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Wayne Smith, CHS chairman and CEO
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Weather walloped CHS harder than its peers, execs say


By Beth Kutscher
Posted: May 7, 2014 - 3:15 pm ET
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Severe winter weather hurt Community Health Systems' admissions more than its peers, as a greater number of its hospitals are located in the hardest-hit states, company officials said in an earnings call.

The Franklin, Tenn.-based chain, now the largest in the country by hospital count, sought to quantify the impact of sub-zero temperatures and snowstorms on its results in the call. CHS yesterday reported a $78 million loss from continuing operations on revenue of $4.2 billion in the first quarter, compared with $98 million in income on $3.3 billion in revenue during the prior-year period.

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Wayne Smith, the company's chairman and CEO, described the winter as the worst he's ever experienced. About 65% of CHS' hospitals, or 130 facilities, in Arkansas, Illinois, Indiana and Pennsylvania, saw volume declines as a direct result of the weather, he said.

In total, CHS estimates that it lost 2,600 admissions and 6,000 adjusted admissions, equating to about $58 million in revenue, due to freezing and sub-freezing temperatures and storms. However, the impact was largely felt in the first two months of the year, with March and April patient volumes returning to levels more in line with expectations.

The quarter was an active one for CHS overall, including its integration of Health Management Associates, as well as initial results from insurance expansion under healthcare reform. The company already has recognized $12 million in synergies since the HMA merger closed in late January, and expects to achieve $100 million in synergies this year and $250 million over two years, officials said.

“The integration is going extremely well,” Smith said on the call. “Our synergies are coming along. We've done a good job, working our way north from Naples to Nashville.” But he added, “This is the first quarter of a long process for us.”

In addition to acquisition and integration costs, CHS said it set aside $101.5 million in a reserve fund to settle HMA's prior legal matters, which also affected results. “I believe we are close to an outcome in this matter,” Smith said.

Across its portfolio, CHS continued to struggle with declining patient volumes, down 8.1% year-over-year, or 5.3% when adjusted for outpatient activity.

Two-midnight rule dampens admissions

In addition to the weather-related admission drop, CHS estimated it saw 5,000 fewer admissions and short stays due to the two-midnight rule and 6,100 fewer patients due to a milder flu and respiratory-disease season.

Yet, the system also began to see some improvements from healthcare reform. About 25% of its adjusted admissions are located in Medicaid-expansion states, said Larry Cash, CHS' chief financial officer. In those states, the number of self-pay patients declined to 5.2% of total admissions, a 1.4 percentage-point decrease. Medicaid admission shares also increased 2.5 percentage points to account for 21.7% of total admissions.

Self-pay emergency room visits declined 16% in expansion states, but increased in non-expansion states, so the overall impact was a 2% decrease across its markets, Cash said.

Overall, the chain saw 5,500 fewer self-pay patients, a 15% drop, to account for 7.2% of its adjusted admissions, compared with 8% during the same period last year.

The number of patients CHS helped to enroll in an insurance exchange plan increased about 34% month-over-month, Cash said. But given the slow ramp-up, CHS expects to realize 75% of the benefits from healthcare reform in the second half of the year, he added.

The chain previously forecast a 15% reduction in uninsured patient visits this year, with a revenue boost of $95 million to $160 million.

Follow Beth Kutscher on Twitter: @MHbkutscher


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