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Earnings Rundown: The Winners and Losers of the 2023 Third Quarter

Analysis  |  By Amanda Norris  
   November 03, 2023

UHS and Tenet Healthcare both beat Wall Street expectations for the third quarter of 2023, contrasting results from CHS and HCA.

Both Universal Health Services (UHS) and Tenet Healthcare were profitable in the third quarter, which was in contrast to Community Health Systems (CHS) and HCA.

Demand for services in its hospitals catapulted UHS' earnings in the third quarter to $3.6 billion, up 6.8% from the same period in 2022.

Although revenue increased, UHS saw a decrease in net income from $182.8 million in the third quarter of 2022 to $167 million in the same period in 2023.

At the same time, operating expenses increased by 7.1% from the same period in 2022 to reach $3.3 billion in the third quarter of 2023. At the same time, salaries, wages, and benefits increased by 6.4%.

Despite the quarterly decrease in net income and increase in expenses and labor costs, UHS reported a relatively stable net income for the nine months ending September 30, 2023, compared to the same period in 2022. This suggests that the financial performance might have fluctuated within the year, but overall, the system maintained profitability.

When it comes it Tenet, the system posted $5.1 billion in net revenue for the third quarter.

On top of this, the net income from continuing operations available to Tenet’s common shareholders was $101 million, equivalent to $0.94 per diluted share. This compares to $131 million, or $1.16 per diluted share, in the third quarter of 2022.

Tenet’s adjusted EBITDA, excluding grant income in the third quarter of 2023, stood at $851 million, up from $787 million in the third quarter of 2022.

This increase can be attributed to strong volume growth in ambulatory care and hospital operations segments, improved contract labor costs, and recognition of $7 million of income from cybersecurity insurance proceeds.

The rise in adjusted EBITDA, driven by strong volume growth and cost management, indicates that the organization is effectively adapting to changing patient demands. It’s likely Tenet will continue to focus on operational efficiencies and growth opportunities in both ambulatory care and hospital operations in the fourth quarter and beyond.

So where did HCA and CHS fall short?

HCA's business in the third quarter was positive overall, which translated into strong revenue growth, but it seems the financial tipping point for HCA was its joint venture with Valesco as increased staffing costs and lower-than-expected sales had it performing below expectations.

As for CHS, it has been plagued with reimbursement challenges, inflationary pressures, regulatory hurdles, and evolving consumer behaviors CHS CEO Tim Hingtgen said during its investors call.

Hingtgen said CHS plans to focus on its expansion projects, strengthening its workforce, and controlling expenses to get its numbers back in the black.

CHS and HCA both announced they would downwardly revise their lower-bound guidance for the year following third quarter earnings.

Amanda Norris is the Associate Content Manager of Finance, Payer, Revenue Cycle, and Strategy for HealthLeaders.


KEY TAKEAWAYS

Two major systems found financial success in the third quarter, while two others were plagued with increased staffing costs, reimbursement challenges, and inflationary pressures.

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