Community Health shares take a tumble

Weak admissions — due in part to 'bad publicity' — take $260M bite out of hospital operator's stock

Shares of Community Health Systems (Ticker: CYH) took a big hit Thursday following the company’s earnings release Wednesday afternoon.

As of 1:55 p.m. Central, the stock was trading at $17.44, down 14 percent on the day. That equates to a loss of about $260 million in market capitalization. Largely to blame for the drop was a 0.7 percent decrease in admissions, which disappointed analysts. In CHS’s earnings release and conference call, company executives said that the decline was due in part to a lower number of flu cases this year.

Also to blame, according to CEO Wayne Smith, is a general trend toward outpatient care, which accounted for 53 percent of Q3 revenues. Exacerbating this for CHS is what Smith called “bad publicity” surrounding allegations of improper admission practices on the part of the company. This has led to increased awareness and sensitivity with regard to admissions and, not surprisingly, has caused those admissions to decline.

Admission practices were among the primary targets in a recently filed derivative lawsuit against Smith and a group of company executives and directors.

The stock, which opened the day at $18.01, had been showing signs of recovery this month, recovering losses incurred in September. Year to date, though, the stock is now off more than 50 percent.

The company's conference call held Thursday morning can be heard here.