Community Health Systems (CHS) saw a substantial income decline in Q4 2023, dropping nearly 90% due to rising costs. CEO Tim Hingtgen attributed losses to high expenses for reimbursement programs and malpractice insurance. Despite a net loss of $133 million for the year, CHS achieved a positive operating margin, aiming to bolster outpatient services amidst ongoing challenges and divestments.
Community Health Systems (CHS) saw a significant drop in income during the fourth quarter of 2023, with costs continuing to rise. According to a report released on Tuesday, the for-profit hospital operator based in Franklin, Tennessee, reported a nearly 90% decrease in net income compared to the same period last year. This decline brought CHS’s net gain for the quarter down to $46 million, marking an 88% decrease from the $414 million reported the previous year.
During an earnings call on Wednesday morning, CHS executives attributed this decline to high costs associated with supplemental reimbursement programs, medical malpractice insurance, and increased rates for outsourced medical specialists. Prior to this quarter, CHS had been operating at a loss for each quarter of its fiscal year 2023.
CEO Tim Hingtgen previously cited poor macroeconomic conditions, including reimbursement challenges, inflationary pressures, and regulatory hurdles, as contributing factors to the health system’s losses.
Want to publish your own articles on DistilINFO Publications?
Send us an email, we will get in touch with you.
For the full year, CHS reported a net loss of $133 million, a significant contrast to the net gain of $46 million in 2022. Despite this, CHS managed to achieve a positive operating margin, generating $12.5 billion in net operating revenue during 2023, a 2.3% increase compared to 2022.
During the earnings call, Hingtgen highlighted high medical fees, accounting for 5% of CHS’s net revenue, and slowdowns in Medicare Advantage fee-for-service payments as major contributors to the cash shortfall in the fourth quarter and full year.
CHS also accelerated interest payments of approximately $30 million during the fourth quarter, originally due in 2024, according to the CEO.
Despite these challenges, CHS reported a 1.9% increase in adjusted admissions during the quarter and a 5.3% increase for the full year, driving net revenue growth. Increased patient volumes led to a 1.2% year-over-year growth in operating revenue to $3.2 billion during the fourth quarter.
Looking ahead, CHS plans to focus on expanding ambulatory and outpatient care offerings, which represented 54% of its net revenue in the fourth quarter. Last year, CHS divested from eight hospitals, including the sale of three Florida hospitals to Tampa General Hospital for $294 million in December.
While the Federal Trade Commission is challenging CHS’s proposed sale of two North Carolina-based hospitals to Novant Health, Hingtgen expressed support for the deal during the earnings call.
CHS is also considering additional sales that could yield up to $1 billion in proceeds in 2024.
Operating expenses totaled $2.85 billion, a 2.1% decrease year over year, but remained challenging for the provider.
Looking ahead to 2024, CFO Kevin Hammons anticipates that CHS will better manage cost pressures, with capital projects and reductions in contract labor spend expected to provide favorable tailwinds for the organization.