Q2 Profit at CHS Drops 64% on Lagging Admissions, Government Probes

In the second quarter of fiscal year 2013, profit at Franklin, Tenn.-based Community Health Systems plummeted more than 64 percent, from $83.4 million to $29.8 million, which mirrored CHS' expectations.

CHSlogoEarlier this month, CHS executives prepared investors for the worst, issuing a preview of second-quarter earnings. They expected net income from continuing operations before income taxes would be $65 million, and results from today showed that total hit $64.6 million — a steep drop from $151.7 million recorded in the second quarter of FY 2012. CHS also confirmed that revenue slipped 0.2 percent in the second quarter to $3.24 billion.

"Our results for the second quarter reflect the ongoing challenges facing healthcare providers in 2013," said Wayne Smith, president and CEO of CHS, in a news release. "As a result, we have intensified our focus on core operating strategies, volume initiatives and expense management across our hospital network to efficiently manage our operations in this challenging environment."

CHS attributed most of the drop in profit and revenue to especially weak volumes in May and June, higher-than-anticipated bad debts and a deteriorating payer mix among its 135 community hospitals. In the second quarter, same-hospital admissions dropped 5.7 percent, while adjusted admissions were down 2.6 percent.

As it mentioned in its preview, CHS said it is also dealing with a new subpoena from the Department of Justice regarding how its hospitals admit inpatients from emergency departments.

For the first six months of 2013, net income was down 31.4 percent, from $158.8 million to $108.9 million. Revenue was up a marginal $8.1 million in the first six months, hitting $6.55 billion. Adjusted EBITDA was down 10.9 percent to $908 million.

Earlier today, a report from CNBC journalist David Faber indicated CHS may buy Naples, Fla.-based Health Management Associates as early as this week, though no details of negotiations have been made available.

More Articles on Community Health Systems:
Report: CHS-HMA Deal May Happen This Week, But Challenges Linger
CHS: Q2 Profit Hurt by DOJ Subpoena, Deteriorating Volumes
Illinois Again Rejects CHS' Bid to Build New Hospital

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