Health system’s second-quarter financials mixed

Labor costs, driven by demand for contract workers amid staff shortages, were the hot topic in the hospital industry’s second-quarter earnings reports. Health system are doling out higher pay and bonuses to attract workers, despite ongoing financial challenges related to the COVID-19 pandemic.

Revenue results were mixed, with some health systems recording small increases, while others failed to turn it around two years into the public health emergency. Expenses in general remain elevated and hospital companies continue to reassess the services they offer to determine what’s dragging down the bottom line.

Here are highlights from some large health systems’ financial reports.

HCA Healthcare

The Nashville, Tennessee-based for-profit chain experienced a 2.7% revenue increase. As expected, salaries and benefits made up a large portion of expenses, and rose 6.4% to $6.8 billion. Supply costs declined 3.3%. Net income declined from $1.45 billion to $1.16 billion.

Admissions decreased 3.2%, although inpatient revenue per admission rose 3.6%. COVID-19 admissions were down 18%, representing about 3% of total admissions; they dropped 70% compared to the first quarter. Inpatient surgery volume fell 4% and outpatient procedures were down 1.5% relative to the second quarter of 2021.

HCA’s Galen College of Nursing opened three campuses during the second quarter. The company plans to add two more this year.

Tenet Healthcare

The for-profit company’s revenue dropped 6.4% to $14.8 billion. Operating expenses related to salaries and wages, however, were down about 6.8%. Net income plummeted from $119 million in the second quarter of 2021 to $38 million this year.

In April, Dallas-based Tenet experienced a cyberattack that disrupted acute care operations and information technology systems, which had an approximately $100 million impact on earnings before interest, taxes, depreciation and amortization. Cybersecurity is a growing concern in healthcare, as attacks have hit providers such as Boston Children’s Hospital and Baton Rouge General Medical Center in Louisiana.

Community Health Systems

Community Health Systems’ second-quarter earnings came in below expectations, largely driven by lower patient volumes and higher labor costs. The return of non-COVID-19 patient volume was also slower than expected. The Franklin, Tennessee-based for-profit company recorded a $326 million net loss compared with a $6 million profit a year before. Admissions declined 3.4% to 107,805; revenue fell 2.4% to $2.93 billion.

Spending on contract labor reached $150 million, triple the cost a year ago but down approximately $190 million from the first quarter.

“We do not see 2022 as the new baseline. Rather, it is a period of disruption and unusual events,” President and Chief Financial Officer Kevin Hammons said during a call with investors.

Universal Health Services

The King of Prussia, Pennsylvania-based health system experienced a 3.9% increase in revenue to $3.32 billion. But net income fell by nearly 50% to $164.1 million as acute care admissions did not meet expectations.

There was a significant decline in acute COVID-19 patients, going from about 13% of total admissions in the first quarter to 3% in the second quarter, Chief Financial Officer Steve Filton said on an earnings call.

Non-COVID-19 admissions did not fill the gap, but are expected to incrementally improve, albeit at a slower-than-expected pace. The for-profit company anticipates that staff vacancies and spending on premium pay to decline as the year progresses.

Encompass Health

Operating revenue grew 3.3% to $1.33 billion but net income dropped 57% to $48.7 million. Contract labor costs declined in the second quarter, enabling the Birmingham, Alabama-based for-profit chain to increase spending on bonuses for new hires and existing employees. The company spent $56.9 million on labor during the second quarter. While that’s nearly double its costs in the corresponding period last year, it’s down 9.7% from the first quarter. The company spun off its home health and hospice business, Enhabit, as it closed out the second quarter.

Sutter Health

Not-for-profit Sutter Health reported a $457 million net loss. The Sacramento, California-based health system’s revenues declined less than 1% but expenses rose more than 4%.

The health system is in contract negotiations with much of its union workforce this year as agreements expire.

Sutter Health and Aetna will end their joint employer health insurance venture next June after it fell short of sales and membership goals.

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