Franklin, Tenn.-based Community Health Systems recorded a profit in the second quarter even as revenue and hospital admissions fell.
The 97-hospital investor-owned system reported a net income attributable to shareholders of $70 million on net operating revenue of $2.5 billion, up from a $167 million net loss on net operating revenue of $3.3 billion in the second quarter of 2019. Adjusted hospital admissions declined by more than 24% on a same-facility basis as a result of the COVID-19 pandemic, which dented revenue by an estimated $1 billion, executives said.
CHS was buoyed by $448 million in federal COVID-19 relief funding as well as $1.2 billion in Medicare accelerated payments in the second quarter, which CMS will start to recoup in August.
Scale has helped CHS weather the pandemic and positions it well as the organization "looks to improve its competitive position," but the federal relief funds have made a substantial difference, Wayne Smith, chairman and CEO of CHS, said during Wednesday's earnings call, adding that he was "feeling pretty good" about CHS' margin performance.
"Funds from the CARES Act have been very helpful to the organization, and so many other healthcare providers," he said, urging everyone to "do their part" to curb the spread of COVID-19.
About three quarters of CHS' net revenue comes from Sunbelt states, many of which have seen recent surges in COVID-19 hospitalization. As a result, some states have reinstated mandates to limit non-urgent procedures, which could drag CHS' revenue.
CHS is currently seeing the highest number of COVID-19 admissions in Texas and Florida as it manages varying degrees of surge in Mississippi and Alabama, said Dr. Lynn Simon, chief medical officer and president of clinical operations at CHS. The company has likely seen its peak COVID-19 volumes in Arizona, she noted.
In total, CHS has tested more than 100,000 patients and cared for around 15,000 COVID-19 patients.
"That compares to approximately 2,000 cared for at the end of April, 3,000 at the end of May and 7,000 at the end of June, which brings into clear perspective the magnitude of the current surge in July," Simon said.
While surgeries were up 2% year-over-year in June, emergency department utilization has lagged, which was down 20%, said Tim Hingtgen, chief operating officer of CHS. Most of that was due to a decline in lower-acuity cases; higher-acuity cases have largely recovered, he said.
Telehealth is helping offset fewer in-person visits at CHS' physician offices, and the organization is gearing up for increased demand for downstream in-person referrals, Hingtgen said.
Cost-cutting measures yielded a 9% reduction in salary and benefits expense and an 18% reduction in supply costs on a same-store basis, said Kevin Hammons, chief financial officer at CHS.
"We are confident that following our recent capital structure work along with our current cash on hand, proceeds from divestitures and signed definitive agreements, availability under our ABL, as well as the possibility of additional federal government stimulus and relief efforts, we have ample liquidity to manage through this current crisis, return to normal operations and are well positioned for growth moving forward," he said.
CHS continued to sell its noncore hospitals, which also boosted its balance sheet. On Jan. 1, CHS completed the divestiture of three hospitals, and since then has entered definitive agreements to sell a total of seven hospitals, for which the company said it expects to receive $430 million by year-end. Those deals would complete CHS' formal divestiture program, first announced in 2017, executives said.