Tenet Healthcare Corp THC
Q3 2012 Earnings Call Transcript

Transcript Call Date 11/07/2012

Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Tenet Healthcare Earnings Conference Call. My name is Jeff, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later we will facilitate a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Tom Rice, Senior Vice President and Head of Investor Relations, and you have the floor, sir.

Thomas Rice - SVP, IR: Thank you, Jeff and good morning, everyone. Tenet's management will be making forward-looking statements on this call. These statements are qualified by the cautionary note on forward-looking statements contained in our annual report on Form 10-K. During the question-and-answer portion of the call, callers are requested to limit themselves to one question and one follow-up question. This time I will turn the call over to Trevor Fetter, Tenet's President and Chief Executive Officer.

Trevor Fetter - President and CEO: Thank you, Tom, and good morning everyone. Last night’s election results are encouraging for the full implementation of the Affordable Care Act. Based on our model of expanded coverage under the Act, all of our hospitals are in markets that will see an increase in covered lives and in virtually all of our markets that growth exceeds the rate for the country as a whole. As you know the Act should be a material positive driver to our earnings over the next few years.

In any event it's nice to have the uncertainty of the election behind us, and I’d like now turn to our third quarter results. I’d like to summarize our discussion of the third quarter by saying I'm very pleased with our performance. We reported $269 million in adjusted EBITDA. This represents growth of more than 40% compared to last year's third quarter. This performance was consistent with our expectations and slightly above the Street’s consensus estimate.

Our solid performance was led by strong top line growth that was driven by increases in pricing and outpatient and surgical volumes. Looking across the investor-owned provider sector, Tenet reported among the strongest set of volume metrics in the third quarter. This volume growth is clear and gratifying evidence that our initiatives around physician alignment and our outpatient strategies are working.

Once again we were very strong on cost control. Our Medicare performance initiative is continuing to deliver great results in controlling costs. In the third quarter supplies costs per adjusted admission declined by 2.2%. The high-level takeaway is that our fundamental business trends in terms of volume growth, pricing, and cost control remains solid. We experienced a small seasonal increase in bad debt expense. This is largely the result of the increase in uninsured volumes and was partially offset by improving self-pay collection rates. Against that backdrop, let me quickly list some of the same hospital highlights for Q3.

Volume growth in all categories compared very favorably with what our peers reported across the sector. Adjusted admissions increased by 1.4%. This marks the eighth consecutive quarter that we've grown adjusted admissions in the 18 out of the last 21 quarters. Surgeries grew by 1.8%. Total ER visits grew by 4.9%. Total outpatient visits also grew by 4.9%, and roughly 80% of that growth was organic.

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