Here's an executive summary style overview and one-pager of CHS' Q2 for Hospitalogists aggregated into relevant hospital categories.
1. Volume + Utilization: Management called out strength in ED, urgent care, and physician practice visit volumes, along with the following:
- Same-store admissions grew 3.0%
- Same-store adjusted admissions grew 3.2%
- Length of stay declined 3.2%
- Same-store ED visits increased 1.1%
- Same-store surgeries increased 0.6%
2. Revenue + Payor Mix: Same-store revenue grew 4.7% driven by 3.2% adjusted admissions growth and 1.4% growth in net revenue per adjusted admission – impacted by improved rates , Exchange growth, and Medicaid supplemental payments offset by geographic mix shift.
3. Expenses + Margin: Adjusted EBITDA Margin expanded to 12.3% in Q2 2024 from 12.0% in Q2 2023. Nurse retention is the highest CHS has seen in a decade. Hiring is up 14% year-over-year as contract labor declined to $45M (3.4% of SWB) against expectations of $50M/quarter. Same-store supplies expense dropped 2% while professional fees grew 5.0% year-over-year. CHS' cost initiative Project Empower (run by Oracle) is driving savings in procurement and other areas. It will be fully deployed by year-end 2024.
4. M&A Environment + Footprint Growth: CHS is in full-on divestment mode – expect to see more sale announcements in 2H 2024 and combined potential proceeds of $1B+ from these sales. While it failed to sell two facilities to Novant given FTC involvement, CHS sold four hospitals in Q2 and doesn't expect additional FTC meddling. CHS is investing in attractive assets like FSEDs (up to 18 in total), physician practice expansion, and new IP facilities in Alabama and Knoxville.
5. Capital Allocation + CAPEX: $88M in Q2; $181M spent on CAPEX so far in 2024 (compared to $227M in 1H 2023). Debt to EBITDA was 7.6x.
6. Outlook + Guidance: CHS tightened its midpoint guidance range. Some observations:
Adjusted EBITDA margin expansion to 12.4% expected on revenue of $12.6B
$350M - $400M in total CAPEX spend expected in 2024
$50M / quarter expectation for contract labor
5% - 10% increase in professional fees expected for 2024
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