CHS generates $70M in profits in Q2, got $448M in COVID-19 relief funds

Community Health Systems generated $70 million in profits in the second quarter of 2019 as government relief funding helped soften the blow of COVID-19.

The hospital system is the latest to earn profits in the second quarter despite rapid drops in March and April in patient volume due to the COVID-19 pandemic. A major driving force has been federal relief funding and advance Medicare payments.

The second-quarter earnings also represent a significant boost year over year, as CHS suffered a net loss of $167 million in the second quarter of 2019.

CHS generated net operating revenue of $2.5 billion for the quarter.

CHS also reported profit of $87 million for the first half of 2020, an improvement after CHS suffered a net loss of $285 million in the first half of 2019.

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But the pandemic has had a major impact on the system, which operates 95 hospitals across 16 states. Hospitals across the country have seen a drastic drop in patient volumes due to the cancellation of elective procedures in all states to preserve capacity to fight COVID-19 and apprehension among patients to go to hospitals for care.

Hospitals in the system have now started to resume elective procedures, but patient volume in the emergency room is on a slower recovery path. 

Hospital ER visits were negative 45% in April and negative 20% in June compared to the same period in 2019, CHS officials said on an earnings call. Now volume is down 15% compared to the prior year.

CHS officials added that the system has very few state mandates that are limiting its ability to provide elective surgeries to patients.

However, in Texas and Mississippi there are capacity thresholds the system’s hospitals have to meet and that has made them throttle back on procedures, officials said.

The system is “definitely seeing a decrease in surgeries in our most affected markets,” said Tim Hingtgen, president and chief operating officer of CHS.

CHS said late Tuesday that it got $448 million out of a $175 billion relief fund passed by Congress.

The system also got $1.2 billion in accelerated payments from Medicare during the quarter. Hospitals will have to start repaying those next month.

CHS previously withdrew its financial outlook for 2020 in April as it combated the first surge of the pandemic. The company said that it still won’t be able to tell what the financial outlook will be in 2020 due to the “continuously changing and unpredictable environment related to the COVID-19 pandemic.”

The system is continuing to make investments in growth opportunities, with officials noting they are opening a new facility in Tucson, Az., later this year.

But it has scaled back on some capital spending. For instance, CHS did scale back some of its information technology spending so they didn’t have to deploy IT professionals unnecessarily into the facilities.

But more provider relief could be coming. Senate Republicans released a package Monday that includes $25 billion more for providers, and hospital lobbies are fighting to renegotiate repayment terms for the Medicare accelerated payments.