Hospitals Headed for Rough Quarter

Shares of HMA slid 1.7% to $23.07 on the report. LifePoint's shares fell an even harder 3% to $42.40.

Ugly Duckling

Looking ahead, ailing Tenet should once again report the ugliest quarter of all.

As Feinstein points out, Tenet operates six hospitals in the Gulf Coast region devastated by Katrina -- including four that remain closed even today. In addition, he notes, the company runs another four hospitals in the Houston area that lost business as a result of Rita even if they did escape serious damage.

Now, Feinstein worries about Tenet facing yet another storm-related hit going forward.

"Tenet notes in its 10-Q filing that it is pursuing purchasing a reinstatement of flood limits with its current insurance carriers or possibly purchasing replacement coverage," writes Feinstein, who has an underweight rating on the stock. "While this seems prudent, we note that this disclosure also leads to questions regarding the adequacy of the company's current coverage due to its significant exposure in New Orleans and potential exposure from other hurricanes that could strike this year."

In the meantime, some experts believe, Tenet could face some legal exposure as a result of the fierce hurricane that has already passed. The company has come under intense scrutiny because many patients at one of its New Orleans hospitals died in the aftermath of Hurricane Katrina.

Just this weekend, in fact, officials from the Louisiana attorney general's office used a search warrant to obtain records from that particular facility.

"For the past several weeks, we have been working cooperatively with the Louisiana attorney general's office to review conditions at the hospital and the evacuation process in the post-storm period," Tenet said when disclosing news of the search on Sunday. "We have provided the attorney general with medical records and other information and will continue to do so."