Staffing challenges continue to weigh on financial outcomes at for-profit health systems, where leaders are struggling to reduce contract workers and navigate wage inflation.
Systems are shelling out higher wages and bonuses to attract more employees, handle still-high overall costs, and reassess operations to find performance opportunities. Executives remain tight-lipped about forecasts for 2023.
Here’s how three of the largest for-profit systems reported results this week in the third quarter.
Community Health System
Chief Financial Officer Kevin Hammons said during Thursday’s earnings call with analysts.
The Franklin, Tennessee-based system reported a net loss of $42 million for the third quarter, a sharp drop from a $111 million profit announced a year ago. Operating revenue came in at $3.03 billion, down nearly 3% from last year’s quarter.
Expenses rose 1.7% to $2.82 billion, driven in part by increased wages, salaries and benefits. Community Health’s total contracted labor costs were $100 million, compared with $150 million in the second quarter. CEO Tim Hingtgen said the system reduced contract labor each month during the quarter.
Earlier this year, Community Health sold its AllianceHealth Seminole hospital operation to SSM Health Oklahoma. Hingtgen said the system is looking to joint ventures and other partnerships to help with growth.
People’s Health Service
Universal Health Services, based in King of Prussia, Pennsylvania, reported net income of $182.8 million for the quarter, down 16.3% from the same period last year. Revenue grew 5.7% to $3.34 billion.
Operating expenses rose 7.7% to $3.06 billion. The health system hopes to reduce acute care billing-related costs by $15 million to $20 million in the fourth quarter. Before the pandemic, the cost of paying quarterly premiums was about $35 million.
Earlier this week, the system hired Edward Sim, formerly of Centura Health, as president of acute care. Sim replaces Marvin Pember, who plans to retire.
Including health
Birmingham, Alabama-based Encompass Health reported net income of $45.4 million, compared with $100 million for the period a year ago. Operating revenue increased 7.8% to $1.09 billion.
Operating expenses increased 11.5% to more than $941 million, including a 12.8% increase in wages and salaries.
CEO Mark Tarr said contract labor costs were $24.8 million, plus another $24.2 million for sign-in and change bonuses. He expects contract labor costs to continue to fall, albeit at a slower pace than initially expected, due to wage inflation. Executives expect wage inflation in the fourth quarter to be around 3%.
“There’s still a lot of volatility out there,” said CFO Doug Coltharp. “[We] didn’t know that we would completely normalize [in 2023] because we’re not sure what that means anymore. ‘
