Tenet Healthcare second-quarter adjusted EBITDA increases 8.9% to $268 million

Tenet Healthcare Corporation (NYSE:THC) today reported adjusted EBITDA of $268 million for the quarter ended June 30, 2010, an increase of $22 million, or 8.9 percent, as compared to $246 million for the second quarter of 2009. Net income attributable to common shareholders for the second quarter of 2010 was $25 million, or $0.05 per diluted share, compared to a net loss of $15 million, or $0.03 per diluted share, for the second quarter of 2009. Continuing operations earned $0.07 per diluted share in the second quarter of 2010 as compared to $0.01 per diluted share in the second quarter of 2009.

“Our earnings power continued to grow as we successfully converted an admissions decline of 2.0 percent into revenue growth of 3.3 percent and adjusted EBITDA growth of 8.9 percent”

"Our earnings power continued to grow as we successfully converted an admissions decline of 2.0 percent into revenue growth of 3.3 percent and adjusted EBITDA growth of 8.9 percent," said Trevor Fetter, president and chief executive officer. "This progression demonstrates our ability to address the challenges presented by the continuing soft macroeconomic environment to produce meaningful growth in value."

Discussion of Results (All percentage changes compare Q2'10 to Q2'09. Same hospital and total company statistics are identical.)

Second quarter 2010 performance was driven by solid revenue growth and incremental cost efficiencies which more than offset the impact from soft volumes. Admissions and outpatient visits declined by 2.0 percent and 0.8 percent, respectively. Adjusted admissions declined by 0.6 percent. Commercial managed care admissions and outpatient visits declined by 7.2 percent and 5.4 percent, respectively. Higher commercial acuity, increased unit revenues, and improved commercial payer mix produced growth in commercial managed care revenues of 2.0 percent. This growth in commercial revenues contributed to an aggregate increase in net operating revenues of $74 million, or 3.3 percent. This increase in revenues was net of unfavorable adjustments of $28 million for the estimated impact on our Medicare disproportionate share hospital payments ($20 million) as a result of estimated lower Supplemental Security Income (SSI) percentages at certain of our hospitals and the portion of bad debt that will not be reimbursed by Medicare ($8 million).

Total controllable operating expense increased by $46 million, or 2.5 percent. This increase included a 2.1 percent increase in salaries, wages and benefits, primarily the result of salary and wage increases awarded to our broad employee population on October 1, 2009. Supplies expense was unchanged and other operating expense increased by 5.5 percent.

Bad debt expense increased by $6 million, or 3.6 percent. There was no change in the ratio of bad debt expense to net operating revenues which remained at 7.5 percent. Items that contributed to the increase in bad debt expense included increases of 1.5 percent and 2.4 percent in uninsured admissions and outpatient visits, respectively, and a 130 basis point decline in the self-pay collection rate to 29.5 percent. These adverse factors were partially offset by a $28 million favorable adjustment for Medicare bad debts that will be claimed on the Company's cost reports. The impact of providing uncompensated care, which includes charity as well as uninsured patients, was mitigated by a decline in charity volumes. This mitigating effect is evident in our estimated costs of providing care to charity and self-pay patients for the second quarters of 2010 and 2009, which were $126 million and $121 million, respectively.

Adjusted net cash provided by operating activities from continuing operations was $198 million and adjusted free cash flow from continuing operations was $121 million, reflecting capital expenditures of $77 million. Cash and cash equivalents were $711 million at June 30, 2010, an increase of $122 million from March 31, 2010. In 2009's second quarter, adjusted net cash provided by operating activities was $202 million. Net cash provided by operating activities was $191 million in the second quarter of 2010 compared to $170 million in the second quarter of 2009.