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Community Health net profit edges up, outlook trimmed

By Susan Kelly

(Reuters) - Hospital operator Community Health Systems Inc reported slightly higher first-quarter net income on Monday, but trimmed the top of its projected range for full-year earnings, citing a more challenging operating environment for healthcare providers.

Community Health, the second-largest U.S. for-profit hospital chain, said admissions declined 5.9 percent in the quarter, compared with a year earlier. The drop reflected a slow start to the year, something also seen at other hospital chains.

Hospital groups HCA Holdings Inc and Health Management Associates Inc both warned that admissions were weak in the first quarter.

Lower patient volumes reflect a still-soft economy with high unemployment, while consumers with private insurance are adjusting to higher deductibles and other out-of-pocket expenses, said Jefferies analyst Brian Tanquilut.

"Consumers are having to think twice about using healthcare. You are seeing fewer unnecessary procedures, because people have more skin in the game," Tanquilut said.

Community Health's chief executive, Wayne Smith, said the company is managing its cost structure for the volatile conditions as the industry steers toward full implementation of healthcare reform. He said he believes hospitals ultimately will benefit from insurance coverage expansion and potential improvement in patient volumes.

Community, which recently announced a strategic alliance with the Cleveland Clinic, is looking for more ways to partner with healthcare providers with the aim of improving care and access to services while reducing costs, Smith said.

"We have continued to identify unique opportunities for collaboration in order to develop solutions that meet the demands of the changing healthcare landscape," Smith said in a statement.

Community Health, based in Franklin, Tennessee, forecast full-year 2013 earnings from continuing operations of $3.50 to $3.80 per share. The company previously estimated the top end of the range at $3.90 per share.

Analysts, on average, were forecasting 2013 earnings of $3.71 per share, according to Thomson Reuters I/B/E/S.

First-quarter net income was $79.2 million, or 86 cents a share, up from $75.5 million, or 85 cents a share, a year earlier. Net operating revenue rose 0.4 percent to $3.31 billion.

Analysts on average had expected first-quarter revenue of $3.37 billion.

Community Health shares, which closed at $45.09 on Monday on the New York Stock Exchange, were trading at $45.59 after hours.

CRT Capital Group analyst Sheryl Skolnick said investors were expecting a weaker first quarter.

"The earnings could have been a whole lot worse without good cost controls given the volume pressure the company experienced," Skolnick said in a note to clients.

(Reporting by Susan Kelly in Chicago; Editing by Andre Grenon and Leslie Adler)

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