Hospital chain Community Health Systems posted a $1 million loss for the first quarter of 2022 after experiencing a massive surge of $190 million in contract labor expenses, the latest system to encounter labor rates dragging down earnings.
CHS generated $3.1 billion in net operating revenues for the first quarter and adjusted earnings before interest, taxes, deductions and amortization (EBITDA) of $409 million, including $47 million in pandemic relief funds. Admissions for the system also declined slightly by 0.3% compared to the same period in 2021.
“We experienced the largest COVID surge to date during the first quarter, which negatively impacted net operating revenues, labor expense and length of stay during the quarter,” said CHS CEO Tim Hingtgen in a statement. “As COVID case counts subsided, our operational and financial performance significantly improved during the month of March, as patient volumes returned and COVID-related expenses moderated.”
CHS experienced massive increases in contract labor as COVID-19 cases surged in January when the system saw 9,000 COVID-19 cases. While the surge fueled by the Omicron variant didn't lead to higher acuity, the more contagious variant led to more workers getting sick.
Overall contract labor costs surged to $190 million for the quarter, a massive $120 million increase compared to the same quarter in 2021. The labor expenses were $50 million more than the fourth quarter of 2021.
But CHS leaders are expecting contract labor expenses to decline for the rest of the year.
"Although anticipate contract labor to remain elevated, our contract labor usage and rates are declining in April," said Kevin Hammons, CHS' chief financial officer on an investor call.
Overall, CHS’ operating costs and expenses increased to $2.8 billion, slightly above the $2.6 billion it generated in the same period in 2021.
Hingtgen said that the surge in COVID-19 cases did not lead to a major change in the system's payer mix for the quarter.
"Our non-COVID business didn’t see any material change on payer mix," he said. "COVID-related business did see a much higher percentage of Medicaid and self-pay patients presenting themselves as COVID cases."
Hospital systems have faced higher rates for contract labor as the pandemic strained staffing. However, those rates have continued to remain elevated even as COVID-19 cases subside.
Other for-profit hospital systems such as Tenet Healthcare and HCA have listed higher contract rates as factors dragging down financial earnings in the first quarter.