Changes to payer mix and higher specialist fees took a toll on Community Health Systems' bottom line in the first quarter, despite a promising rebound in patient volume.
Same-facility admissions grew 4.8% year-over-year, and surgeries grew by 10.6%. However, about two-thirds of the growth in volume came from patients covered by government payers, particularly Medicare Advantage, Chief Financial Officer Kevin Hammons told investors on Tuesday's earnings call. Medicare Advantage often pays rates below traditional Medicare.
Franklin, Tennessee-based Community Health also navigated increases in outsourced specialist fees for anesthesiologists, emergency medicine providers and hospitalists. The higher fees stem in part from the No Surprises Act, which implemented protections on medical bills from specialists who are out-of-network or who work in hospitals but are not part of those hospitals' insurance contracts. As a result, some specialists charge hospitals a subsidy to make up for what they can't charge patients, a Community Health spokesperson said.
System executives expected specialist fees to peak in the first quarter, and some new vendor agreements with better pricing are in place, CEO Tim Hingtgen said during the call.
Lower acuity cases and the end of federal COVID-19 relief funds also contributed to the system's losses.
Community Health reported a quarterly net loss of $51 million, or 40 cents per share, compared with a $1 million net loss, or 1 cent per share, a year ago. Operating income declined 22.2% to $210 million.
Quarterly revenue decreased 0.1% to $3.11 billion.
First-quarter operating expenses rose 2% to $2.9 billion, including a 1.6% increase for supplies and a 3% jump for salaries and wages. Community Health reduced contract labor costs by about 54% year-over-year, but those costs were up more than 6% to approximately $85 million compared with the fourth quarter of 2022, Hammons said.