Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Finance
July 20, 2013 01:00 AM

Late News: Sour earnings report

Federal inquiry, bad debt shake Community Health

Beth Kutscher
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Community Health Systems' earnings preview—which showed larger-than-expected drops in patient volume and net income—may set the stage for a difficult quarter going into earnings season for publicly traded hospital operators. Those difficulties may be heightened by ongoing federal investigations into Community and another large hospital operator, Health Management Associates.

    Franklin, Tenn.-based Community on July 18 braced investors for earnings results that are expected to show a 57.2% decline in net income, which it attributed to weak patient volume, higher-than-expected bad debt and an adverse payer mix.

    It also said the U.S. Justice Department had handed down an additional subpoena as well as a request to interview two high-ranking executives as part of its two-year investigation into the company's admissions practices.

    The admissions numbers—a 5.7% drop in same-facility admissions and a 2.6% decline in adjusted same-facility admissions, a number that includes outpatient activity—came just days after HCA, the country's largest hospital chain, surprised Wall Street with an upbeat earnings preview that surpassed expectations for volume and net income.

    “I think HCA will be your outlier,” said Brian Tanquilut, an analyst at Jefferies & Co. “HCA has differentiated themselves from everyone else.”

    Tanquilut noted that some of the difference may be because of HCA's urban focus compared with Community's more rural focus. He added that HCA offers a greater number of ancillary services. “I think having a lot of side businesses basically opens up a lot of referral opportunities,” he said.

    HCA has also “made a very concerted effort to cut costs,” said Tom Gallucci, an analyst at Lazard Capital Markets. “It sounded like that worked out very well to their benefit.”

    Community said it expects to report

    $65 million in net income on revenue of $3.2 billion for the second quarter, compared with net income of $151.7 million on revenue of about $3.2 billion during the same period last year. It is scheduled to report earnings July 29.

    The government opened its investigation into Community's admissions practices in April 2011, after Tenet Healthcare Corp.—in an attempt to thwart a takeover attempt—accused Community of improperly using short-stay admissions instead of observation.

    The latest subpoena came on July 9, shortly after the second of two meetings that Community held this year with the Justice Department.

    But the feds want more documents supporting Community's position, requesting for instance its criteria for observation status and its financial relationships with physicians who have admitting privileges, the company said.

    Justice also served “civil investigative demands” to interview two current employees, a division president and a senior vice president, according to the company. Community said it would cooperate with the government's investigation.

    HMA, Naples, Fla., is also under investigation into its short-stay admissions practices, and received similar subpoenas in May and July 2011. The company used the same emergency department management software as Community.

    The investigation has been one of the ongoing issues that hedge fund Glenview Capital Management has raised in its campaign to unseat HMA's current board of directors and install nominees who may be more receptive to a takeover.

    While Community is rumored to be the lead suitor for a potential tie-up with HMA, the company said in its earnings preview that the negative second-quarter results have “intensified its focus on core operating strategies, volume initiatives and expense management”—which will likely heighten speculation about whether it has the focus and firepower for a deal.

    But Tanquilut said he thought Community's troubles might offer more incentive for the company to seek out the synergies a strategic transaction would offer. “It's going to prompt them to do a deal—I'm in that camp,” he said. “The only concern I have is financing.”

    Scott Becker, a healthcare attorney at McGuireWoods, noted that Community has a “pretty driven” leader in President and CEO Wayne Smith, and the company—like Tenet, which recently scooped up Vanguard Health Systems in a $4.3 billion deal—is in “growth mode.” Federal investigations, he said, aren't necessarily a hurdle. “The larger the company, the less it will hold up a deal.”

    Glenview, for its part, is moving forward with its consent solicitation process to replace HMA's current board.

    The hedge fund said on its Revitalize HMA website that its nominees have met three times in the past several weeks “to establish committee structures and a transition plan to foster quality of care and continuity.” The group also tapped turnaround firm Alvarez & Marsal to conduct a review of HMA's operations.

    Follow Beth Kutscher on Twitter: @MHbkutscher

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Money arrows increase up
    Takeaways from health systems' first-quarter earnings results
    medicare advantage stars covid
    CVS expects $1B hit from Medicare Advantage star ratings dip
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing