Tenet Healthcare refines 2011 Outlook for Adjusted EBITDA

In advance of scheduled investor meetings and the Company's participation at an industry conference, Tenet Healthcare Corporation (NYSE:THC) today refined its 2011 Outlook for Adjusted EBITDA. With eight months of the year completed, the Company now expects to achieve 2011 Adjusted EBITDA toward the lower end of its previously communicated Outlook range of $1.175 billion to $1.275 billion.

"We continue to see impressive growth in aggregate patient volumes, and we are achieving excellent cost efficiency as well as continued increases in commercial managed care pricing," said Trevor Fetter, Tenet's president and chief executive officer. "We are gaining share among the patient populations in our markets, reflecting the success of our physician relationship program and other programs to drive volume growth. We initiated cost cutting actions early in August designed to reduce the impact of less favorable patient mix. We expect these accelerated cost efficiencies to have a more visible impact in our fourth quarter."

Tenet's total admissions and paying admissions each grew by 1.8 percent through the first 70 days of the third quarter, as compared to the same ten full weeks in last year's third quarter. Outpatient volume growth was strong with total outpatient visits and paying outpatient visits growing by 3.7 and 4.0 percent, respectively, on a same-hospital basis through the end of August. During the same time period, same-hospital adjusted admissions grew 2.5 percent and total surgeries were up 3.4 percent. With respect to commercial admissions, the rate of decline was the smallest in more than three years.

Despite strong volumes and expense management, Tenet was impacted by an unfavorable mix shift including significant growth in Medicaid volumes and declines in Medicare acuity. Medicaid admissions, which provide lower reimbursement than other payer classes, grew by 5.5 percent, reflecting more than 75 percent of the admissions growth thus far in the third quarter. Tenet also recorded below average levels of Medicare acuity in July and August, which was only partially offset by higher acuity among commercially insured patients. Tenet's results are also being unfavorably impacted by the effect of decreasing interest rates on medical malpractice and other discounted liabilities.

Tenet's Medicare Performance Initiative (MPI) remains on track to achieve its 2011 cost savings target. In addition, incremental cost savings in excess of $25 million have been identified and are expected to be realized during the last four months of 2011. Because these incremental cost efficiencies are expected to meaningfully impact results beginning in the fourth quarter, the Company expects Adjusted EBITDA in the third quarter of 2011, including an anticipated $26 million revenue contribution from the California Provider Fee program, will be approximately flat relative to Adjusted EBITDA in the third quarter of 2010 of $203 million. In 2012, MPI has targeted incremental savings of $80 million, an increase of $30 million relative to the Company's initial 2012 target.

Source: Tenet Healthcare Corporation