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Tenet increases 2018 outlook after better-than-expected Q4'17


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Tenet increases 2018 outlook after better-than-expected Q4'17

Driven in part by Congress' delay of Medicaid cuts, Tenet Healthcare Corp. increased its EBITDA outlook for 2018 by $25 million to between $2.50 billion and $2.60 billion.

The improved outlook came as executives said during a Feb. 27 earnings call that the company generated $840 million in EBITDA in the fourth quarter of 2017, about $20 million more than the high end of its outlook.

CFO Daniel Cancelmi said the two-year delay in disproportionate share cuts for hospitals serving large numbers of low-income patients will add $25 million to $30 million to results in 2018. The company also expects revenue from the California provider fee program in 2018 to be $250 million, $25 million more than expected.

Leerink Partners LLC analyst Ana Gupte was "solidly bullish" on Tenet in a Feb. 27 note.

CEO Ronald Rittenmeyer also said on the call that the company is on track to meet its goal of gaining $1 billion in proceeds in divestitures, including the completion of the sale of two Philadelphia hospitals in January and the expected completion of its sale of Chicago's MacNeal Hospital in March.

Other deals could be coming. "We will continue to evaluate individual hospitals and markets based on total cost of ownership and make necessary adjustments dictated by our own analysis," said Rittenmeyer.

Tenet has also said it is trying to sell its healthcare business subsidiary, Conifer Health Solutions. Rittenmeyer declined to give further details, saying only, "we are very pleased with the level of interest that has been generated."

Conifer was significant in the higher-than-expected fourth-quarter earnings and the improved 2018 outlook. It produced $79 million of EBITDA in the fourth quarter of 2017, $13 million higher than expected, a trend Cancelmi said the company expects will continue in 2018.

Tenet said it is also on track to meet its goal of finding $125 million of savings in 2018. The company in January announced plans to cut 2,000 jobs, or about 2% of its workforce, as part of its cost-cutting measure.