- Community Health Systems has been shrinking in recent years as it has been shedding properties in order to restore its bottom line, but a recent 8-K filing with the Securities and Exchange Commission suggests some moderately better times might be ahead.
- The filing, required because the for-profit hospital chain will be selling a $1 billion round of senior secured notes while buying back an issue that matures next year, provided estimates that show a dip in net operating revenues for the fourth quarter and calendar year ending Dec. 31.
- However, estimates for its same-store hospitals — the 101 facilities it continued to own between the end of 2018 and 2019 — saw modest upticks in revenue. By contrast, operating revenue dipped nearly 6% during the third quarter of 2019. Operating and net income were not disclosed in the 8-K.
Tennessee-based CHS hasn't posted a profitable year since 2015, and that has helped shrink its stock price from around $52 a share in mid-2015 to little more than $4 per share today. It's also been shrinking its footprint in recent years, shedding facilities that are costly to operate in an effort to boost its bottom line.
Fitch assigned a B rating to CHS' secured notes. The ratings agency believes the refinancing transaction will "buy CHS more time to execute an operational turn-around plan focused on restoring organic growth and improving profitability of hospitals in certain targeted markets."
However, Fitch noted the organization's credit remains stressed due in part to a high overall debt burden and said its operating profile is "among the weakest" in the sector. The agency said it "believes that some of the company's hospital markets may require additional capital investment to improve organic growth and profit margins, and this is concerning since cash generation is thin."
While its 2019 earnings report is still nearly a month away from release, Thursday's SEC filing may have some positive news for CHS. Net operating revenue on a same-store basis was up 3.7% for the fourth quarter and 4.2% for 2019. Adjusted patient admissions were also up 2.2% for the year (although down 10.6% when taking sold properties into account).
Surgeries — which tend to be a big revenue producer — were up 3% for the fourth quarter and 4.1% for the year in existing facilities.
The consensus among Wall Street analysts remains fairly grim for CHS. On average, they project a loss of $1.37 per share for 2020. That may not sound great, but its better than the projected loss of $1.75 per share for 2019.