Community Health Systems reported a net loss of $38 million in the second quarter, lagging behind rival for-profit systems that posted financial results solidly in the black.
The Tennessee-based company noted the deficit was a significant improvement from the same period last year, when the company reported a net loss of $326 million. CHS benefited in the quarter from rising patient volumes, admissions and improved occupancy rates, but was pressured by declining patient days and length of stay, as well as rising expenses, according to management.
Among the rising expenses were unexpected costs associated with the collapse of American Physician Partners, which CHS contracted with to procure ED and hospital services, CEO Tim Hingtgen said on a Thursday morning call with investors.
CHS insourced 500 APP providers in order to prevent disruptions of patient care at CHS facilities, according to Hingtgen. While adding 500 employees to payroll had not been “in our immediate plans,” it’s an “attractive opportunity” to stand up a scalable, in-house labor solution to meet the system’s needs,” he said.
To move forward strategically from a quarter that was essentially in line with Wall Street’s expectations but still set the stock back on market open Thursday, Hingtgen announced a series of initiatives he told investors will help CHS’ operations.
First, the company will be divesting from certain markets to refocus resources on areas of higher growth.
Florida “is a good market, but divestitures like [Bravera Health] and others such as El Dorado, Arkansas; Seminole, Oklahoma; and two other small health systems in West Virginia enable us to deliberately focus our resources in markets that we deem as most investable and that can produce greater growth and returns over the long term,” Hingtgen told investors.
CHS announced last week plans to sell three Florida hospitals — Bravera Health Brooksville, Bravera Health Seven Rivers and Bavera Health Spring Hill — for $290 million.
CHS is also launching a business modernization plan it’s calling “Project Empower.”
The project, which will begin rolling out this year and continue through early 2025, includes redesigning workflows and standardizing operations in areas including supply chain and finance to enable faster decision-making and lessen administrative burden, according to CFO Kevin Hammons.
CHS plans to leverage an integrated Oracle Enterprise Resource Planning platform to remove “disparate systems” and improve transparency into the health system’s databases, Hammons said.
“Oracle recently purchased — acquired — Cerner and we're a big Cerner shop, with more than half of our hospitals on Cerner clinical platforms,” Hammons said. “This has the potential to open up the opportunity for integration between those clinical systems and financial systems to further allow us to leverage data in a very new way.”
CHS has already devoted “significant” resources into launching Project Empower, Hammons reported, including bringing in change management consultants to help with implementation.
Though Hammon anticipates the program will yield significant cost savings in the future, he also pointed to more immediate positives for CHS’s flagging financials.
CHS joins the ranks of other for-profit hospitals reporting lower contractor labor costs this quarter, with Hammon saying costs fell 15% to about $74 million. He expects to meet the company’s target of reducing contract labor costs by 50% from 2022.
Meanwhile, physician recruitment is up 13.1% year over year. Nurse hiring rose 5.3%, which Hingtgen told investors was in part due to hiring international nurses.