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Tenet Healthcare Corp. (NYSE: THC)

Tenet Healthcare Corporation (THC) is an investor-owned health care services company, whose subsidiaries and affiliates principally operate general hospitals and related health care facilities. The Company’s operations are conducted through its subsidiaries. As of December 31, 2008, THC’s subsidiaries operated 53 general hospitals, a cancer hospital and a critical access hospital, with a combined total of 14,352 licensed beds, serving urban and rural communities in 12 states.

Of those general hospitals, 45 were owned by the Company’s subsidiaries and eight were owned by third parties and leased by its subsidiaries (including one hospital Tenet owned located on land leased from a third party). The Company also operated various related health care facilities, including a rehabilitation hospital; a long-term acute care hospital; a skilled nursing facility; various medical office buildings; and physician practices, captive insurance companies, and other ancillary health care businesses, such as outpatient surgery centers, diagnostic imaging centers, and occupational and rural health care clinics, as well as owned interests in two health maintenance organizations.

In August 2008, the Company announced that it has completed the previously disclosed sale of its entire interest in Broadlane Inc. to TowerBrook Capital Partners L.P. In November 2008, THC announced the formation of a wholly owned operating subsidiary, Conifer Health Solutions Inc.

The Company was founded in 1967 and is headquartered in Dallas, Texas, with additional offices in Santa Ana, California; Coral Springs, Florida; and Philadelphia, Pennsylvania.

Source: https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=THC , http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=THC, http://www.tenethealth.com/pages/home.aspx

Financial Summary

THC’s results of operations have been and continue to be influenced by industry-wide challenges, including fluctuating volumes, decreased demand for inpatient cardiac procedures, and high levels of bad debt, that have negatively affected its revenue growth and operating expenses.THC believes its future profitability will be achieved through volume growth, appropriate reimbursement levels, and cost control across its portfolio of hospitals. It also believes its results of operations for the most recent fiscal quarter best reflect the trends the Company is currently experiencing with respect to volumes, revenues and expenses.

Net operating revenues increased approximately $111 million, or 5.2%, on a same-hospital basis in the three months ended September 30, 2009, as compared to the same period in 2008. Favorable prior-year cost report adjustments contributed approximately $11 million to net operating revenues in the three months ended September 30, 2009, as compared to a contribution of $10 million in the three months ended September 30, 2008. Excluding prior-year cost report adjustments, same-hospital net operating revenues would have shown the same increase of 5.2% in the three months ended September 30, 2009, as compared to the same period in 2008. Net operating revenues in the three months ended September 30, 2009, include the recognition by THC’s

Philadelphia hospitals of $6 million of revenues related to 2008 that were approved for distribution to THC in the three months ended September 30, 2009, by a Philadelphia health maintenance organization in which THC holds a minority ownership interest.

Commercial managed care revenues increased by 4.2% on a same-hospital basis despite the 4.5% decline in commercial managed care admissions and the flat commercial managed care outpatient visits in the three months ended September 30, 2009, as compared to the same period in 2008.

Pricing improvement was evident across all key metrics, primarily reflecting the improved terms of our commercial managed care contracts. The growth in net inpatient revenue per admission of 3.7% was adversely impacted by a shift in payer mix, including a decline in commercial managed care admissions as a percent of total admissions to 25.8% in the three months ended September 30, 2009 as compared to 27.0% the three months ended September 30, 2008. Similarly, the 2.7% growth in outpatient revenue per visit in the three months ended September 30, 2009 compared to the same period in 2008 was constrained by the decline in commercial outpatient visits as a percent of total outpatient visits to 35.8% in the three months ended

September 30, 2009 from 37.5% in the three months ended September 30, 2008.

Total selected operating expenses, which is defined as salaries, wages and benefits, supplies, and other operating

expenses, decreased by 0.6% on a per adjusted patient day basis in the three months ended September 30, 2009, compared to the three months ended September 30, 2008.

Other operating expenses per adjusted patient day decreased by 3.2% in the three months ended September 30, 2009 as compared to the same period in 2008. Contributing to this decrease was a $4 million, or 12.9%, decline in total hospital malpractice expense to $27 million in the three months ended September 30, 2009, compared to $31 million in the three months ended September 30, 2008. This decrease is primarily attributable to improved claims experience. Declines in consulting costs, utility costs and information systems implementation costs also had a favorable impact on other operating expenses, which was partially offset by increases in costs of contracted services and a reduction in information systems and business office costs allocable to discontinued operations.

Outpatient surgery visits grew by 4.4% and outpatient imaging visits increased by 2.7% in the three months ended September 30, 2009, as compared to the same period in 2008. Emergency department outpatient visits increased 30,353 visits, or 9.3%, in the three months ended September 30, 2009, compared to the three months ended September 30, 2008. This increase in emergency department outpatient visits contributed 67.3% of the increase in total outpatient visits in the three months ended September 30, 2009, as compared to the same period in 2008. Flu-related outpatient visits were 5,271 in the three months ended September 30, 2009, as compared to 214 in the three months ended September 30, 2008. This increase of 5,057 visits accounted for 11.2% of the total increase in outpatient visits of 45,091 in the three months ended September 30, 2009, compared to the same period in 2008.

Source: http://www.tenethealth.com/investors/pages/sec%20financial%20reports.aspx

Analyst Consensus

This is the consensus forecast amongst 21 polled investment analysts. Against the Tenet Healthcare Corp company.

The 15 analysts offering 12-month price targets for THC have a median target of 7.00, with a high estimate of 9.00 and a low estimate of 4.50. The median estimate represents a 33.84% increase from the last price of 5.23.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=THC

Investment Highlights

THC recently  announced that 42 of its hospitals received 257 quality designations through CIGNA HealthCare. These quality designations are based on outcomes for treatment of 29 surgical procedures and medical conditions. The patient outcomes data are based partially on a hospital’s Centers for Medicare and Medicaid Services (CMS) Hospital Compare measures, Leapfrog Patient Safety Measures, mortality and complications rates. The designations indicate superior outcomes and nearly 65% of CIGNA HealthCare’s network hospitals receive a quality designation for treatment of at least one condition. In addition to the quality designations, 26 of THC’s hospitals received 76 Center of Excellence (COE) designations for 2009 from CIGNA HealthCare, improving year over year COEs by 26%. These COE designations recognize hospitals meeting CIGNA HealthCare’s high standards for quality and efficiency.

THC earlier this year announced revisions to its outlook for 2009 Adjusted EBITDA to a new range of $900 million to $950 million. The prior outlook range was $810 million to $875 million. This new range corresponds to an outlook for net income attributable to shareholders in a range of $76 million to $141 million. Adjusted EBITDA is a non-GAAP term defined and reconciled to GAAP net income below. Adjusted EBITDA in the third and fourth quarters of 2009 is expected to be approximately equal. The Company’s revised 2009 outlook continues to make allowances for potential deterioration in bad debt expense and adverse trends in business mix in the remaining months of 2009. Additional details on revised 2009 outlook assumptions are provided in Table #1 below. THC also provided interim admissions statistics for the period July 1 to September 8, a time period which represents the first complete 10 weeks, or 70 days, of the third quarter. Comparing volumes in 2009 to the same 70-day period of 2008, admissions grew by 0.2%, paying admissions were flat, and commercial managed care admissions declined by 4.1%. Charity and uninsured admissions grew by 3.5%.

THC in August announced that 29 hospitals have received 73 designations for cardiac care, cardiac surgery and heart rhythm disorders. Hospitals must meet or exceed UnitedHealthcare’s rigorous quality criteria based on nationally recognized medical standards including programmatic structure, patient care processes and clinical outcomes that are submitted by the hospital to UnitedHealthcare. “Quality is our top priority at Tenet, and we use evidence-based medicine protocols that are designed to improve patient outcomes,” Stephen L. Newman, M.D., THC’s chief operating officer and interim chief medical officer stated in the press release. “These designations reflect our hospitals’ strong clinical quality focus and commitment to providing high-quality cardiac care for our patients.”

Source: Scottrade.com, Reuters.com

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

THC is trading below its 50-day moving average. However, this moving average is trending higher which suggests that there has been buying interest in this stock.

Bollinger Bands

THC is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

MACD

The MACD for THC currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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