Community Health Systems (CHS) announced its third-quarter earnings report, which included net operating revenues dropping by 16.3% compared to last year to $3.6 billion. The company said it’s completed 30 hospital divestitures this year and may have buyers for additional facilities.
The Franklin, Tenn.-based for-profit health system said its EBITDA fell by nearly 29% compared to a year ago and its cash flow operations decreased 36% from $178 million in the third quarter last year to $114 million this year.
When comparing only facilities still operated by the health system, CHS said both its admissions and adjusted admissions decreased 2.3% in the third quarter compared to last year. For the first nine months of FY17, admissions decreased by 1.9%.
CHS has been working to divest more than two dozens hospitals this year, as it looks for ways to get out from under billions of dollars of debt. The health system lost $1.7 billion last year and accumulated about $15 billion in debt.
In the third quarter, CHS said it sold two hospitals on Sept. 1, as well as a total of nine facilities on the last day of the second quarter and the first day of the third quarter. The company has completed 30 hospital divestitures this year, which isn’t easy given the current climate of health systems no longer interested in paying top dollar for struggling hospitals saddled with debt.
However, the for-profit health system, which operates or leases 129 hospitals in 20 states, said possible buyers are discussing purchases of other CHS hospitals. The company did not name the facilities, but said that they have at least $2 billion in annual net operating revenues.
CHS’ disappointing third quarter is part of a trend for the health system. Moody’s Investors Service recently downgraded CHS’ corporate family rating, probability of default rating and senior unsecured notes because of its financial issues.
The operator experienced a 12.3% decrease in total admissions and 13% drop in total adjusted admissions over the first nine months compared to a year ago.
Taking into account only the facilities that are still in the CHS chain, net operating revenues dropped 1.5% during the third quarter compared to last year. Operating revenues decreased 0.3% over the first nine months compared to a year ago when only comparing those hospitals.
In announcing the sobering numbers, Wayne T. Smith, chairman and CEO at CHS, said there were many factors that affected the results, including lower volumes, divestiture activity and the hurricanes. CHS said Hurricanes Harvey and Irma cut net operating revenue by about $40 million. CHS facilities in Texas, Florida and Georgia were affected by those storms. The $40 million figure does not include any insurance recoveries that CHS may receive.
“Hurricanes Harvey and Irma directly impacted operations at a significant number of our hospitals, forcing evacuations at some facilities and requiring others to take extraordinary measures to remain operational during these storms,” said Smith.
CHS isn't alone regarding catastrophic events. HCA disclosed that the hurricanes negatively affected HCA by 30 basis points and equivalent admission growth by 80 basis points.
Despite the poor quarter, Smith said CHS is focused on strategic initiatives that it believes will yield positive results.
“We’ve made substantial progress in our portfolio rationalization initiative with 30 hospital divestitures now complete. Our goal is to emerge from this process with a sustainable group of hospitals that are positioned for long-term success and growth,” he said.