Community Health Systems posted a net loss of $42 million for the third quarter — down from a net gain of $111 million in the same period last year -– amid high labor costs and as demand for non-COVID-19 care services returned more slowly than projected, but it is seeing significant reductions in its temporary staffing costs, according to company executives.
Franklin, Tenn.-based CHS is "rapidly reducing contract labor," which declined each month of the third quarter and totaled $100 million in the three months ending Sept. 30 compared to $150 million the prior quarter, CEO Tim Hingtgen said in the company's most recent earnings call.
While contract labor expenses were still elevated over the prior year, they have continued to show sequential improvement.
"During the third quarter of 2022, contract labor was approximately $100 million compared to $60 million in the prior year quarter," CFO Kevin Hammons said. "This compares to $150 million in the second quarter of 2022 and $190 million in the first quarter of 2022. We anticipate continued progress in reducing contract labor going forward."
CHS' centralized nurse recruitment team is also seeing positive results, with retention objectives a core focus for the 81-hospital system.
"On a year-to-date basis, RN hiring is up 12 percent over last year, and our retention rates have improved 300 basis points, resulting in a strong net gain in nursing [full-time equivalents] overall," Mr. Hingtgen said.
Similar to what most health systems reported in the second and third quarters, demand for non-COVID healthcare services returned more slowly and later than expected, leading to softer than anticipated volumes in the middle of the year.
"Moving through the third quarter, we did see volumes, especially surgery and outpatient visits picked up by mid-August coinciding with the end of summer travel, return to school and more normal schedules," Mr. Hingtgen said. "Those improvements continued throughout the rest of the quarter."
Operating revenues hit $3.03 billion in the third quarter, down from $3.12 billion in the same period last year. Operating costs were $2.82 billion, up from $2.78 billion.
"Sequentially we saw improvements in admissions, adjusted admissions and ER visits," Mr. Hammons said. "We also improved length of stay, reduced contract labor expenses, made improvements to our capital structure, maintained strong liquidity and produced positive free cash flow during the quarter."
CHS' same-store surgeries increased 5.3 percent and continue to beat the 2019 pre-pandemic baseline, according to its third-quarter financial report. The system ended the quarter with surgeries at 101 percent compared to 2019.
"Even though we are seeing a shift of some procedures to outpatient, we are also experiencing higher surgical acuity overall as we focus on service line investments," Mr. Hingtgen said. "Surgical case mix increased 5 percent compared to the 2019 baselines across service line categories; we saw the strongest growth in orthopedics, spine, neuro, [gastroenterology] and colorectal procedures."
Emergency department volumes are also rebounding compared to the 2019 baseline, and in the third quarter at 99 percent, according to Mr. Hingtgen.
"We continue to invest in ER services and capacity, freestanding emergency departments, EMS partnerships and ER marketing and outreach programs in our communities," he said. "While improving sequentially net revenue in the third quarter declined year-over-year due to both lower admissions and lower acuity of inpatient admissions versus prior year, which again was a COVID search period."