Tenet CEO counsels patience to wary investors

By Kim Dixon and Bill Berkrot

NEW YORK (Reuters) - Investors looking for signs of a turnaround at hospital chain Tenet Healthcare Corp (THC.N: Quote, Profile, Research, Stock Buzz) should focus on trends in paying customers, numbers of outpatient visits and sustained clinical quality over the coming year, its chief executive said on Tuesday.

Tenet, one of the biggest publicly traded hospital chains with nearly $9 billion in annual revenue, is still trying to claw its way back from years of upheaval, culminating in a $900 million payment to the U.S. Justice Department to settle charges of bilking the federal government.

Tenet CEO Trevor Fetter said the key gauges of commercial managed-care patients -- those who can pay for its services -- "because those are the ones you really want" and outpatient visits will portend a turnaround.

"And of course the bottom line is earnings and free cash flow. Eventually the company needs to generate positive free cash flow," Fetter told the Reuters Health Summit in New York. "We've invested heavily in our hospitals, and that needs to generate a return."

Dallas-based Tenet's volume of commercially insured admissions declined in the third quarter, but the rate of decrease has been steadily slowing.

"Trends are moving in the right direction," Fetter said. "Moving through flat would be another good step in the right direction."

Still, Wall Street is not yet convinced.

Ten Wall Street analysts rate the company "underperform" or "sell", 10 rate it a "hold," and one recommends buying the stock, according to Reuters Estimates.  Continued...