Quorum Health (QHC) Misses Q1 EPS by 18c, Revenues Miss; Provides FY19 Revenue Guidance

Quorum Health (NYSE: QHC) reported Q1 EPS of ($0.82), $0.18 worse than the analyst estimate of ($0.64). Revenue for the quarter came in at $442.8 million versus the consensus estimate of $467.87 million.

Robert Fish, Quorum Health’s President and Chief Executive Officer, commented, “During the first quarter, our team continued to execute on several key strategic goals. We made meaningful progress on our cost management efforts, achieved an important milestone through the establishment of our partnership with R1 RCM for revenue cycle management services and significantly expanded our divestiture efforts. While seasonally soft volumes, as well as certain market specific circumstances dampened our results, this trend has abated and appears confined to the first quarter. Our continued focus on cost management and the revenue cycle improvements from our new R1 partnership give me confidence that we will meet or exceed our previously stated 2019 goals.”

Financial results for the first quarter ended March 31, 2019 reflect the following:

• Compared to the first quarter of 2018, same-facility net patient revenues decreased 3.5%, while same-facility net patient revenues per adjusted admission increased 1.4%. The decrease in same-facility net patient revenues relative to the first quarter of 2018 was driven by a 4.9% decline in same-facility adjusted admissions and an 8.6% decline in same-facility surgeries. The decline in volumes relative to the first quarter of 2018 represents approximately $21.8 million of same-facility net operating revenues.
• First quarter Adjusted EBITDA was 4.7% of net operating revenues and Same-facility Adjusted EBITDA was 5.3% of same-facility net operating revenues. Same-facility Adjusted EBITDA reflects a $12.9 million reduction in same-facility operating expenses relative to the first quarter of 2018, primarily as a result of the Company’s margin improvement initiatives, which were implemented in the second quarter of 2018.
• Same-facility net operating revenues in the first quarter included a $4.5 million adverse impact resulting from a decline in self-pay patient collections since the transition of the Company’s secondary collections activities on October 1, 2018. Secondary collections have continued to increase since the transition with April collections reaching pre-transition levels.
• Same-facility surgeries in the first quarter of 2019 were negatively impacted by weak outpatient demand. Of the decline in surgery volumes, 68% is concentrated at four facilities and is related to independent physician turnover and the Company’s efforts to re-syndicate two underperforming outpatient surgery centers in Illinois. Since the end of the quarter, the Company has seen same-facility surgery volumes trend positively compared to the same period in 2018.
• Same-facility admissions for the first quarter are impacted by the Company’s margin improvement initiatives to eliminate certain unprofitable service lines, underperforming physicians and unfavorable managed care contracts, which were implemented in the second quarter of 2018. Same-facility admissions were also negatively impacted by a decline in flu-related admissions, which reduced same-facility admissions by 1.6% compared to the first quarter of 2018.

GUIDANCE:

Quorum Health sees FY2019 revenue of $1.825-1.875 billion, versus the consensus of $1.85 billion.

For earnings history and earnings-related data on Quorum Health (QHC) click here.

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