Falling admissions, lower-acuity patients compared to the delta variant spike, Hurricane Ian and an unfavorable payer mix contributed to a net loss for Community Health Systems, outpacing an effort by the hospital operator to reduce contract labor expenses in the third quarter.
CHS posted a $42 million net loss in the quarter, down significantly from its net income of $111 million same time last year.
Despite the loss, the operator reaffirmed its full-year net operating guidance of $12.2 billion to $12.5 billion issued in the second quarter after lowering its guidance in both the first and second quarters of 2022.
Shares in CHS rose 16% late Thursday morning.
The Franklin, Tennessee-based for-profit hospital operator reduced its temporary labor costs from $150 million in the second quarter of 2022 to $100 million in the third, said CEO Tim Hingtgen on a Thursday earnings call. However, contract labor expenses were still significantly elevated compared to pre-pandemic levels and the prior-year period.
“Impacts from the top line, including lower admissions and acuity, along with elevated contract labor and wage inflation continued to affect our economic performance,” CFO Kevin Hammons said on the call.
Admissions declined 3.7% year over year to 108,509 admissions. Same-store admissions also fell 2.2%, leading to a 7.1% decrease in net revenue per admission. Lower acuity patients contributed to an average length of stay of 4.6 days, down from 5.1 same time last year.
The lower patient acuity and decrease in revenue per admission reflect an absence of COVID-19 cases, which were elevated during the third quarter last year due to a spike in delta variant cases, Hingtgen said. Coronavirus admissions made up only 5% of inpatient admissions in the quarter, compared to 13% of admissions same time last year.
“Demand for non-COVID healthcare services has returned more slowly and later than most predicted, leading to softer than anticipated volumes during the middle of the year,” Hingtgen said.
However, adjusted admissions rose 5.2% sequentially — a “bright spot” in the systems earnings, despite a “cautious view” on same-stay admissions given macroeconomic headwinds, Jefferies equity analysts wrote in a note on the results.
Same-stay surgeries increased by 0.3%, beating pre-pandemic baseline levels, the CEO said. However, the operator noted a “shift” of some inpatient procedures to outpatient providers.
Revenue of $3 billion, a 3% decrease from the same period in 2021, narrowly missed Wall Street expectations.
The system also posted a 21% year-over-year decrease in EBITDA to $400 million, despite $115 million in third quarter pandemic relief funds.
The operator, which owns eight hospitals and more than 80 outpatient care sites on the west coast of Florida, sustained a $10 million loss attributed to Hurricane Ian, the CEO said, adding that work is “ongoing” to restore care sites to full operation.
Additionally, the operator noted that it is in “advanced” divestiture discussions, declining to speculate on deal ranges, but adding it that continues to receive asset interest. CHS divested a 32-bed Oklahoma hospital during the third quarter.
“If these transactions come to fruition, we believe that in addition to paying down debt opportunities also exist to reinvest resources," Hammons said.