In the ailing hospital sector, some players clearly look healthier than others.


Community Health

(CYH) - Get Report

. The rural hospital operator late Thursday reported fourth-quarter results that beat expectations despite weak flu admissions. The company called its performance "especially gratifying" in the current industry environment.

But then

Universal Health

(UHS) - Get Report

followed up with a swift reminder that all is not well with the group. Unlike Community, Universal failed to overcome last quarter's light flu season and missed Wall Street estimates even though it has behavioral health facilities to help it out. For Universal -- like many in the sector -- the acute-care hospital business remains a painful one.

Still, no hospital operator seems to be hurting more than wounded


(THC) - Get Report

. The company is expected to post another quarterly loss next month and then keep bleeding through the year. In the meantime, Tenet failed to cure one of its biggest legal headaches when a high-profile criminal case -- which has been dogging the company for months -- ended in a mistrial and is now tentatively scheduled to start all over again.

Because of its legal problems, Tenet faces particularly tough challenges at a time when the entire hospital industry is searching for relief.

Pain Medicine

Occasionally, a hospital operator finds it.

Community Health posted fourth-quarter revenue of $872 million that, while $7 million shy of the consensus estimate, came in 11% above last year's level. Fourth-quarter net income jumped 13% to $40.2 million, and per-share operating profits of 44 cents beat Wall Street expectations by 2 cents.

The company managed to boost fourth-quarter admissions by 1% with the help of recent acquisitions. However, it saw same-facility admissions fall 3.4% due to a drop in fourth-quarter flu cases and respiratory illnesses.

The decline seemed to mean fewer uninsured patients. Community's bad debt expense fell sequentially and came in lower than some had expected.

Looking ahead, Community forecasts 2005 earnings of $1.78 to $1.88 a share. Analysts believe the company will approach the high end of that target. Jason Gurda of Bear Stearns is among those who see brighter days ahead.

"We remain positive on CYH's operating strategy and long-term growth profile," wrote Gurda, who has a peer-perform rating on the stock because he sees limited upside right now. "With a long-term mid-teens growth rate, we believe buy-and-hold investors will benefit from CYH's organic margin-expansion opportunities."

For now, however, the company's strong fourth quarter failed to help the stock. Shares of Community slipped 17 cents to $31.48 late Friday morning.

Weaker Hand

Universal's stock fared better, rising 47 cents to $45.25, even though the company's results looked worse.

Like Community, the company posted fourth-quarter revenue -- which totaled $1.03 billion -- that fell short of expectations. Profits missed the mark as well. Fourth-quarter net income of $37.2 million came in well below the $46.5 million reported a year ago. And operating profits of 51 cents a share were 4 cents below the consensus estimate.

Universal reported a 0.5% decrease in acute-care admissions but enjoyed a 2% jump in volume at its behavioral health facilities. The company also posted a drop in bad debt expense, although it was caused by a rise in charity care cases that also tend to go unpaid.

Prudential analyst David Shove did suggest that Universal's bad debt problem may be stabilizing. Still, he continues to see room for improvement.

"Net-net, we believe Universal Health Services' 4Q04 performance reflects its continued struggle with industry and company-specific pressures," wrote Shove, who has a neutral rating on the stock. "Universal Health Services' weak acute-care volume and pricing growth increases the pressure for aggressive change."

New Trial

Meanwhile, Tenet remains stuck.

The company could soon be heading back to the courtroom at a time when it was hoping to put its legal problems behind it. The federal government has criminal charges pending against a Tenet subsidiary, Avarado Hospital Medical Center, and Alvarado CEO Barry Weinbaum. The feds have accused all three of illegally bribing physicians in exchange for patient referrals. The defendants have denied any wrongdoing.

Following a four-month trial, a jury last week failed to reach a verdict in the case. The presiding judge has since set a tentative date, March 29, for a second trial. He has also indicated that he will probably deny Tenet's request to acquit the defendants on a charge of conspiracy, according to analyst reports. He has said nothing about what decision -- if any -- he expects to render on the remaining charges.

Fulcrum analyst Sheryl Skolnick tends to fear the worst. She says the judge's stand on the conspiracy charge implies that he believes enough evidence exists to warrant a second trial. Moreover, she doubts the judge will throw out all of the other charges given his rulings in the past.

Skolnick does note, however, that federal prosecutors have yet to officially announce whether they plan to retry the case. But she tends to believe they will.

For now, she says, the situation remains "completely out of THC's control," and the uncertainty caused by the surprising courtroom development continues.

"We reiterate our neutral rating and our view that it is too dangerous to 'bet' or trade on the likely outcome," Skolnick wrote. "No one could have predicted this circus would happen, and if it were in a novel, the story would likely be rejected by a publisher as being too unbelievable."

Second Opinion

Shove offered a far brighter prognosis.

He believes that Tenet could wind up defending itself against only one charge -- conspiracy -- that, he feels, the company would overcome. Thus, he is dwelling less on the trial than on the company's operating performance.

And he sees the potential for a recovery.

Shove is viewing Tenet's newly chosen CFO, Robert Shapard, as something of a miracle-worker. He notes that Shapard, who is leaving his post as CFO of


(EXC) - Get Report

, has a long history of turning around companies in the utility industry. At the same time, however, he indicates that a cure for Tenet could prove to be a tough one to swallow.

"Shapard has both the financial expertise and guts to make the difficult financial choices," wrote Shove, who has a neutral rating on Tenet's stock. "Should Tenet's turnaround falter, Shapard would likely even consider restructuring the company (including break-up) to maximize shareholder wealth."

For now, shareholders continue to hold their breath. Tenet's stock slipped 4 cents on Friday to $10.69, a far cry from the $50 it fetched during the company's glory days.