CHS Loses $112M During Initial HMA Integration

Soft admissions coupled with the early stages of integrating the hospitals within Health Management Associates battered the bottom line of Community Health Systems in the first quarter.

CHSlogoIn the three months ended March 31, Franklin, Tenn.-based CHS posted a net loss of $112 million. That total includes the operational and impairment losses of two hospitals — Riverview Regional Medical Center in Gadsden, Ala., and Carolina Pines Regional Medical Center in Hartsville, S.C. — CHS must sell as part of the HMA merger deal. It also includes losses suffered due to several government investigations. The loss from continuing operations totaled $78 million, compared with a $98 million operating profit a year ago. CHS' adjusted EBITDA missed estimates, totaling $485 million, down 2 percent from last year. Excluding costs related to the HMA deal, adjusted EBITDA was $541 million.

CHS closed on its acquisition of Naples, Fla.-based HMA on Jan. 27, a deal valued at $7.6 billion, and the first quarter earnings included HMA's results from that date forward. Not surprisingly, revenue soared, from $3.3 billion in the first quarter of 2013 to $4.2 billion in the most recent quarter.

However, same-hospital admissions plummeted 8.1 percent. Adjusting for outpatient activity, admissions were still down 5.3 percent. In a news release, CHS Chairman and CEO Wayne Smith said the for-profit hospital company is going through a "challenging" period as it integrates all HMA hospitals. He also said the low volumes were due to "severe winter weather in several key markets and lower flu volumes compared with the previous year." CHS consequently lowered its guidance for the rest of 2014. CHS expects the high range of EBITDA at year-end will be $2.98 billion instead of $3.08 billion.

Despite the tough quarter, Mr. Smith said the company is "excited about the long-term benefits," and "we have a significant opportunity to leverage our assets and apply our disciplined approach to providing quality healthcare in more local communities across the United States."

Brian Tanquilut, an analyst with Jefferies who follows CHS and other investor-owned hospital chains, said CHS' poor quarter was "highly anticipated." He said CHS is still "well-positioned to benefit from healthcare reform over the next few quarters."

More Articles on CHS:
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NLRB Files Complaint Against Valley, Deaconess Hospitals

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