Tenet’s stock is going through one of the worst declines in the hospital segment, after reporting its fifth consecutive quarter of net losses and losing $3.6 billion in market cap since last summer, according to a Dallas News report.
Here are five reasons contributing to the poor performance:
1. The company’s stock experienced a lift when the Supreme Court upheld ObamaCare and treatment demand was expected to rise while uncompensated care would fall. However, fewer people are enrolling than projected and 43 percent of Tenet’s hospital beds are in Florida and Texas, two states that haven’t expanded Medicaid.
2. Mid-year 2015 other hospital companies began reporting bad debt and “disappointing earnings.” Investors began losing confidence, according to the report, and Tenet’s stock was halved last fall, experiencing a deeper cut because the company has high leverage.
3. Tenet borrowed from Vanguard Health System in 2013 and then purchased majority stake in United Surgical Partners International last year. The company added $10 billion in long-term debt and earlier this year received a credit rating downgrade.
4. Tenet was involved in a whistleblower lawsuit alleging antikickback violations. The company set aside $20 million for a settlement last year, and that amount has gone up as negotiations with the Justice Department continue.
5. Major insurance companies are now leaving the health insurance exchanges set up by the Affordable Care Act and enrollment will likely be down next year. However, Tenet has diversified efforts with Conifer Health Solutions and partnerships with not-for-profit health systems, leading some analysts to urge another look at the company.
Barclays Capital analysts expect the company’s “strategic shifts to produce faster growth and higher returns.”