CHS boosts 2021 financial outlook despite omicron surge
Shares of Community Health System got a boost on Tuesday on updated guidance that is now expected to hit the high end of the company’s previously announced 2021 revenue and earnings forecasts.
Although Franklin, Tennessee-based CHS has yet to announce a date for its 2021 earnings release, the company Preview provided Its full-year results were better than expected. The investor-owned hospital chain now expects revenue of between $12.355 billion and $12.375 billion, up from a forecast of between $12.15 billion and $12.35 billion issued in October.
Investors paid off for a positive update on the company, which rose nearly 5% through Tuesday’s close.
Despite the challenges posed by the ongoing COVID-19 pandemic, CHS is likely to benefit from a plan to sell underperforming hospitals that ends in 2020. A CHS spokesman declined to comment beyond the disclosure.
“Community Health’s 2021 results and preliminary 2022 guidance reflect improved financial performance and a smaller and more focused hospital portfolio,” Mike Holland, senior credit analyst at Bloomberg Intelligence, wrote in an email. “However, given the uncertainty surrounding COVID-19, it seems premature to get too excited about 2022 guidance.”
During the company’s third-quarter earnings call in October, executives said CHS’s remaining 83 hospitals were concentrated in high-growth markets such as Arizona, Texas, Alabama and Florida.
Tim Hingtgen, chief executive of CHS, said at the company’s third meeting: “Our portfolio is strong, located across the country, with attractive demographic trends and favorable economic conditions, which A solid foundation for growth for years to come.” Quarterly Earnings Call.
CHS now expects its 2021 adjusted earnings, reflected as EBITDA, to hit the high end of its previously announced guidance of $1.82 billion.
One thing that could help CHS’s finances is that Medicare pays hospitals extra to treat patients who test positive for COVID-19, even if it’s not their primary diagnosis, said Credit Suisse Health Services analyst AJ Rice. The company is also urging patients to return in the fourth quarter of 2021 to the care they put off early in the pandemic, which could also help profitability, he said.
CHS said it has confirmed about $145 million in pandemic relief funding for 2021. That compares to about $600 million in 2020.
In 2022, CHS expects its operating income to fall between $12.6 billion and $13.1 billion. The company expects adjusted EBITDA to be between $1.825 billion and $1.975 billion.
Holland said the real test for CHS, as well as any heavily indebted hospital operator, is cash flow.
“Looking ahead to 2022, the focus is on the company’s ability to generate positive cash flow,” he said.
CHS generated $400 million in cash flow from operations in the first nine months of 2021, down from $2.1 billion in the same period last year. But CHS cautioned that this is not an apples-to-apples comparison, as the 2020 period includes nearly $1.2 billion in accelerated Medicare payments and another $715 million in pandemic relief funds.
CHS is not in Last week’s JPMorgan Healthcare Conference, although it has been done in previous years, colleagues at for-profit hospital operators highlight trends that may also apply to CHS. For example, the treasurer of Universal Health Services said the impact of COVID-19 was “basically positive” in the third quarter. Patients infected with the delta variant (the dominant strain at the time) were severely ill and had longer hospital stays than the average UHS patient.
UHS CFO Steve Filton told the conference audience: “While these COVID patients incur significantly higher costs, especially in terms of wages, this high acuity brings more revenue and higher profitability.”
Another factor contributing to longer hospital stays: Difficulty finding a post-acute provider That could require patients, Felton said, as nursing homes and rehabilitation facilities struggle to maintain adequate staffing just like hospitals.
In 2020, CHS reported operating income of $11.8 billion, down nearly 11% from the previous year, in part due to its Aggressive hospital sell-off plan That year is over. CHS’s net income for the year was $511 million, compared with a net loss of $675 million in 2019.