Hospitals & Facilities

Tenet Healthcare expects ‘headwinds’ due to new laws in California and Florida

This year, California passed a law increasing healthcare wages, and Florida is capping medical damage payments.
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Dallas-based Tenet Healthcare is eyeing two new laws that it anticipates could affect future hospital expenses.

Tenet, which operates 61 hospitals and about 590 outpatient centers and other facilities in the US, anticipates that California’s 2024 healthcare wage increase and Florida’s reimbursement rates for medical damages could lead to rising costs in the upcoming years, Tenet EVP and CFO Dan Cancelmi told investors last month.

“The new regulations related to workers’ compensation and personal injury reimbursement in Florida, and healthcare wages in California, represent around $100 million in headwinds in aggregate,” Cancelmi said during the Q3 2023 earnings call.

Last month, California Governor Gavin Newsom signed a law to increase the minimum wage for healthcare workers in the state from $15.50 to a maximum of $25 an hour over the next decade, the Associated Press reported. Tenet operates 66 facilities in California.

Over 469,000 California healthcare workers could see their wages increase under the new law, according to an analysis from the UC Berkeley Labor Center. The change in payroll costs from the wage increase depends on the type of healthcare facility: Hospitals may see labor expenses rise by almost 3%, while facilities for home health services could see the highest increase at nearly 18%, the analysis found. However, some of these increasing expenses may be offset by cost savings from lower staff turnover rates, according to the analysis.

In March, Florida Governor Ron DeSantis signed a law to change medical damage caps in a personal injury lawsuit. Tenet has 83 facilities across Florida.

Under the new law, patients in a personal injury lawsuit who don’t have insurance would be limited on the amount of medical damages they can present at trial, South Florida’s PBS and NPR station WGCU reported in March.

“To limit what a doctor can charge to 1.4 times the Medicaid rate will basically drive all the doctors out of doing any type of work,” Richard Purtz, a partner at law firm Goldstein, Buckley Cechman, Rice, and Purtz, told WGCU. “It’s very difficult to convince any doctor to work for that money.”

In the coming years, however, Tenet expects to see earnings increase from other factors, such as “the aging of the population, the growing burden of chronic illness, the population shifts into many of our markets, and the continued impacts of service and technology innovation that occur outside of the pharmaceutical sector,” Tenet CEO Saum Sutaria said.

“Thus far in our planning, we expect our earnings growth opportunities will more than offset these headwinds,” Cancelmi said.

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