Community Health Systems is still working to get back in the black amid a challenging operating environment.
On Wednesday afternoon, the for-profit system reported a net loss of $38 million, or 29 cents per diluted share, in the second quarter. It was, however, a significant improvement over the year-ago period's $326 million net loss, or $2.52 per share. The Franklin, Tennessee-based company said results were driven by higher inpatient and outpatient volumes, higher-acuity cases, increased reimbursement rates and reduced contract labor costs, among other factors.
Revenue rose 6.2% year over year to $3.12 billion, and same-store admissions grew 4.8% in the quarter. Average length of stay remained relatively flat at 4.5 days.
Community Health Systems leaders are hoping higher patient volumes and efforts to centralize operations will have a positive impact on earnings as the year progresses.
To help cut costs, the system launched Project Empower, a plan to redesign workflows, standardize operations in areas such as finance and supply chain, increase transparency for faster decision-making, reduce complexity in administrative tasks and integrate enterprise resource planning software, President and Chief Financial Officer Kevin Hammons said on a Thursday morning earnings call. He said the system will start implementing changes later this year and continue through early 2025.
Contract labor costs fell 15% in the last quarter to about $74 million, down substantially from the $190 million peak in the first quarter of 2022, Hammons said. He expects quarterly expenses to fall to between $60 million and $65 million by the end of the year. The health system has also transitioned more than 500 hospital-based clinicians to affiliated facilities from staffing company American Physician Partners after it announced last month it would close, CEO Tim Hingtgen said on the earnings call.
Operating expenses were up 1.9% year-over-year to $2.87 billion, including a 3.3% increase for salaries and benefits and a 3.5% increase for supplies.
Community Health Systems, which operates 77 hospitals and more than 1,000 other care sites, continues to sell off hospitals, most recently agreeing to sell three Florida facilities to Tampa General Hospital in a deal valued at about $290 million.
“[Florida] is a good market, but divestitures like this one and others such as El Dorado, Arkansas; Seminole, Oklahoma; and two other small health systems in West Virginia enable us to deliberately focus our resources in markets that we deem as most investable and that can produce greater growth and returns over the long term,” Hingtgen said on the call.
In more favorable markets, Community Health Systems has added nearly 200 beds in the last year and a half, plus ambulatory surgery centers and freestanding emergency departments, Hingtgen said.
Earlier this year, the system sold its last hospital in West Virginia and also announced plans to exit North Carolina. Hammons said Thursday the system will continue to consider new deals “when it makes financial and strategic sense.” He told investors in February the company was conducting ongoing discussions about potential transactions to help pay down debt and reinvest resources.
Community Health Systems' financial results contrast those of other for-profit healthcare systems. Nashville, Tennessee-based HCA Healthcare, King of Prussia, Pennsylvania-based Universal Health Services and Dallas-based Tenet Healthcare increased projections for 2023 as profits grew due to higher patient volumes and lower contract labor costs.
