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Community Health Systems sees $131M operating loss in 2Q

July 29, 2017
  • Community Health Systems (CHS) announced a $131 million operating lossfor the second quarter of this year, the fifth consecutive quarter it is posting a loss. In giving the preliminary numbers, CHS said net operating revenues were about $4.144 billion, compared to $4.59 billion in the second quarter of last year.
  • Lower patient volumes played a key role in the nearly 10% revenue drop. Total admissions dipped almost 11% since the second quarter of last year.
  • CHS, the second-largest investor-owned health system with 137 affiliated hospitals in 21 states, plans to announce its formal numbers on Aug. 1, but the company didn’t say why the numbers released on Thursday aren’t considered final.

Lower volume leading to less revenue has been a common theme in other health systems’ earnings report. For CHS though, the lower volume issue is exacerbated by costs related to sales of hospitals.

“The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues. The results were also impacted by increases in medical specialist fees, purchased services and information systems expense,” said CHS.

CHS had a busy quarter of M&A activity. In the second quarter, it sold 11 hospitals on May 1 and then another nine on June 30 and July 1. The hospital chain plans to divest 30 hospitals this year in hopes of cutting its $15 billion debt. CHS lost $1.7 billion last year.

In a reverse of previous statements where CHS stated divestitures would not be a big focus moving forward, CHS stated it “continues to receive interest from acquirers for certain of its hospitals” and is “pursuing the interest for sale transactions involving hospitals with a combined total of at least $1.5 billion in annual net revenue and combined mid-single digit Adjusted EBITDA margins.”

CHS moved a step closer to dropping 30 hospitals earlier this week when it sold 126-bed Highlands Regional Medical Center in Sebring, Fla., to HCA Healthcare. While CHS is divesting hospitals, HCA is buying hospitals and recently said it planned to offer senior secured notes to fund hospital purchases.

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