For-profit health systems report financial challenges as labor expenses soar

While the healthcare industry grapples with severe workforce shortages, several for-profit health systems reported losses or decreases in profits as labor costs ballooned in the first quarter of 2022.

Nashville, Tenn.-based HCA Healthcare's net income dropped to $1.3 billion in the first quarter, compared to $1.4 billion for the same period last year, according to its financial results. Meanwhile, its labor expenses soared by 10.1 percent year over year, to $6.9 billion in the first quarter of this year.

King of Prussia, Pa.-based Universal Health Services also reported a drop in its net income, by 26.4 percent, to $153.9 million for the three months ended March 31, compared to $209.1 million in the same period last year. Its operating income fell 21.2 percent year over year to $232.9 million in the first quarter of this year, according to its financial results.

UHS reported a 13 percent increase in its expenses for salaries, wages and benefits, from $1.5 billion in the first quarter of 2021 to $1.7 billion this year.

"Our operating results during the first quarter of 2022 reflect continued uncertainties related to the COVID-19 pandemic, as well cost as escalations related to the nationwide shortage of nurses and other clinical staff and support personnel," UHS said in the report. "As a result, our labor costs were higher than anticipated, and patient volumes at our behavioral healthcare facilities were lower than anticipated, which unfavorably impacted our operating results during the first quarter of 2022."

Community Health Systems, headquartered in Franklin, Tenn., posted a net loss of $1 million for the first quarter of this year, although it improved from the $64 million loss it had for the same period last year, its financial results showed. The system's operating income fell by 17.2 percent year over year, to $270 million in 2022, from $326 million in 2021.

Like UHS and HCA, CHS' expenses for salaries and wages rose, but at a smaller rate of 1.7 percent, to $1.3 billion. The system expects the labor challenges to continue, CEO Tim Hingtgen said in the report.

"Moving through the second quarter and the remainder of the year, we anticipate contract labor rates to remain elevated. However, we expect our operational momentum to continue, as we anticipate capturing deferred healthcare demand, benefiting from recent strategic investments, and continuing the execution of the company’s margin improvement program," he said.

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