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After sleeping on the news,

Tenet Healthcare

(THC) - Get Tenet Healthcare Corporation Report

investors decided the company's profit warning late Tuesday wasn't so bad after all.

Shares of the troubled hospital chain jumped 6.5% Wednesday afternoon to $19, more than recovering from Tuesday's after-market slide. The stock sank below $17 late Tuesday after Tenet warned that profits will fall short of expectations both this year and next.

But for Tenet investors, fretting for weeks over Medicare billing scandals and regulatory investigations, profits are clearly secondary. The market in fact rushed to embrace promises that Tenet will adopt more conservative billing practices that could cut deeply into earnings growth.

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Under its new business strategy, Tenet is expecting 2003 earnings of $2.38 to $2.78 a share, well below previous guidance of $2.93. The company also cautioned that 2004 earnings could slip to $2 a share before new growth plans take hold.

"We have a lot of work to do to recover from the events of recent weeks, and I do not underestimate the task we have ahead of us," CEO Jeffrey Barbakow admitted. "I recognize the very real skepticism and anger among investors.

"We intend to earn back their trust through hard work and solid results."

In recent years, Tenet has relied heavily on generous "outlier" payments -- reimbursements from Medicare for expensive medical procedures -- to fuel its profit growth. But the company has come under fire for possible abuse of the system, particularly at a Tenet hospital where two doctors stand accused of performing unnecessary surgeries. Tenet has denied any wrongdoing. Even so, the company -- withering under regulatory and investor scrutiny -- has been forced to search out a new engine for growth.

Tenet now plans to seek more revenue from private clients, like HMOs, going forward. And the company insists that brighter days lie ahead.

"As I have examined Tenet's operations, I have become more confident than ever about the company's fundamental strength," said Trevor Fetter, Tenet's new president. "We have the assets, the resources and the people to resume a sustainable level of growth and to continue enhancing health care in the communities we serve."

Tenet itself is throwing money at that future. The company, delighting investors, said it will begin buying back its own shares to display its confidence to the market. With its stock price fighting back from the low teens of just a month ago, investors must be hoping the company keeps putting its money where its mouth is.