CHS reports losses due to hurricanes, payer denials, increased workforce expenses

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Community Health Systems took a financial hit for the third quarter of 2024 due in part to the continuation of high payer denials, higher workforce expenses and the unanticipated setback of back-to-back hurricanes.

CEO Tim Hingtgen began the Oct. 24 earnings call by addressing the impact of hurricanes Helene and Milton in communities served by CHS hospitals in Florida, Georgia and East Tennessee. Hospitals needed to cancel elective procedures, and three facilities were evacuated and closed, Hingtgen said.

"The biggest impact occurred in our ShorePoint Health System located South of Tampa, Physicians Regional Healthcare System in Naples and Tennova Newport in East Tennessee," Hingtgen said. "Most significantly, ShorePoint Punta Gorda experienced major damage due to flooding. The hospital remains closed today, and remediation efforts are currently underway."

Hurricane Helene resulted in an estimated loss of operating revenues together with incremental expenses due to response efforts of approximately $7 million. No insurance proceeds related to Hurricane Helene were received or recognized during Q3. It is expected that additional net operating revenues will be incurred for remediation and restoration efforts in the fourth quarter of 2024 and one or more future periods, CHS said. 

Insurance proceeds, which are expected to cover substantially all of CHS' costs related to these events, are expected to be received in one or more future periods.

WHY THIS MATTERS

Net loss for the quarter attributable to Community Health Systems stockholders was $391 million, compared to $91 million for the same period in 2023. 

Third-quarter results were impacted by a continued increase in denials and downgrades by insurers, according to Hingtgen. 

"We are seeing some payers aggressively deny payment for medically necessary services that have been provided for our patients," he said.

In response, CHS has enhanced its utilization review program and centralized physician advisor services to ensure patients are placed in the correct care status for appropriate payment. The health system is making incremental investments in its centralized patient financial services processes as well as its Physician Advisor Program, he said.

"As a result, our physician advisor service has been able to obtain a high rate of reversal on initial payer denials," Hingtgen said. "Nevertheless, the rate of denial activity by payers continues to grow and has continued to pressure our top line."

Also, CHS' net operating revenues for the three months ended Sept. 30 reflected a 4.1% decrease in admissions and a 3.7% decrease in adjusted admissions, compared to the same period in 2023. 

On a same-store basis, admissions increased 2.4% and adjusted admissions increased 2.6% for the three months ended Sept. 30, compared to the same period in 2023.

In addition, the increase in net loss was driven by increased expense for salaries and benefits and the increased costs for outsourced medical specialists, which were partially offset by higher same-store volumes, increased reimbursement rates, a higher net benefit from supplemental reimbursement programs, reduced expense for contract labor and reductions in supplies expense, according to the earnings release.

THE LARGER TREND

Community Health Systems is one of the nation's largest healthcare companies, operating in 39 markets across 15 states. As of Oct. 23, the company's subsidiaries own or lease 69 affiliated hospitals.

During 2024, CHS completed two hospital divestitures, including one on Aug.1 and the other on Oct. 1.

CHS has sold 32 hospitals since 2020, according to Becker's Hospital Review.

Email the writer: SMorse@himss.org