CHS earnings warning hits rest of publicly-traded hospital sector

The publicly-traded Community Health Systems (CHS) said last week it would struggle to make its quarterly numbers. Much of the investor-owned hospital ecosystem suffered as a result.

Shares of CHS plunged 30 percent after the earnings warning was issued, dropping from about $40 a share to just above $26, according to the Associated Press. It has since rebounded slightly, to about $28 a share.

The AP said that CHS may be struggling with its numbers because the dividend of extra patients associated with the implementation of the Affordable Care Act (ACA) may be coming to an end. It quoted a note issued by Goldman Sachs analyst Matthew Borsch saying there may be a "big chill" to future hospital admission increases. And that Labor Day fell later than usual this year may have led to some elective surgeries being scheduled for later in the year, the wire service said.

The ACA has been very good for publicly-traded hospitals as a whole. CHS officials said last year that the reform law led to a significant drop in self-pay patients, which very rarely pay the entire cost of their care. However, much of that drop was connected to the 31 states that have expanded Medicaid eligibility as opposed to the states that continue to hold out. The trend had been fairly long-lived; as early as 2012 chains such as HCA said they were experiencing double-digit quarterly increases in revenue as a result of the ACA. And hospital stocks did very well after the U.S. Supreme Court ruled that the bulk of the ACA was constitutional.

The stocks of other publicly-traded hospital chains also suffered due to the anxiety about patient volumes. Tenet Healthcare Corp. dropped almost 14 percent; LifePoint Health dropped more than 10 percent, and HCA fell nearly 5 percent.

However, Oppenheimer reissued an outperform rating for the company late last week and held to a target price of about $70 per share, Dakota Financial News reported.

To learn more:
- read the Associated Press article 
- check out the Dakota Financial News article