(Reuters) - Hospital operators Tenet Healthcare Corp (THC.N) and Community Health Systems (CYH.N) on Monday reported weaker quarterly earnings than a year ago as insurance enrollment slowed in the second year of the Affordable Care Act.
Tenet, the third-largest U.S. for-profit hospital chain, posted a third-quarter net loss, while No. 2 Community Health said net profit declined 16 percent from a year ago.
Dallas-based Tenet also announced plans to buy back up to $500 million of its stock.
Tenet’s shares slipped about 3 percent in after-hours trading. Shares of Community Health, which last month warned of an earnings shortfall, also slumped about 3 percent after hours.
Tenet’s adjusted admissions, which include both inpatient and outpatient figures, increased 0.7 percent from the same period a year ago, at hospitals it operated for at least one year. A year ago, more newly insured patients under President Barack Obama’s healthcare reform law were visiting the doctor.
Tenet Chief Executive Trevor Fetter said the company was expecting slower demand for healthcare services after an initial rush following the creation of insurance marketplaces and expansion of Medicaid coverage for the poor under the reform law.
“It was bound to happen,” Fetter said in an interview.
Shares of hospital operators have pulled back sharply in recent months as investors braced for softer demand. Both Community Health and No. 1 hospital operator HCA Holdings Inc (HCA.N) warned of weaker third-quarter results.
In 2016, additional states are unlikely to expand Medicaid coverage during an election year, and insurance buying on the exchanges is expected to grow more slowly, said Jefferies analyst Brian Tanquilut.
In the third quarter, Tenet reported a net loss of $29 million, or 29 cents a share, compared with net income of $9 million, or 9 cents, a year ago.
Earnings before interest, tax, depreciation and amortization (EBITDA), excluding special items, rose 23.3 percent to $566 million, within the range the company projected last month.
Tenet narrowed its outlook for full-year 2015 EBITDA, excluding special items, to a range of $2.25 billion to $2.3 billion.
Community Health said third-quarter net income fell to $52 million, or 44 cents a share, from $62 million, or 54 cents a share, a year ago.
Reporting by Susan Kelly in Chicago; Editing by Matthew Lewis and Richard Chang