Tenet shares rise after CEO touts growth prospects

Shares of Tenet Healthcare Corp. rose to their highest point in nearly seven years Friday on hopes that the hospital operator will benefit from coverage expansions under the health care overhaul.

THE SPARK: Tenet's CEO Trevor Fetter said at J.P. Morgan's annual health care conference in San Francisco Thursday that his company's exposure to large populations of uninsured people in markets like Texas and Florida will be reduced in 2014.

That year, the overhaul expands the state-federal Medicaid program to cover more people, and it will provide income-based tax credits to help many people who don't qualify for Medicaid pay for coverage.

"Tenet's geographic footprint will enable us to capture significant benefits from the coverage expansion that's created by the (overhaul)," Fetter said.

He also touted Tenet's outpatient locations, which he said improve the company's profitability and growth rate and don't require a lot of capital investment.

THE BIG PICTURE: Tenet, based in Dallas, operates 49 hospitals in several states, with most locations concentrated in Texas and the Southeast. The company also runs more than 100 outpatient centers and Conifer Health Solutions, which helps hospitals manage revenue and run their business operations.

THE ANALYSIS: Tenet expects about 75 percent of its hospitals to benefit as the number of patients with health coverage grows between now and 2017, Raymond James analyst John Ransom said in a research note.

He said that, "assuming all states implement Medicaid expansion," Tenet's presence in states like Texas and Florida will benefit the company's growth rather than pressure it.

The Supreme Court ruled last June that states can opt out of the Medicaid expansion, however, and some states have indicated that they wlll opt out.

SHARE ACTION: Up 4.9 percent, or $1.61, to $34.77 in afternoon trading. The stock peaked earlier at $34.97, its highest level since April 2006.