Life just got a whole lot harder for hospital operators in the Big Easy.
Following Monday's devastating hit by Hurricane Katrina, hospitals found themselves struggling to care for patients in a flooded city that could be without full power for a month. Several for-profit chains -- including
-- operate hospitals in the New Orleans area. But Tenet, with five hospitals in New Orleans and one in storm-ravaged Biloxi, Miss., could weather the most damage of all.
For its part, Tenet said it was still assessing the situation on Tuesday morning. But some company observers feared the worst.
"This is a major setback for every industry there, including hospitals," says Peter Young, a business consultant at HealthCare Strategic Issues in Florida, which has weathered its own share of hurricane damage. "The scope and the amount of the flooding is the issue. ... Many of those commercial buildings will have to be torn down."
Even if they ultimately survive, he says, the damaged buildings could take a long time to repair. On top of that, Young says hospitals must now compete for limited labor and supplies in an area with a surge in demand.
"It's going to take a long time -- I would say decades -- before some of these areas recover," he says.
Tenet's stock slipped 8 cents to $12.62 on Tuesday.
Caymus Partners analyst Jeff Villwock spent six years in New Orleans and became quite familiar with Tenet's hospitals in the region.
Based on his knowledge of the area, Villwock views at least three Tenet hospitals as particularly vulnerable. He says the first, Kenner Regional Medical Center in New Orleans, is reportedly swamped with four feet of water right now.
"What we're hearing is that the whole area is just devastated," Villwock says. "So I think that hospital is going to be out of commission -- or at least greatly diminished -- for an extended period of time."
Villwock says that Tenet's Meadowcrest Hospital is likewise located in a low-lying region of New Orleans that has weathered "massive flooding" as well. In the meantime, he says, Tenet operates a hospital in nearby Slidell that took a direct hit from the hurricane and likely suffered major wind damage as a result.
On a brighter note, Villwock expects Tenet's two midtown New Orleans hospitals to escape with manageable wind damage. But he offers a far darker outlook for the company's Gulf Coast Medical Center in Biloxi.
"That area was hit very, very hard -- worse than New Orleans," he says. "So I would expect the Biloxi hospital to be significantly impacted."
Indeed, hospitals throughout that area seemed to be struggling. The
reported on Tuesday that every hospital in Mississippi had either been left without regular power or damaged by water and wind.
All told, Villwock estimates that Tenet relies on its New Orleans and Biloxi operations for roughly 15% of its total revenue. Thus, he believes the company could take a big hit for several quarters to come.
"This damage will not be fixed until the middle of the first quarter," he predicts. "It's going to be four to six months before New Orleans gets back on its feet."
By now, Villwock says, those hospitals affected by the hurricane have already stopped performing the elective procedures that tend to bring in the most profits. Looking ahead, he says, some of those hospitals may face months of repairs before they can handle normal patient loads again. Even those that have been spared, he adds, will probably see volumes decline as well.
"If you've got a knee that's bothering you, and all the sudden your house is flooded, your knee doesn't seem to hurt so badly anymore," he explains. "So I don't expect these hospitals -- even those with no damage -- to get back to normal for at least a month. The hospitals may be back up and running in three to five days, but the people won't be."
HCA faces exposure in those same areas. The company operates two facilities in New Orleans and another two in Gulfport, Miss. Universal also runs two hospitals in the city of New Orleans.
HCA slipped 21 cents to $49.79 on Tuesday. Universal rose 17 cents to $52.63.