Tenet Healthcare Corp. and HCA Healthcare saw profits dip in the third quarter, as higher labor costs and inflation continue to plague the industry.
Tenet, which released results Thursday, reported net income of $131 million in the third quarter, a 71% drop from the year-ago period. Revenue decreased nearly 2%, to $4.8 billion.
Operating expenses at the Dallas-based for-profit system rose 9.7% to $4.31 billion–including a 1% increase in salaries, wages and benefits, but a 1.2% decrease in supply costs. Contract labor costs remained elevated, comprising 7.4% of total salary costs, compared with 6.2% in the second quarter.
Tenet’s board also authorized a $1 billion share buyback program that runs through the end of 2024.
Tenet continues to expand its ambulatory footprint through subsidiary United Surgical Partners International, capitalizing on an industrywide shift away from traditional acute-care facilities. This past quarter, it added 32 ambulatory surgery centers across 10 states, mostly through acquisition. Another 15 centers are under construction.
On a Friday call with analysts, CEO Saum Sutaria said Tenet expects lower returns from its ambulatory segment in 2022, in part due to a COVID-related spike in cancellations in July and the effects of Hurricane Ian. There have been no changes in patient demand related to the potential economic downturn, he said.
Tenet plans to invest $250 million each year into mergers and acquisitions or construction for its ambulatory segment, he said.
“We were confronted with some of the challenges impacting the segment, but we also had periods where performance met our high expectations early in 2022,” Sutaria said. “These centers are performing well. Their earnings are consistent in a range of our expectations, and they are continuing to ramp up.”
HCA Healthcare, a Nashville, Tennessee-based for-profit system, on Friday reported net income of $1.13 billion in the third quarter, a 50% drop from 2021’s period. Revenue decreased 2%, to $14.97 billion.
Expenses at HCA came to $13.27 billion, compared with $12.12 billion the prior-year period. Expenses related to salaries, wages and benefits decreased 2.75% while expenses for supplies dropped 5.8%. HCA reported an increase in in its “other expenses” category, in part due to provider taxes, professional fees and utility costs.
Chief Financial Officer Bill Rutherford estimated $35 million in additional expenses and lost revenue in the third quarter due to Hurricane Ian’s impact on HCA facilities.
The system is still experiencing some capacity issues, CEO Sam Hazen said, as same facility admissions declined by 1.5% in the quarter.