Community Health Systems Rocked on Lower Guidance, Hospital Woes Continue

Community Health Systems Inc. (NYSE: CYH) is showing that the weakness in hospital and medical care facilities may not be over. Its preliminary financial and operating guidance has bushwhacked its shares on Thursday.

Net operating revenues for the third quarter of 2015 will be approximately $4.846 billion. This would be against revenues of $4.780 billion for the same period in 2014, and versus the $4.99 billion consensus estimate from Thomson Reuters.

Income from continuing operations for the three months ended September 30, 2015, excluding expenses from the planned spin-off of Quorum Health, is expected to be $0.56 per share (diluted), compared with $1.01 per share (diluted) for the three months ended September 30, 2014. Thomson Reuters has the consensus analyst estimate at $0.88 in earnings per share.

Income from continuing operations before taxes will be approximately $121 million, down from $133 million a year earlier. Adjusted EBITDA for the quarter would now be about $661 million, down from $750 million for the same period in 2014.

Community Health said that the consolidated operating results for the quarter reflect a 1.9% decrease in total admissions and a 0.2% increase in adjusted admissions from a year earlier. On a same-store basis, admissions were down 2.1% and adjusted admissions were up 0.1%. Same-store net revenue per adjusted admission was up by 1.0%.

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Additional date provided by Community Health was as follows:

• Consolidated net operating revenues increased over the prior year by 1.4% as a weakness in volume and deterioration in revenue payor mix compared with the first six months of 2015 resulted in lower than anticipated net operating revenues during the period.
• Consolidated salaries and benefits, which included higher costs related to an increase in the number of employed physicians, increased as a percentage of consolidated net revenue from 45.7% to 46.2%.
• Consolidated supplies expense, which increased primarily from higher drug costs, also increased as a percentage of consolidated net revenue from 15.3% to 15.7%.
• Consolidated other operating expenses, which included higher costs incurred related to the company’s implementation of ICD-10, increased as a percentage of consolidated net revenue from 23.4% to 23.7%.
• Electronic health records incentives were also lower than the same period in the prior year by $34 million.

Shares of Community Health Systems were last seen down a whopping 34% at $26.73, and its shares hit a new 52-week low on Thursday. The new 52-week range is $26.10 to $65.00, and the new market cap is now down to about $3.1 billion.

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