DOJ Investigations, Poor Admissions Drag Down CHS' Q3

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The third quarter was far from rosy for Franklin, Tenn.-based Community Health Systems, as net income at the for-profit hospital operator plummeted 91 percent to $4.1 million.

CHSlogoOperating income fell 63 percent to $21.6 million. Net revenue increased a marginal 0.2 percent to $3.22 billion. The drop in operating and total profit came from a few avenues, CHS officials said in a news release.

CHS said it created a $98 million reserve to cover a settlement with the Department of Justice. The DOJ is investigating CHS' Medicare short-stay hospital admissions between 2005 and 2010, and it is also investigating unnamed issues at the company's 326-bed Laredo (Texas) Medical Center. CHS did not disclose further details on the DOJ's probes, which have not been finalized.

The company also said it has set aside funds to cover expenses related to its acquisition of Naples, Fla.-based Health Management Associates, which is expected to close early next year. The transaction is valued at $7.6 billion. The legal reserves and transaction expenses, as well as early repayment of debt, were the main drivers of decreased profit, CHS said.

However, lagging admissions hindered CHS' third quarter as well. Same-hospital admissions fell 6.8 percent in the quarter, while adjusted admissions dropped 3.9 percent. For the first nine months of fiscal year 2013, same-hospital admissions were down 6.2 percent.

For the first nine months of 2013, CHS' net income fell 44 percent to $113 million. Operating income declined 37 percent to $165 million. Revenue crawled up a little more than 0.1 percent to $9.77 billion.

CHS Chairman, President and CEO Wayne Smith said in the release the company is still "pleased" with the third-quarter results amidst a "very challenging operating environment."

"Our net operating revenues improved over the prior year period on both a consolidated and same-store basis in spite of ongoing volume weakness," Mr. Smith said. "We have begun to realize the benefits of our cost management initiatives, and we remain focused on driving operating efficiencies across our hospital network."

More Articles on CHS:
CHS: Federal Regulators Extending Review Process of HMA Acquisition
Market Matters: How Major Hospital Mergers Have Avoided Antitrust Issues
CFO Larry Cash: CHS is "Well-Positioned for the Future"

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