By the numbers
Net income fell nearly 68% from $119M in the second quarter of 2021
Decrease in adjusted admissions to the same hospital compared to the same period last year
Labor costs fell amid higher wage rates
Shares of Tenet Healthcare soared nearly 10% after the company’s earnings call, signaling optimism even as its net operating income, revenue and volumes fell amid a recent breach of cybersecurity.
Lower labor spending for wages, salaries and benefits dampened Tenet’s revenue, down 6.8% year-over-year in the second quarter. Tenet’s labor spending also fell in the first quarter of this year, making it an outlier among other for-profit peers as hospital labor costs rose to across the country.
The decline in labor spending is due to Tenet simultaneously managing labor costs and volumes, executives reiterated during the company’s earnings call on Friday. Tenet also pointed to a recent agreement reached with the California Nurses Association for new contracts at eight of its hospitals.
At the same time, Tenet still faces staffing hurdles and has struggled to staff some lower-acuity departments due to excessive contract labor costs, CEO Saum Sutaria said.
“The reality is that the cost structure needed to hire staff to support much of this volume is much more than just the marginal unit cost of an additional nurse, and we realized that very early in the pandemic, and so we were very deliberate in handling that,” he said.
Once new full-time staff are hired and the need for traveling nurses decreases, “we will have the capacity to open those units and deliver that volume in a cost-effective manner,” he said.
Additionally, net operating revenue for its outpatient network increased 16% in the second quarter compared to the same period last year, even though cases in the outpatient unit were down 0.9% from one year to the next. The increase in its net operating income is attributed in part to the growth of the service line and its acquisition of SurgCenter Development for $1.1 billion.
Currently, Tenet holds interests in 410 outpatient surgery centers and 24 surgical hospitals in 34 states through its outpatient business segment, United Surgical Partners International.
The company has accelerated investments in this segment which is “a very capital-efficient business model, with capital requirements that are only a fraction of what we see in the hospital sector,” Sutaria said.