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Becker’s Healthcare Podcast
Q3 Results and Strategic Shifts Across For-Profit Health Systems with Alan Condon
00:08:54
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- [00:00]
A
This is Scott Becker with the Becker Healthcare Podcast. Thrilled today to be joined by brilliant editor in chief Alan Content. And Alan joins us regularly just to give us a quick update on some of the key financial stories that he's watching in healthcare. Alan, let me tee it up and turn it to you. What are some of the key stories you're watching currently?
- [00:20]
B
Yeah, great to be back on with you, Scott. I think first and foremost we just got to the end of our Q3 earnings calls and reporting period for the big three, the big four, I should say, for profit health system. So I'll focus on namely what we see in the acute care side in terms of hca, tennis and community health systems. Some kind of key trends and takeaways to pull out from these earnings calls just over the last couple days. So I think overall when we think about hca, Tenet and chs, third quarter brought a mix of gains and some strategic pivots for those health systems. CHS saw a little bit of a sharper turnaround of course some ongoing divestiture plans there as part of its strategic strategy. Tennis really, really strong growth overall, particularly on the ambulatory side with USPI continues to make great gains there and HCA really impressive strong performance as well in terms of its operating performance. So I think what's in common for all three systems is again CEOs of all three systems really leaned into and highlighted growth in higher acuity care, some favorable pair mixes driving results there and supplemental revenue programs really key factors to drive some of its profitability. HCA saw its Q3 net profit jumped 29% up to $1.6 billion for the quarter it's raised its full year 2025 guidance now expects to hit $6.7 billion overall in net income for the year. That'd be $76.5 billion in revenue. Really whopping revenue across the board for HCA. When we hear from CEO Sam Hazen, what's really driving this growth from HCA over recent quarters was really disciplined efforts and continue to control expenses as well as expanding access to care, investing in new technologies to drive performance and AI and whatnot and also really doubling down on strengthening and training its workforce, jumping over to tennis, similar really impressive ambulatory growth across the board in terms of overall it's Q3 Tenet posted a 16.8% operating margin. Huge, huge, really impressive results there, but that's slightly down from a 21.2% operating margin in the same quarter of last year. I think one quick note there is that tenet did offload and sell a lot of hospitals in the third quarter of last year which would have contributed to its significant revenue and operating margin there. Tenant CEO Dr. Sam Sotari A fantastic leader there again similar to HCA. CEO Sam Hazen pointed to high acuity service line really key focusing there operational discipline really to help deliver same store revenue growth across the board. Really impressive operational performance particularly like I said with USPI and also a quick note on its revenue cycle subsidiary Conifer Health Solutions continue to impressively add some growth and gains there I would say. Last, last note just in terms of CHS a little bit different in terms of the challenges that they've been that they've been pushing back against over the last few years really divesting, consolidating and offloading hospitals as part of its restructuring plan. But we did see a pretty impressive quarter for CHS in terms of it swung to 130 million net profit in Q3. That's significant because it's up significantly from almost a $400 million loss in the same quarter of last year. And some of the key things that helped kind of drive this performance are again payer mix improvements in some of CHS's markets, offloading some hospitals and some markets that were maybe underperforming, higher reimbursement rates that it's managed to navigate with certain commercial payers and some legal settlements as well there which drove into revenue. But CHS continued to really drive down its long term debt stands at around 1111 billion or so. It trimmed 800 million off the top of this quarter and really expect to see further hospital divestitures, further sales this year And Internex CHS really continues to deleverage through some of its hospital strategic plan there. But good performance and continued continued size of strength for HCA and tennis and CHS certainly moving in direction right direction under Kevin Hammonds, former cfo, now the interim CEO after Tim Hinton recently left the company.
- [04:51]
A
Thank you. And you look at this, it seems like CHS has really benefited from its divestiture program and getting more lean and getting better Tenet USPI has really leaned into ambulatory. But your point that both HCA and all three of them are really doing well in the higher acuity stuff, the higher acuity cases. That's a really interesting point, isn't it?
- [05:16]
B
Yeah, absolutely. I think again it was something that all three health system leaders had pointed to particularly like you said HCA tenet CHS to maybe a slightly lesser extent but I think it'll be certainly Interesting to see what we hear from other health system leaders in relation to higher acuity mix from the likes of Trinity Health Providence, some of these earnings calls from the nonprofit systems, whether they're kind of pointing to the same things, but interesting Q3 overall and certainly kind of paying attention to what we see, what we report on the nonprofit side too. What are they seeing? The same trends, following the same trends too.
- [05:51]
A
Thank you very, very much and Alan, so watching that and I know HCA just keeps on hitting it out of the park. I mean it's sort of what we generally think of as the best manager of the huge for profit systems. Anything else that you're watching closely?
- [06:05]
B
I think just to kind of double down on maybe CHS in terms of some of its turnaround there. I think a really interesting time for community health system, specifically new leadership after CEO Tim Hingedon recently left. Kevin Hammond's fantastic CFO who's been leading that organization for quite some time. He just recently stepped into the interim CEO role. Strong hand in terms of that leadership in terms of this transitioning period. But one thing we follow closely, which really seems to be paying strong dividends for CHS is last year at the end of 2024, they deployed this Project Empower initiative across all of its hospitals. And what that is essentially is a combined Oracle Health enterprise resource planning system with other financial supply chain and human capital management systems that are offered by Oracle Health. So CHS CEO Kevin Hammond said that has paid significant dividends in terms of really better insight into procurement savings opportunities to really cut costs across the line and sees that continue to grow in the upcoming quarters. So really when you think about this technology driving efficiencies, unlocking new opportunities, that's been a real key driver, a big, big enterprise wise initiative for CHS again and then just really looking to increase efficiencies, dive into AI technologies across the board. There's in addition to exiting some key markets in terms of its hospital market, we know that it plans to exit Pennsylvania altogether, plans to sell its last three hospitals there by the end of this year. So being strategic in terms of the markets that it wants to be in the market maybe wants to exit. But the other point, HCA tenet, you know, looking more so to hca, certainly acquiring some hospitals, some systems where it makes sense in new markets, New Hampshire being a big one, antennas no hospital divestitures this year. It certainly offloaded about 14 hospitals in key markets last year for significant valuables. But a tennis really, really acquiring various ambulatory outpatient ASC facilities continuing to do that quarter over quarter, really bolstering its portfolio across the board under uspi.
- [08:19]
A
Thank you very, very much, Alan. What a pleasure to visit with you. As always. You do an incredible job of summarizing and synthesizing what's out there. So we understand it. Incredible to all these for profit systems doing pretty well right now. And the not for Profits more of a mix. Some of the profit margins at the for profits are incredible compared to the operating margins at the not for Profits and it's just fascinating to listen to. Thank you so much for joining us. We appreciate you being with us on the Becker Selic, your podcast. You're fantastic. Thank you very, very much.
- [08:49]
B
Always a pleasure. Thanks so much. Scott.