Community Health Systems Rocked on Lower Guidance, Hospital Woes Continue

Net operating revenues for the third quarter of 2015 will be approximately $4.846 billion. This would be against revenues of $4.780 billion for the same period in 2014, and versus the $4.99 billion consensus estimate from Thomson Reuters.

Income from continuing operations for the three months ended September 30, 2015, excluding expenses from the planned spin-off of Quorum Health, is expected to be $0.56 per share (diluted), compared with $1.01 per share (diluted) for the three months ended September 30, 2014. Thomson Reuters has the consensus analyst estimate at $0.88 in earnings per share.

Income from continuing operations before taxes will be approximately $121 million, down from $133 million a year earlier. Adjusted EBITDA for the quarter would now be about $661 million, down from $750 million for the same period in 2014.

Community Health said that the consolidated operating results for the quarter reflect a 1.9% decrease in total admissions and a 0.2% increase in adjusted admissions from a year earlier. On a same-store basis, admissions were down 2.1% and adjusted admissions were up 0.1%. Same-store net revenue per adjusted admission was up by 1.0%.

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Additional date provided by Community Health was as follows:

• Consolidated net operating revenues increased over the prior year by 1.4% as a weakness in volume and deterioration in revenue payor mix compared with the first six months of 2015 resulted in lower than anticipated net operating revenues during the period.
• Consolidated salaries and benefits, which included higher costs related to an increase in the number of employed physicians, increased as a percentage of consolidated net revenue from 45.7% to 46.2%.
• Consolidated supplies expense, which increased primarily from higher drug costs, also increased as a percentage of consolidated net revenue from 15.3% to 15.7%.
• Consolidated other operating expenses, which included higher costs incurred related to the company’s implementation of ICD-10, increased as a percentage of consolidated net revenue from 23.4% to 23.7%.
• Electronic health records incentives were also lower than the same period in the prior year by $34 million.

Shares of Community Health Systems were last seen down a whopping 34% at $26.73, and its shares hit a new 52-week low on Thursday. The new 52-week range is $26.10 to $65.00, and the new market cap is now down to about $3.1 billion.

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