Community Health Systems Q2 results miss guidance by $90 million

Community Health Systems had a slow first quarter with winter weather disruptions that plagued its initial months of operation following its blockbuster merger with Health Management Associates that nearly doubled its size. The second quarter did not do enough to lift revenue and the leading U.S. hospital operator came in short of guidance by $90 million just after other companies like LifePoint Hospitals and HCA Holdings had released stellar Q2 results for their hospitals.

Naturally, this did not please investors and caused the stock to fall 4 percent in value on what was a rough day for stocks overall. The S&P 500 was down 2.2 percent.

For the second quarter, Franklin, Tennessee-based Community Health Systems reported net operating revenues of $4,779 million (which is up 49.8 percent year-over-year) and operating expenses of $4,428 million. Operating income was $75 million and net income was 70 million. For investors, earnings per share were up 37 cents, which while not bad, was less than investors had hoped.

Community Health Systems, Inc., has positioned itself as the leading for-profit publicly-traded operator of general acute-care hospitals in U.S. non-urban and mid-size markets. This means that its fortunes, even more than most hospital operators, is linked to the outcome of healthcare reform and how quickly reform may help rural patients, who are often low-income, access health insurance.

“We are pleased with our performance for the second quarter of fiscal 2014 and our ability to execute our strategy in an evolving healthcare environment,” noted Wayne T. Smith, chairman and chief executive officer of Community Health Systems in the press release accompanying the release of the Q2 financials. “These results reflect improved operating synergies from the integration of the HMA hospitals and a more favorable operating environment with less weather disruptions than we experienced early in the year. At the same time, we have continued to position the Company to capitalize on the opportunities created by implementation of The Affordable Care Act. We have already realized the early benefits of healthcare reform in the second quarter with a decline in uninsured admissions and a modest shift in payor mix, and we expect this trend to continue with further expansion of insurance coverage. While we were pleased with the sequential improvement in our volume trends over the first quarter, we are focused on initiatives to drive our overall admissions.”

Through its subsidiaries, Community now owns, leases or operates 206 hospitals in 29 states with 31,117 licensed beds in service. This is a more than 50 percent increase in licensed beds compared to the same period over a year ago and reflects the company's rapid growth through mergers. (It most recently picked up the bankrupt 179-bed Natchez Regional Medical Center in Natchez, Mississippi.)

Its admissions for the quarter numbered 238,906, up 47.8 percent from the previous year, but clearly a number Smith would like to improve upon even further.