Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shareholders of Community Health Systems (CYH 4.46%), a hospital operator in the U.S., are feeling sick to their stomachs this afternoon, with their stock dropping as much as 13% after announcing its preliminary second-quarter results.
So what: For the quarter, Community Health Systems noted that admissions dropped by 5.1%, which led to expected revenue of $3.24 billion. The Street, by comparison, had been looking for revenue of $3.37 billion. The company specifically lists bad debt accounts, presumably from treating an increase in uninsured people, and declining reimbursements, as the primary reasons for the shortfall. It also projected EBIDTA of $414 million, which would be down 14% from the year-ago period.
Now what: Community Health Systems' results are actually a bit confusing because they come just days after HCA Holdings, the nation's largest hospital operator, significantly guided its EPS higher for the upcoming quarter. This could merely represent some short-term poor luck on Community Health's part, or it may signal a struggling transition in the wake of impending health-care reform under the Patient Protection and Affordable Care Act. I'd prefer to wait for Community Health Systems' quarterly report to get the full story, but for now, I'd recommend adding it to your Watchlist.
