Dallas-based Tenet Healthcare, which operates 77 hospitals, saw revenue decrease and its net loss widen in the third quarter of this year.
Tenet's financial results were in line with the third quarter preview the company issued in October. The for-profit hospital operator ended the third quarter of this year with a net loss of $367 million on revenues of $4.59 billion. That's compared to the same period of 2016, when the company recorded a net loss of $8 million on revenues of $4.85 billion.
Tenet said revenues from the Texas Medicaid Waiver program and Florida's Medicaid program were lower than expected in the third quarter of this year. The company also took an estimated $30 million hit from hurricanes Harvey and Irma.
To improve its financial position, Tenet is launching a $150 million cost reduction plan, which will involve renegotiating contracts with suppliers and vendors, as well as significant headcount reductions. Tenet said it anticipates eliminating approximately 1,300 positions, including contractors.
"We are challenging ourselves to improve accountability, agility and decision making, changing how we manage our business day-to-day, and reiterating our focus on quality and service," said Ronald A. Rittenmeyer, executive chairman and CEO, who was appointed to lead Tenet after longtime CEO Trevor Fetter stepped down late last month.
Although the company will realize some savings from actions within its ambulatory care and Conifer business segments, about 75 percent of the savings will come from Tenet's hospital operations, including the elimination of a regional management layer.
Tenet expects to incur pre-tax restructuring costs of about $40 million in the fourth quarter of this year in conjunction with the cost reduction initiative, with substantially all of the costs related to employee severance payments.
The cost cutting plan and workforce reduction are Tenet's latest moves to improve performance. The company is facing pressure from shareholders as it struggles with a nearly $15 billion debt load and plunging share prices. John Morrow, a managing director at Franklin Trust Ratings who analyzes the healthcare industry, told Bloomberg in October investors "are losing faith" in Tenet.
Investors in Tenet are hopeful activist shareholders will bring about change at the company. In August, Tenet's largest shareholder, Glenview Capital Management, ended an agreement that prevented it from joining efforts by other investors to oust Tenet's management or force a sale of the company. Tenet shares rallied after the hedge fund ended the pact.
Glenview Capital Management may try to replace Tenet's board as soon as January, a person familiar with the matter told Bloomberg.
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