Franklin, Tenn.-based Community Health Systems remains cautiously optimistic about its cost management strategies in the face of economic uncertainty and potential tariff headwinds, company executives told investors during its first-quarter earnings call on April 24.
While global trade policy continues to pose cost uncertainties for the healthcare supply chain, CHS leaders argued that their procurement strategy offers meaningful insulation — at least for now.
Despite early-year challenges, including some “softness” due to flu-related impacts, CHS reported strong inpatient admission volumes in the first quarter, according to CFO Kevin Hammons. This volume increase, while adding pressure to operational resources, did not compromise expense control, he said.
“We still had very strong inpatient admissions, and we were able to control our expenses with the added load of inpatient patients,” Mr. Hammons said. “We believe that we’ll continue to maintain and control expenses throughout the year.”
He noted that the implementation of Oracle Health’s enterprise resource planning system is beginning to yield new operational insights for the health system, offering opportunities to streamline costs further.
“We think that there’s some tailwinds for us as we continue to stabilize our new ERP and gain insights into the business and see … some tailwinds on being able to take out some additional cost relative to tariffs,” Mr. Hammons said.
CHS’ procurement strategy, particularly its membership in HealthTrust Purchasing Group, plays a central role in shielding the company from supply price volatility. About 70% of CHS’ supply purchases are made through HPG, which provides multi-year contracts and consistent pricing, according to company executives.
“With that, we have fixed pricing,” Mr. Hammons said. “Typically, contracts are three years through the GPO, so we have some price protection there.”
This protection is further reinforced by the geographic distribution of CHS’ suppliers. About half of the GPO-driven purchases are domestic, making them immune to foreign tariffs. Less than 5% of the system’s purchasing is from China — the country most directly affected by recent and potential new tariffs — minimizing the system’s exposure to major pricing disruptions, according to Mr. Hammons.
The rest of CHS’ purchasing is spread across several countries. “It’s yet to be determined what the risk is there,” he said.
While CHS leadership emphasized the relatively small exposure to tariff-sensitive supply lines, they acknowledged the need for continued monitoring as global trade dynamics evolve. The company’s diversified sourcing strategy and reliance on long-term group purchasing contracts offer a buffer, but not absolute immunity, in an unpredictable environment.
