segment
The Ambulatory Care segment produced net operating revenues of $554 million in the fourth quarter of 2018, an increase of 1.7 percent compared to $545 million in the fourth quarter of 2017. In addition, the Ambulatory Care segment generated Adjusted EBITDA of $245 million in the fourth quarter of 2018, up 9.9 percent from $223 million in the fourth quarter of 2017 and Adjusted EBITDA less facility-level noncontrolling interest expense was $151 million, up 4.1 percent from $145 million in the fourth quarter of 2017. After normalizing for the divestiture of Aspen, Adjusted EBITDA less facility-level noncontrolling interest expense increased 7.1 percent in the fourth quarter of 2018; Aspen was divested on August 17, 2018 and generated $4 million of EBITDA less facility-level noncontrolling interest in the fourth quarter of 2017.
The results of many of the facilities in which the Ambulatory Care segment has an investment are not consolidated by Tenet (of the 337 facilities at December 31, 2018, the results of 110 were accounted for under the equity method for unconsolidated affiliates). To help analyze the segment’s results of operations, management uses system-wide measures, which include revenues and cases of both consolidated and unconsolidated facilities. On a same-facility system-wide basis, revenue in the Ambulatory Care segment increased 3.8 percent in the fourth quarter of 2018, with cases increasing 0.9 percent and revenue per case increasing 2.8 percent. In the surgical business, which represents the majority of the revenue in the Ambulatory segment, same-facility system-wide revenue grew 3.7 percent in the fourth quarter of 2018, with cases up 1.1 percent and revenue per case up 2.6 percent.
Conifer Segment
During the fourth quarter of 2018, Conifer’s revenue declined 5.6 percent to $372 million, primarily due to client attrition following divestitures by Tenet and other customers, down from $394 million in the fourth quarter of 2017. Revenue from third party customers declined 7.1 percent to $222 million in the fourth quarter of 2018.
Conifer generated $87 million of Adjusted EBITDA in the fourth quarter of 2018, up 10.1 percent from $79 million in the fourth quarter of 2017, with Adjusted EBITDA margins increasing 330 basis points to 23.4 percent.
Net Income and Earnings Per Share
Tenet reported a net loss from continuing operations attributable to Tenet common shareholders of $5 million, or $0.05 per diluted share, in the fourth quarter of 2018 compared to a net loss of $230 million, or $2.28 per diluted share, in the fourth quarter of 2017.
After adjusting for the items listed on Table #2, Tenet produced Adjusted net income from continuing operations available to Tenet common shareholders of $53 million, or $0.51 per diluted share, in the fourth quarter of 2018, compared to Adjusted net income from continuing operations attributable to Tenet common shareholders of $143 million, or $1.40 per diluted share, in the fourth quarter of 2017.
A reconciliation of GAAP net income available (loss attributable) to Tenet common shareholders to Adjusted net income available (loss attributable) from continuing operations and Adjusted diluted earnings (loss) per share from continuing operations is contained in Table #2 at the end of this release.
Results for the Year Ended December 31, 2018
Hospital Operations and Other Segment
Net operating revenues in the Hospital Operations and other segment were $15.285 billion in 2018, down 6.0 percent from 2017. The decline in revenue was primarily due to hospital divestitures, partially offset by same-hospital revenue growth. Revenue from the California Provider Fee program did not impact year-over-year comparability with $262 million of revenue recognized in 2018 compared to $267 million recognized in 2017.
On a same-hospital basis, net patient revenues after implicit price concessions were $13.995 billion in 2018, up 3.6 percent from 2017. Adjusted admissions were essentially unchanged in 2018 on a same-hospital basis. Revenue per adjusted admission increased 3.6 percent on a same-hospital basis in 2018.
Adjusted EBITDA in Tenet’s hospital segment was $1.411 billion in 2018, a decrease of $51 million or 3.5 percent compared to $1.462 billion in 2017. The $51 million decline was primarily due to an $88 million decline related to divestitures, partially offset by other items. As a group, divested facilities generated Adjusted EBITDA of negative $37 million in 2018 compared to positive $51 million in 2017. After normalizing for divestitures as well as other items that are outlined in an accompanying slide presentation, Adjusted EBITDA in the hospital segment increased by $34 million, or 2.4 percent, in 2018; for additional details, please see the investor presentation dated February 25, 2019 that will be accessible through the Company’s website at www.tenethealth.com/investors.
Tenet’s health plan business recognized $14 million of revenue and $9 million of Adjusted EBITDA in 2018 versus $110 million of revenue and negative $41 million of Adjusted EBITDA in 2017. The revenue and expenses associated with the Company’s health plan operations are included in Tenet’s consolidated statements of operations; however, the results are excluded from Adjusted EBITDA in both periods.
Selected operating expenses in the Hospital Operations and other segment, defined as the sum of salaries, wages and benefits, supplies and other operating expenses, increased 3.1 percent on a per adjusted admission basis in 2018 and increased 2.4 percent excluding an $85 million increase in malpractice expense in the hospital segment. Salaries, wages and benefits increased 1.3 percent and supply expense increased 4.5 percent per adjusted admission in 2018. Other operating expenses increased 5.6 percent per adjusted admission and increased 3.1 percent excluding the increase in malpractice expense.
Ambulatory Care Segment
The Ambulatory Care segment produced net operating revenues of $2.085 billion in 2018, an increase of 7.5 percent compared to $1.940 billion in 2017. In addition, the Ambulatory Care segment generated Adjusted EBITDA of $792 million, up 13.3 percent from $699 million in 2017 and Adjusted EBITDA less facility-level noncontrolling interest expense was $504 million, up 10.8 percent from $455 million in 2017. After normalizing for the divestiture of Aspen, Adjusted EBITDA less facility-level noncontrolling interest expense increased 12.7 percent in 2018; Aspen was divested on August 17, 2018 and generated $16 million and $22 million of EBITDA less facility-level noncontrolling interest in 2018 and 2017, respectively.
On a same-facility system-wide basis, revenue in the Ambulatory Care segment increased 5.1 percent in 2018, with cases increasing 3.4 percent and revenue per case increasing 1.6 percent. In the surgical business, which represents the majority of the revenue in the Ambulatory Care segment, same-facility system-wide revenue grew 4.9 percent in 2018, with cases up 2.1 percent and revenue per case up 2.