Community Health Systems’ operating income declines amid rising expenses

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Community Health Systems more than doubled its profits in the fourth quarter, but high labor costs and inflation continued to pressure its results.

The Franklin, Tennessee-based for-profit system on Wednesday reported fourth-quarter net income of $414 million, or $3.18 per share, compared with $178 million, or $1.34 per share, a year ago. The results included a $180 million gain from early debt extinguishment and $119 million from HealthTrust Purchasing Group’s sale of CoreTrust Holdings, which closed on Oct. 1. Community Health Systems is a noncontrolling partner in HealthTrust.

Quarterly operating income fell more than 46% to $228 million. Expenses rose 3.7% to $2.91 billion. Costs for salaries and benefits were up 1.5%. Net operating revenue declined 2.8% to $3.14 billion.

Community Health Systems has whittled down contract labor costs each quarter since they peaked early last year, Chief Financial Officer Kevin Hammons told investors Thursday. These expenses declined from $140 million during the fourth quarter of 2021 to $80 million during the final three months of 2022.

The health system decentralized nurse recruitment last year, which enabled it to boost hiring by 18%, Hammons said. Once contract labor spending levels out, average quarterly costs will likely be $50 million to $60 million, he said.

Community Health Systems, which has 79 affiliated hospitals and more than 1,000 care sites, continues to cut costs by adjusting its physical footprint. Last year, Hammons said the company was in “advanced discussions” about divestitures. In January, it agreed to sell its last hospital in West Virginia to Vandalia Health System.

“We remain engaged in continuing discussions about other potential transactions. We believe these transactions, if they come to fruition, will provide opportunities to further pay down debt as well as allow opportunities to reinvest resources to areas of our portfolio to advance their long-term growth in earnings,” Hammons said Thursday.

For the full year, Community Health Systems reported net income of $46 million, or 35 cents per share, compared with $230 million, or $1.76 per share, in 2021. Revenue declined 1.3% to $12.21 billion, and expenses rose 3.9% to $11.39 billion.

Also this week, Community Health Systems disclosed a data breach potentially compromising personal and health information of about 1 million patients. The company does not believe its information systems were affected but said an investigation is ongoing.

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