LifePoint navigates shrinking admissions and surgeries to Q2 earnings gain

LifePoint Health posted a sizable earnings gain in the second quarter despite feeling the hurt, like other hospital chains, of declining admissions, emergency room visits and surgeries.

The 72-hospital company on Tuesday reported net income of $46 million on revenue of $1.6 billion compared with net income of $20.1 million on revenue of $1.6 billion in the year-earlier quarter.

LifePoint was aided by tight cost controls and favorable comparables with the year-earlier period, when the chain suffered about $15 million in costs from the departure of key doctors at its Marquette, Mich., hospital.

LifePoint, though, joined HCA, Community Health Systems and Universal Health Services in reducing its earnings guidance for the rest of 2017, largely on less-than-expected revenue this year.

In the second quarter, LifePoint saw admissions fall 3% year-over-year, inpatient surgeries drop 8%, outpatient surgeries 3.5% and emergency room visits 3%.

The silver lining in the latter statistic was that half of the decline in ER visits was from fewer uncompensated care cases.

LifePoint's results drove hospital stocks lower on Tuesday. LifePoint shares fell 90 cents, or 1.5%, to close Tuesday at $58.50. CHS' shares dropped 4%, or 26 cents, to $6.88. HCA's shares gave back $1.09, or 1%, to close at $79.28.

In an earnings call with analysts Tuesday, LifePoint CEO Bill Carpenter said some of the volume challenges, especially in larger markets, may be the result of increased competition from physicians and ambulatory surgery centers. But the company is working to recruit physicians and open new points in those markets "to gain back" the business, he added.

Also, a LifePoint hospital more frequently than not is the sole or dominant hospital in its market so it can move surgeries and other procedures to outpatient settings without losing them from the system, he said.

Carpenter said LifePoint was able to manage through "volume challenges" by ratcheting down hard on costs, including supplies.

Standardizing on certain medical supplies helped LifePoint cut its supply cost in the quarter to $263.2 million vs. $268.9 million in the year-earlier period, the company noted.

On the results, Mizuho Securities cut LifePoint's share price target to $58 from $62.

Mizuho Research Director Sheryl Skolnick said the 16 hospitals that LifePoint acquired between 2014 and 2016 are now contributing to revenue and earnings, but not enough to overcome softening volumes across the system.

"The big issue we see for 2Q17 and 2H17 is the really weak revenue," Skolnick said in a note to investors Tuesday.