Community Health swings to $64M loss in Q1

Dive Brief:

  • Community Health Systems posted a $64 million loss in the first quarter, compared to an $18 million profit during the same quarter last year.
  • But the chain beat Wall Street expectations on revenue of $3.01 billion, exceeding consensus estimates by 2%. 
  • Volumes are still notably weak — same store surgery volumes were essentially flat and same store emergency room volumes were down 17% in the first quarter though higher patient acuity and improved payer mix helped offset that.

Dive Insight:

With vaccines rolling out and COVID-19 cases stabilizing, hospitals are beginning to see signs of a return to normal operations, which analysts expect to ramp up in the second half of the year.

The Franklin, Tennessee-based chain’s loss contrasts with HCA, Tenet and Universal Health Services, which all managed to eke out profits during the quarter.

Still, all the major chains are reporting weak volumes and heightened acuity during the period.

Compared to the first quarter of 2020, same store admissions for CHS decreased 4.9%, and adjusted admissions decreased 7.2%. But same store revenue rose 9.8%.

Jefferies analysts said in a note the performance points to continued operating improvements and emerging recovery in healthcare utilization.

CHS management “pointed to improved volume trends in March and good momentum in April, which is consistent with utilization rebound comments made by other hospitals/healthcare providers,” analysts noted.

Over the past two years the hospital chain eliminated 21 hospitals from its portfolio — including three in January, one in February and one in April. While its formal divestiture program ended in December, it’s still entertaining interest from prospective buyers and open to selling additional hospitals.

“This improved earnings performance, in our view, points to operational strengthening that has occurred at CHS over the last two years,” Jefferies analysts wrote. 

The hospital operator has tried in recent years to pivot from its rural strategy, and instead is focused on developing its footprint in areas with larger populations.

CHS recognized about $82 million of federal relief grants it claimed as a reduction in operating costs and expenses in the first quarter, and also repaid about $18 million in advanced Medicare payments in the first quarter.

The chain finished off 2020 posting a $511 million profit.

The industry still has a ways to go to recovery from the pandemic’s impact.

A recent Kaufman Hall report predicts the effects of the pandemic to drive 2021 hospital margins down between 10% and 80%, and revenues down between $53 billion to $122 billion compared to pre-pandemic levels.