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Community Health Systems (NYSE:CYH) 2025 Conference November 11, 2025 09:30 AM ET Speaker0Hi everyone. I'm A.J. Rice, the healthcare service analyst at UBS, and we will have up next up Community Health Systems. Happy to have Kevin Hammons, our Chief Executive Officer of Community, and Jason Johnson, Chief Financial Officer. We're about 10 months into the year at this point, a little over 10. What has sort of been some of the takeaways for you so far, Kevin? Surprises, challenges?Speaker2Sure. It's been a li ...

Core Viewpoint - Community Health Systems, Inc. will participate in a fireside chat at the UBS Global Healthcare Conference scheduled for November 10 - 12, 2025, indicating the company's engagement with investors and the healthcare sector [1] Company Participation - The fireside chat presentation is set to begin at 9:30 a.m. Eastern time on November 11, 2025, showcasing the company's commitment to investor relations [1] - The event will be accessible to investors through a live audio webcast, reflecting the company's efforts to enhance transparency and communication with stakeholders [1]

Group 1 - Community Health Systems (CHS) has agreed to sell its stakes in two joint ventures to Vanderbilt University Medical Center (VUMC) for $600 million, which includes the acquisition of the remaining 80% stake in the joint ventures that operate Tennova Healthcare-Clarksville and other ancillary businesses [7] - The deal will make Tennova Healthcare a part of VUMC's regional medical centers, expanding its presence in Tennessee, where VUMC already operates seven hospitals [3][7] - The transaction is expected to close early next year, pending regulatory approvals and closing conditions [7] Group 2 - VUMC's interest in the hospital is driven by population growth in Clarksville, which has a population of 200,000, making it Tennessee's fifth largest city [3] - CHS has been divesting full or partial stakes in several hospitals this year, including facilities in Florida, Texas, and North Carolina, indicating a strategic shift [5] - CHS's CEO mentioned during a recent investor call that the company has several deals in progress, hinting at ongoing restructuring efforts [4]

Group 1 - Tenor Health Foundation affiliates have signed a definitive agreement to acquire three hospitals in Pennsylvania from Community Health Systems (CHS) [1] - The hospitals included in the acquisition are Wilkes-Barre General Hospital (369 beds), Regional Hospital of Scranton (186 beds), and Moses Taylor Hospital (122 beds) [1] - The acquisition follows the termination of a previous divestiture agreement with WoodBridge Healthcare in November 2024 [1] Group 2 - CHS has collaborated with Pennsylvania governor Josh Shapiro's office and state General Assembly members to find a new operator for the hospitals [2] - The transaction is subject to standard regulatory approvals and is contingent on Tenor Health Foundation securing its funding [2][3] - Once funding is secured, the deal is expected to close in the fourth quarter of this year [3] Group 3 - The financial terms of the agreement have not been disclosed [3] - These hospitals are part of potential divestitures mentioned during CHS' earnings call for the third quarter of 2025 [3] - CHS manages healthcare delivery systems in 36 markets across 14 states, owning or leasing 70 affiliated hospitals with over 10,000 beds [4]

Core Points - Community Health Systems, Inc. has entered into a definitive agreement to sell three hospitals in Pennsylvania to Tenor Health Foundation [1][3] - The hospitals involved in the transaction include the 186-bed Regional Hospital of Scranton, the 122-bed Moses Taylor Hospital, and the 369-bed Wilkes-Barre General Hospital [1][3] - The transaction is subject to regulatory approvals and contingent on Tenor Health Foundation securing funding, with an expected closing in the fourth quarter of this year [3] Company Overview - Community Health Systems, Inc. is one of the largest healthcare companies in the United States, operating 70 affiliated hospitals with over 10,000 beds across 14 states [4] - The company also manages more than 1,000 care sites, including physician practices, urgent care centers, and ambulatory surgery centers [4]

Financial Performance - Net operating revenues for the three months ended September 30, 2025, decreased slightly to $3.087 billion from $3.090 billion in the same period in 2024, but increased by $172 million on a same-store basis [122]. - The company reported a net income of $171 million for the three months ended September 30, 2025, a significant recovery from a net loss of $(355) million in the same period in 2024, aided by a $163 million income tax benefit [123]. - For the nine months ended September 30, 2025, net operating revenues increased to $9.379 billion from $9.369 billion in the same period in 2024, with a same-store increase of $473 million [125]. - The company achieved a net income of $516 million for the nine months ended September 30, 2025, compared to a net loss of $(334) million in the same period in 2024 [126]. - Net income attributable to Community Health Systems, Inc. stockholders was $130 million for Q3 2025, compared to a net loss of $(391) million for Q3 2024 [163]. - For the nine months ended September 30, 2025, net income attributable to Community Health Systems, Inc. stockholders was $399 million, compared to a net loss of $(446) million for the same period in 2024 [173]. - Net income, as a percentage of net operating revenues, was 5.5% for the nine months ended September 30, 2025, compared to a net loss of (3.6)% for the same period in 2024 [172]. Operational Metrics - Consolidated inpatient admissions decreased by 6.6% for the three months ended September 30, 2025, while same-store inpatient admissions increased by 1.3% [124]. - Inpatient admissions decreased by 6.1% during the nine months ended September 30, 2025, compared to the same period in 2024, while adjusted admissions decreased by 6.1% [164]. - Average length of stay for inpatients decreased by 2.3% in Q3 2025 compared to Q3 2024 [154]. - Self-pay revenues represented approximately 0.8% for the three months ended September 30, 2025, down from 1.1% in the same period in 2024, indicating a decrease in self-pay patient volume [129]. Divestitures and Acquisitions - The company divested two hospitals in Florida and one in North Carolina, generating total net proceeds of approximately $1.0 billion, with these hospitals representing annual net operating revenues of about $760 million in 2024 [118]. - An agreement was made with Labcorp to acquire select assets of the ambulatory outreach business for $195 million, expected to close in Q4 2025, pending regulatory approvals [120]. - The company is considering further divestitures of hospitals and non-hospital businesses that are less strategically beneficial, with proceeds expected to be used for corporate purposes and capital expenditures [121]. Regulatory and Policy Impact - Regulatory uncertainties are increasing due to recent U.S. Supreme Court decisions and potential changes in federal healthcare policies, which may impact the company's operations and reimbursement rates [130]. - The 2025 Reconciliation Law is expected to adversely impact revenue and financial results due to limitations on Medicaid eligibility and reductions in federal Medicaid funding [134]. - The 2025 Reconciliation Law is anticipated to increase the number of self-pay patients due to reduced federal Medicaid funding [134]. - Future Medicaid reform proposals may lead to further reductions in Medicaid expenditures and changes in funding structures, potentially impacting state Medicaid expansions [135]. - The company anticipates that regulatory changes and price transparency initiatives may affect relationships with payors and reimbursement rates [141]. Revenue Sources - Medicare revenue as a percentage of net operating revenues decreased from 18.2% in Q3 2024 to 17.1% in Q3 2025, and from 18.4% in the first nine months of 2024 to 17.7% in 2025 [142]. - Medicaid revenue increased from 14.2% in Q3 2024 to 16.4% in Q3 2025, and from 14.4% in the first nine months of 2024 to 16.3% in 2025 [142]. Cash Flow and Liquidity - Net cash provided by operating activities increased by $13 million, from approximately $264 million for the nine months ended September 30, 2024, to approximately $277 million for the nine months ended September 30, 2025 [174]. - Net cash provided by investing activities was approximately $705 million for the nine months ended September 30, 2025, compared to net cash used in investing activities of approximately $132 million for the same period in 2024 [175]. - Net cash used in financing activities was approximately $896 million for the nine months ended September 30, 2025, compared to approximately $137 million for the same period in 2024, a change of $759 million [176]. - Liquidity, as measured by net working capital, increased to approximately $1.020 billion at September 30, 2025, from approximately $956 million at December 31, 2024 [177]. Debt and Taxation - The company recognized an income tax benefit of approximately $163 million during the nine months ended September 30, 2025, primarily due to higher pre-tax income and a decrease in valuation allowances [171]. - The effective tax rate for Q3 2025 was 8,650.0%, significantly higher than 15.3% for Q3 2024, primarily due to a decrease in valuation allowances [161]. - The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $44 million as of September 30, 2025 [221]. - A total of $8 million of interest and penalties is included in the liability for uncertain tax positions as of September 30, 2025 [221]. Accounting Standards and Market Risk - The Financial Accounting Standards Board (FASB) issued ASU 2023-09, effective for annual periods beginning after December 15, 2024, which establishes new requirements for income tax disclosures [223]. - The FASB also issued ASU 2025-06, effective for annual reporting periods beginning after December 15, 2027, modifying criteria for capitalizing software costs [224]. - The company evaluated other recently issued ASUs and does not expect them to materially impact consolidated financial position or results of operations [225]. - There have been no material changes in the quantitative and qualitative disclosures about market risk during the three months ended September 30, 2025 [229].

Core Insights - The company is optimistic about its future, focusing on improving healthcare experiences and operational performance while maintaining financial discipline [4][29][30] Financial Performance - The third quarter results showed a 6% year-over-year increase in same store net revenue, driven by a 5.6% rise in net revenue per adjusted admission [5][10] - Adjusted EBITDA for the third quarter was $376 million, up from $347 million in the prior year, with a margin increase of 100 basis points to 12.2% [9][10] - The company recognized a $28 million gain from a legal settlement, which contributed to the reported results [5][10] Operational Highlights - Inpatient volume growth continued, although the business mix remains skewed towards medical cases rather than surgical ones [6][11] - The company is expanding its service lines, including new urology and neurosurgery programs, and has successfully recruited approximately 160 more employed physicians and advanced practice providers [7][8] - The capital structure improved, with leverage reduced to 6.7 times from 7.4 times at year-end 2024 [8][15] Strategic Initiatives - A leadership conference is planned for 150 CEOs and CFOs to discuss the company's vision and commitment to quality investments [4] - The company is pursuing divestitures and has ongoing discussions for potential deals, indicating a strategic approach to capital deployment [22][25] Market Trends - There is a noted improvement in payer mix, which is expected to positively impact future volumes as consumer confidence stabilizes [20][36] - The company is observing a slight recovery in outpatient elective surgeries, although overall outpatient volumes remain under pressure [19][20] Future Outlook - The adjusted EBITDA guidance for the full year 2025 has been tightened to a range of $1.5 to $1.55 billion, reflecting the impact of the legal settlement and operational performance [16] - Anticipated Medicare rate increases and potential new state-directed payment programs are expected to provide incremental benefits in 2026 [25][40]

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Core Insights - Community Health Systems, Inc. (CYH) reported adjusted earnings of $1.27 per share for Q3 2025, surpassing the Zacks Consensus Estimate of a loss of 32 cents and improving from a loss of 30 cents in the prior year [1][11] - Net operating revenues remained stable at $3.1 billion, exceeding the consensus mark by 3.2% [1][2] Financial Performance - The quarterly results were supported by reduced expenses, favorable changes in payor mix, and increased same-store admissions, although declines in patient days, occupancy rate, and adjusted admissions partially offset these positives [2] - Total operating expenses decreased by 13.7% year over year to $2.8 billion, primarily due to lower non-operating expenses, but were 2.6% higher than estimates [4] - Net income for the quarter was $171 million, a significant increase from a net loss of $355 million in the same period last year [6][11] - Adjusted EBITDA rose by 8.4% year over year to $376 million, driven by increased non-patient revenues and higher reimbursement rates [6] Operational Metrics - As of the end of Q3, the hospital count was 70, down from 77 a year ago, with patient days decreasing by 9.3% year over year [3] - The average length of stay decreased by 2.3% to 4.2 days, while the occupancy rate slightly declined to 49.7% [3] - Adjusted admissions fell by 7.7% year over year, although same-store admissions increased by 1.3% [3] Balance Sheet and Cash Flow - Cash and cash equivalents increased to $123 million from $37 million at the end of 2024, while total assets decreased to $13.2 billion from $14.1 billion [8] - Long-term debt decreased to $10.6 billion from $11.4 billion at the end of 2024 [8] - Operating cash flows for the first nine months of 2025 were $277 million, up from $264 million in the prior year [9] Future Guidance - The company anticipates net operating revenues between $12.4 billion and $12.6 billion for 2025, with adjusted EBITDA expected in the range of $1.5 billion to $1.55 billion [12] - Net income per share is projected to be between 80 cents and 90 cents for 2025 [12] - Capital expenditures are expected to be between $350 million and $400 million [13]