Analyst says Tenet poised for major turnaround

Wed, 30 Apr 2008 06:59:57 -0400

This must be satisfying for Tenet execs to see: A major healthcare analyst has turned tail and upgraded the hospital company's rating dramatically, after slamming it less than a year ago and suggesting it would soon go out of business.

Eight months ago, leading healthcare analyst Ken Weakly of Credit Suisse Securities predicted that Tenet's stock would drop to $2 per share from its then-status of $3.67 per share, rating the stock as "under perform." At the time, Weakly noted that several threats, including the chain's reliance on Medicare outlier payments and lower-than-needed patient volumes, posed serious threats to the chain's survival, and predicted that within three years it would go bankrupt. Not only that, the company was still recovering from its protected legal troubles, which included a $725 million payment to settle Medicare billing charges.

Now, however, Weakly has done a complete turnaround, changing his rating to "outperform" and pushing his price forecast up to $8 per share from $6. With Tenet not only boosting patient volumes, but also seeing better pay from health plans, the company now has a "sustainable economic profile," Weakly wrote in a recent note to investors. In addition to taking in more money, Tenet has cut costs aggressively, eliminating almost 1,500 jobs in 2007, shed its poorer performing hospitals and re-structured services to focus on more profitable eras like neonatal care and cancer treatment.

To learn more about Tenet's situation:
- read this article from The Dallas Morning News
- read this piece from The Boston Globe

PLUS: Though Tenet may still be struggling, hospital operator Universal Health Services is going strong, with profits having jumped nearly 25 percent during the first quarter of this year.

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MI hospital defaults on bonds, discusses selloff

Wed, 09 Apr 2008 06:59:55 -0400

Things have gotten ugly for financial managers at North Oakland Medical Center. The 178-bed hospital, which is based in Pontiac, MI, defaulted on $38.5 million in bonds issued by the Pontiac Hospital Finance Authority. The hospital lost $13.4 million from operations in fiscal 2007, and had a meager 18 days cash on hand on Dec. 31, according to Standard & Poor's. The hospital missed a January 15 bond payment, which lowered its S&P rating on the series from B to D.

Executives say that they've been squeezed by their role as a safety-net hospital, which resulted in their spending $21 million in uncompensated care over the last three years. It hasn't helped that admissions have fallen from 7,600 in 2006 to a projected 5,000 this year.

Given these conditions, North Oakland execs are in talks to sell the facility to one of several local chains, including Henry Ford Health System, Trinity Health and William Beaumont Hospitals.

To learn more about the hospital's fate:
- read this Crain's Detroit Business piece (reg. req.)

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Analyst says Tenet poised for major turnaround

MI hospital defaults on bonds, discusses selloff