Net revenue and profit at Franklin, Tenn.-based Community Health Systems dropped in the fourth quarter and full year as weak inpatient volumes defined 2013.
The poor financial results mirrored what CHS executives predicted in January: For the three months ended Dec. 31, net revenue fell 1.4 percent to $3.23 billion. Operating income totaled $52.3 million, a 39 percent decline from $85.6 million posted in the same period a year ago. Total profit slipped 55 percent to $28.2 million.
For fiscal year 2013, CHS posted a shade less than $13 billion in revenue, which was a 0.2 percent decline from FY 2012. Operating income dropped 37 percent to $217.3 million, giving CHS an operating margin of 1.7 percent. Total profit sank to $141.2 million.
In 2012, CHS and many other for-profit hospital operators capitalized from a busy flu season, but hospitalizations trended heavily downward last year. CHS' same-hospital admissions plummeted 10.5 percent in the fourth quarter, and they were down 7.2 percent on the year.
Wayne Smith, chairman and CEO of CHS, said in a news release that the company's poor fourth quarter and overall 2013 reflected the big obstacles facing the healthcare industry. "As we previously announced, weakness in volume, combined with higher bad debts and a less favorable payer mix, affected our operating revenues during the fourth quarter," Mr. Smith said. "However, we have continued to focus on our cost management and strategic initiatives to efficiently manage our operations in this challenging environment, and we are pleased with the progress being made across our hospital network."
Adjusted EBITDA equaled $1.73 billion, less than what CHS originally estimated. However, CMS had to pay $101.5 million into a reserve to cover a settlement with the Department of Justice. CHS also had to pay $14.1 million related to its acquisition of Naples, Fla.-based Health Management Associates. CHS closed on the deal in January, agreeing to buy Health Management for $3.9 billion in cash and assume $3.7 billion of debt.
However, the Federal Trade Commission has mandated CHS to divest two hospitals to receive full antitrust approval. According to the settlement with the FTC, CHS must sell 281-bed Riverview Regional Medical Center in Gadsden, Ala., and 116-bed Carolina Pines Regional Medical Center in Hartsville, S.C., both of which were owned by Health Management.
CHS, which now operates 206 acute-care hospitals across the country, the most of any for-profit operator, also released guidance for FY 2014. The company expects revenue this year will total between $19 billion and $20.2 billion, while adjusted EBITDA could be as high as $3.08 billion. CHS also plans on spending up to $1.15 billion in capital expenditures throughout 2014 and completing three or four additional hospital acquisitions.
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