Happy Tuesday, Hospitalogists!

I hope you guys enjoyed the long weekend. Today we're wrapping up CHS and then this Thursday will be a comparative summary of each for-profit hospitals' Q2. I'll add Ardent next quarter and we'll be diving into nonprofit results soon too.

But first - the Hospitalogy virtual event series is back!!

I'm thrilled to be joined by Lumeris' Rick Goddard and Mercy's Michael Englehart to talk all things value-based strategies for health systems amidst the massive changes happening in 2024.

Don't miss it, and while you're at it, reply to this e-mail with any questions you have for that discussion on 9/24.

Hospital Earnings Executive Summary

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

And in case you missed the past few sends, here are all of the hospital one-pagers in one spot for you guys. I'm in the business of making things easier, not harder!

HCA:

Tenet:

UHS: 

For conversations / networking around hospitals, health systems, and provider organizations among folks focused in strategy and operations, join my community! Reply to this email to ask any questions or learn more from me.

MISCELLANEOUS MADDENINGS

My way-too-early reactions from college football week 1:

• Florida State...yikes. Their start reminds me of Texas when we went from 13-1 to 5-7. I wouldn't wish that fate on any fanbase. But at the same time, you kind of deserve it when you acquire DJ Uiagalelei in the transfer portal. One of the biggest 5* busts of all time.
• Oregon was surprisingly trash
• Michigan looked not-so-great but I think Fresno State is better than people give them credit for
• LSU will probably never schedule a Sunday opening season game again
• Poooooooooooooooooooooooooooooooooooor Aggies
• Clemson is close to collapse
• Miami looked impressive but Florida is in a state of utter disarray
• Abilene Christian with the near upset of Texas Tech...Lubbock would have been turned upside down
• Dare I say it...but Texas looks incredible. Talent everywhere. Is this year the year?

Thanks for the read! Let me know what you thought by replying back to this email.

— Blake