Community Health Systems missed Wall Street expectations on revenue in the second quarter and posted a sizable net loss compared to the net income it reported a year ago.
Challenging operating dynamics like lower-than-anticipated volume, lower net revenue per adjusted admission and significant contract labor costs impacted earnings in the quarter, CEO Tim Hingtgen said in a release.
CHS stock was down about 36% in Thursday morning trading.
The Franklin, Tennessee-based for-profit hospital operator saw admissions fall 3.4% year over year while adjusted admissions fell 0.4%. On a same-store basis, admissions fell 3.5% and adjusted admissions fell 0.5% year over year.
“A main contributor to this decline was a greater migration of higher acuity, short-stay surgery cases that were historically inpatient status being performed as outpatient status, as evidenced by a much smaller decline in adjusted admissions,” Hingtgen said on a Thursday call with investors.
To rein in labor costs, CHS executives said they’re taking an approach similar to Tenet by managing both volumes and labor costs concurrently. “We are consolidating some service locations and intentionally reducing capacity and staffing,” Hingtgen said.
“We will do this where it makes sense and in ways that balance the labor supply challenges with our focus on growth and expanding market presence in the long term,” he said.
In the first quarter of this year, CHS lowered its full-year expectations as its spending on contract labor more than doubled year over year, executives said during a call with investors at the time.
The chain again cut revenue guidance for the full-year in Q2 to reflect shortfalls and expectations for continued volume softness this year, Jefferies analysts wrote in a note.
CHS also continued dealing with a challenging nurse staffing environment in the quarter.
Contract labor spending declined from around $190 million in Q1 to $150 million in Q2, though that's still significantly up from pre-COVID levels, Jefferies analysts wrote in a note.
The hospital operator’s “wide top line and EBITDA misses will translate to significant stock volatility as investors question its fundamentals, especially in light of relatively good results from HCA & THC,” Jefferies analysts wrote.
Editor’s note: This story has been updated with comments from CHS executives during an earnings call Thursday.