Analyst Says Tenet’s Cost-cutting Plan Is ‘As Good a Start As Any’

An analyst who’s been tough on Tenet Healthcare Corp. in the past applauded the company’s announcement Friday of a cost-reduction plan that includes laying off 1 percent of its total workforce, or 1,300 employees. “It [Tenet] has to start somewhere, and this is as good a start as any,” Mizuho Securities USA’s Sheryl Skolnick wrote in a client note.

The comment by Skolnick, who has called Tenet “the single most frustrating stock, ever,” came after the beleaguered Dallas company announced preliminary third-quarter losses from continuing operations and outlined a $150 million cost-savings plan for 2018. The plan will involve renegotiating contracts with suppliers and vendors as well as the layoffs. Most of the reductions will come from Tenet’s hospital operations and include doing away with its regional management layer.

The company had long-term debt of about $15 billion as of June 30.

“We are moving quickly and decisively to improve financial results and returns for our shareholders,” Ronald A. Rittenmeyer, Tenet’s executive chairman and CEO, said in a news release. “The cost reduction program … includes a number of structural changes in the way we operate, all intended to reinforce accountability, improve agility and speed decision making. We believe these changes will help us drive organic growth, expand margins, and better support our hospitals and other facilities in delivering higher levels of quality and patient satisfaction.”

Tenet said it expects to report a net loss of $366 million on revenue of $4.58 billion for the third quarter, compared to a loss of $9 million on revenue of $4.85 billion in 2016’s third quarter.

Its quarterly revenue, Tenet said, was negatively impacted by about $40 million as a result of “an estimated $30 million of lower revenues and higher expenses associated with Hurricanes Harvey and Irma … $8 million of lower-than-anticipated revenues from the Texas Medicaid Waiver program, and approximately $2 million of lower-than-anticipated revenues from the Florida Medicaid program due to changes associated with the Low Income Pool program.”

The company said it plans to report its final results for the third quarter after the market closes on Nov. 6.

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