A decrease in same-hospital admissions dragged down profits at Community Health Systems in the third quarter, the company said in a preview of its results late Wednesday.
The Franklin, Tenn.-based chain is the second investor-owned hospital operator to preview quarterly earnings results that are below analyst expectations. Last year set a high bar for the publicly traded hospital chains as newly insured patients flocked to providers with pent-up healthcare needs. But now investors are closely watching for signs that the financial upside from the Affordable Care Act may be beginning to wane.
Community reported a 2.1% decline in same-hospital admissions and a modest 0.1% increase in admissions adjusted for outpatient activity. The chain also blamed a deterioration in its payer mix during the first half of the year for lackluster revenue growth of just 1.4%.
At the same time, Community increased the number of employed physicians, which meant higher salary and benefit expenses. And the chain also incurred higher costs associated with the transition to ICD-10 billing codes and an increase in drug prices.
In total, Community expects to report third-quarter income from continuing operations of $121 million on $4.84 billion in revenue. That compares with $131 million in income from continuing operations on $4.78 billion in revenue during the same period last year.
The company's shares were trading down more than 15% in after-hours trading.
Community's financial performance has lagged its peer group in recent years, especially compared to chains that focus on faster-growing urban markets.
Yet the third quarter may well be shaping up to be tough across the board. HCA similarly previewed pre-tax income that declined year over year as the Nashville-based chain grappled with higher labor costs. And while patient volume increased, HCA reported a small increase in the percentage of uninsured among its total admissions.
Community meanwhile has been rethinking its portfolio and has steadily divested facilities. In its largest move, it will spin off 38 rural hospitals under a new operating company known as Quorum Health Corp. The divestiture will allow Community to focus on creating regional networks in its larger markets.
The company will report full results on Nov. 2.