HCA, Tenet and CHS' margins have topped 2019 results since pandemic began

Recent industry reports have highlighted the financial challenges that many hospitals and health systems are facing, with shrinking operating margins potentially contributing to one of the worst financial years in decades, according to one report. 

However, operating margins among the three largest for-profit health systems in the country — Nashville, Tenn.-based HCA Healthcare, Dallas-based Tenet Healthcare and Franklin, Tenn.-based Community Health Systems — have met or exceeded pre-pandemic levels throughout most of the pandemic, according to an analysis published Dec. 5 by Kaiser Family Foundation.

Six things to know:

1. Operating margins among all three systems — which accounted for about 8 percent of community hospital beds in the U.S. in 2020 — were positive and exceeded pre-pandemic levels for most of the pandemic, including in the third quarter of 2022.

2. HCA and Tenet had positive operating margins throughout the pandemic, according to the analysis. CHS had positive operating margins in all but two quarters of the pandemic, and one of those quarters was at the beginning of the pandemic. For nine out of the last 11 quarters, HCA had operating margins of at least 10 percent. During the same period, Tenet reported operating margins of at least 5 percent, while CHS' margins were lower than 5 percent. CHS also had lower margins than HCA and Tenet before the pandemic.

3. During two quarters of 2020, HCA and Tenet's operating margins dropped below their 2019 levels, according to Kaiser Family Foundation. CHS' operating margins dropped below its 2019 levels during the first quarter of 2020 and the second quarter of 2022 before increasing again.

4. For the third quarter of 2022, operating margins were 11.4 percent for HCA, 8.4 percent for Tenet and 1.2 percent for CHS, according to the analysis. 

5. Stock prices fluctuated during the pandemic. For HCA and Tenet, stock prices increased overall since January 2020, but CHS stock prices decreased. At their heights, stock prices increased by 87.9 percent for HCA, by 153.8 percent for Tenet and by 383.1 percent for CHS relative to January 2020.

5. In 2020, stock prices dropped significantly, particularly for CHS and Tenet. As of Nov. 8, stock prices rose 44.6 percent for HCA and 12.6 percent for Tenet overall relative to January 2020. CHS stock prices dropped by 11.5 percent since January 2020, but it has had longstanding financial challenges that precede the pandemic, according to the analysis.

6. As of Dec. 2, most market analysts followed by MarketWatch were bullish on HCA and Tenet stock and neutral about CHS stock, according to the report. 

Editor's Note: Kaiser Family Foundation's definition of operating margins excludes income taxes and nonrecurring revenues and expenses, such as from the sale of facilities. The receipt and repayment of loans — such as through the Medicare Accelerated and Advance Payment programs — do not factor into the determination of operating margins. The definition includes, among other provisions, government COVID-19 relief funds and equity in the earnings of affiliated businesses, such as ASCs, in which the system has a large but noncontrolling stake.

Click here to read the report. 

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