Tenet ( THC) remains in critical condition.

The ailing hospital chain announced Tuesday that special charges, mostly related to facilities it hopes to sell, will easily wipe out its meager first-quarter operating profit. The company expects to report a net loss of $117 million, or 25 cents a share, when it formally releases first-quarter results next week. Excluding special items, however, the company's 5-cent operating profit is considerably better than the break-even results Wall Street was expecting.

Still, Kenneth Weakley -- the UBS analyst who first exposed Tenet's problems -- dismissed the earnings surprise as "a modest ray of sunshine in an otherwise messy quarter." And Tenet itself warned investors against banking on continued upside.

"Winter is the busy season in certain of our markets, and we caution investors from extrapolating our results for this period," said CFO Stephen Farber. "Although we are optimistic that our results will improve over time, we reiterate our expectation of approximately break-even net income from continuing operations" this year.

Investors nevertheless chose to celebrate the rare bit of good news. They quickly pushed shares of Tenet up 4% to $11.85 -- their highest level in weeks -- on Tuesday.

Dodge Ball

For starters, Tenet escaped the fresh bad-debt hit that some had expected.

Granted, bad-debt expenses jumped 29% from a year ago. But the company's bad-debt ratio, figured as a percentage of net revenue, actually fell from 11.9% to 11% sequentially, even as competitors -- most notably industry leader HCA ( HCA) -- saw their own bad-debt problems accelerate in the latest quarter.

At least one analyst this month predicted that Tenet might be raising its full-year bad-debt guidance instead.

"Given this news by HCA, we believe that there is some risk that Tenet may have to increase its provision for doubtful accounts to a level that is higher than 12%," wrote Citigroup bond analyst Steve Abrams, who recommends selling Tenet's notes. "HCA is better positioned to grow revenues in 2004, which we believe may help it deliver a lower provision for doubtful accounts as compared to Tenet."

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