Franklin, Tenn.-based Community Health Systems, which operates 83 hospitals in 16 states, saw revenues decline in the third quarter of this year but ended the period with higher net income. The hospital operator released its third-quarter earnings two days after being sued over the 2020 bankruptcy of a company it spun off.
In financial documents released Oct. 27, CHS said revenues and admissions were down in the three months ended Sept. 30. Revenues fell less than 1 percent year over year to $3.1 billion and admissions declined 5.5 percent. On a same-hospital basis, admissions were up 2.8 percent and revenues climbed 7.1 percent compared to the third quarter of 2020.
CHS hospitals saw the greatest number of COVID-19 patients to date in the third quarter of this year, CEO Tim Hingtgen said in an earnings release.
"We are grateful to our medical staffs, clinical support teams and hospital leaders who again ensured exceptional care for their patients during this latest surge," Mr. Hingtgen said. "We are also pleased with our results this quarter, especially as we balanced the demands of caring for COVID-19 patients while remaining focused on our growth strategies, key investments and operational improvement plans, which we believe will continue to drive positive results in the future."
Net cash provided by operating activities totaled $121 million in the third quarter of this year, which included the repayment of about $133 million of Medicare accelerated payments. In the third quarter of last year, CHS reported $393 million in net cash from operating activities.
After factoring in costs and one-time expenses, the for-profit hospital operator ended the third quarter with net income of $144 million, compared to $128 million in the same period of 2020.
Looking at the first nine months of this year, CHS posted net income of $146 million on revenues of $9.1 billion. In the same period a year earlier, the company reported net income of $254 million on revenues of $8.7 billion.
CHS released its quarterly earnings a few days after being sued over the 2020 bankruptcy of Quorum Health, a company it spun off in 2016. The complaint, filed Oct. 25, alleges actions by CHS and Credit Suisse Group burdened Quorum with more than $1.2 billion in debt. CHS tapped Credit Suisse as an adviser during the spinoff, according to The Wall Street Journal.
The lawsuit alleges Quorum was financially troubled from the start. The company defaulted under its debt documents in April 2020 and entered Chapter 11 bankruptcy. "Meanwhile, the spin-off dividend afforded CHS the additional liquidity and runway that it needed to avert its own bankruptcy," the litigation trustee and bondholder representative's 23-count complaint alleges.
"We believe the allegations made in the Trust's lawsuit have no merit and we will vigorously defend against them," CHS said in a statement to Becker's Hospital Review. "The spin-off of Quorum Health Corporation was a carefully deliberated transaction reviewed by multiple independent third parties, including attorneys, accountants and consultants. We remain confident in the processes surrounding the transaction. Quorum's own board of directors investigated allegations nearly identical to those raised in the Trust's complaint and determined insufficient cause to pursue them. Likewise, Quorum raised many of these claims in a separate arbitration against us many years ago, and we prevailed. Consequently, Quorum represented in its bankruptcy filing that these claims had 'no material value.' We strongly agree."
The plaintiffs are seeking repayment of the $1.2 billion spin-off dividend and $20 million in transaction fees, according to The Wall Street Journal.