More on Operations

Tenet CEO: New tax law will save us $10 to $20 million every year

Tax Cuts and Jobs Act of 2017 brings big benefits to for-profit hospitals, Tenet Healthcare's chief said.

Susan Morse, Senior Editor

Tenet Healthcare Headquarters from GoogleTenet Healthcare Headquarters from Google

Tenet Healthcare has updated its 2018 financial outlook to reflect the positive financial benefit of the Trump Administration's new tax law.

The Tax Cuts and Jobs Act of 2017, signed into law last month, gives corporations a reduction in the corporate federal income tax rate from 35 to 21 percent.

[Also: Community Health Systems to sell five more hospitals]

Tenet will lower its cash tax payments by $10 to $20 million per year over the next several years due to the law's repeal of the corporate alternative minimum tax rate, Tenet said.

There's also the positive benefit of 100 percent bonus depreciation, which lower's Tenet's federal taxable income and results in a slower utilization of the net operating loss carryforwards. Tenet said the carryforward amount will be about $1.6 billion as of Dec. 31, 2017.

[Also: For-profit hospitals have stable outlook, Moody's says]

"We anticipate approximately 80 percent of capital expenditures in 2018 should qualify for immediate expensing, which will more than offset the impact of the interest expense limitation," Tenet said Friday.

Earnings per share are projected to be greater than originally forecast.

[Also: Tenet ponders sale of revenue cycle platform Conifer, will boost cost-reduction program by $100 million]

"The change in the tax law is positive for Tenet from an economic perspective," CEO Ron Rittenmeyer said by statement. "Our cash tax payments will be approximately $10 million to $20 million lower each year over the next several years, which will be additive to free cash flow. In addition, the new law does not change our ability to utilize our substantial NOL (net operating loss). While EPS (earnings per share) will be lower due to the limitation on interest expense deductibility, this does not impact free cash flow, and over the next two to three years, we expect these changes will positively affect EPS due to the lower tax rate."

None of the other large for-profit hospitals, Hospital Corporation of America, Community Health Systems or Prime Healthcare Service, posted changes in their financial outlook.

Some of the for-profit systems have faced financial challenges. Tenet during its third quarter saw a more than 2-percent drop in patient revenue.

Community Health Systems has been selling off hospitals to reduce billions in debt.

The new tax law is easing some of the financial pressure, with its long-term impact on for-profit systems not yet known.

In recent months, a wave of mergers among large Catholic hospital operators such as Dignity and Catholic Health Initiatives, and Ascension and Providence St. Joseph Health, has taken away acquisition targets for investor-owned companies such as HCA Holdings, Tenet and Community Health Systems.

Twitter: @SusanJMorse
Email the writer:

Show All Comments