Community Health Systems (CHS) is aiming to insource more physicians—i.e., adding them to a company’s payroll rather than contracting—to help offset high labor costs and additional fees that arise from contracted medical specialists, CHS execs told investors in its Q3 2023 earnings call on October 26.
Insourcing providers saved the Tennessee-based for-profit company $4 million in its adjusted earnings for the quarter, compared to subsidies it had previously paid to the now-bankrupt medical staffing company American Physician Partners, CHS President and CFO Kevin Hammons said during the call. Net operating revenues for the third quarter reached $3.09 billion, up from $3.03 billion for Q3 2022, according to the company.
“The progress with our insourcing initiative has been very encouraging, and we expect further improvement in the coming quarters as we scale this effort,” Hammons said.
CHS has focused its insourcing efforts on physician and emergency medicine programs in select hospitals, and has so far added more than 500 providers to work under the model, CHS CEO Tim Hingtgen said. The company aims to insource anesthesia services in select markets next, he added.
However, CHS, which operates 74 hospitals and 1,000+ other sites of care, doesn’t “expect to have every single one of [its] hospital-based contracts serviced by an insource model,” Hingtgen said.
“It’s really still early to see how much benefit we can glean from that type of affiliation with insource providers, but it’s something we’re keeping a close eye on,” Hingtgen said.
Other initiatives to cut down labor costs helped CHS curb expenses in the third quarter. Nurse recruitment and retention efforts drove down contract labor costs to $54 million from $72 million; the company’s previous expectation was $60–$70 million for the year, Hammons said.
“We’re really pleased with how this transaction has taken shape and our ability to rapidly insource these providers in the last two months of the quarter. We see a lot of opportunities looking forward,” Hingtgen said.
Navigate the healthcare industry
Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.