Community Health Rides on Same-Store Volumes, Streamlining Efforts

Core Viewpoint - Community Health Systems, Inc. (CYH) is positioned for growth due to improving same-store volumes, favorable payor mix changes, and reduced contract labor expenses, with strategic improvements and divestitures expected to unlock shareholder value [1] CYH's Tailwinds - Adjusted admissions on a same-store basis improved by 3.1% year over year in the last reported quarter, contributing to a 10.9% year-over-year increase in adjusted EBITDA to $428 million [2] - The company's occupancy rate has been increasing over the last two years, driven by a growing senior population and rising disease cases, which is expected to continue [2] - Revenue per adjusted admission is growing significantly, supporting top-line growth, while divestitures of non-core assets, such as the recent sale of ShorePoint Health for $260 million, are optimizing the hospital portfolio and improving margins [3] - A partnership with Denim Health to integrate conversational AI technology into the Patient Access Center is streamlining agent workload, potentially leading to cost savings, while decreasing contract labor expenses is also expected to reduce losses [4] - Community Health anticipates adjusted EBITDA to be between $1.45 billion and $1.60 billion in 2025, with net cash from operating activities projected to be between $600 million and $700 million this year [5] CYH's Headwinds - Declining patient days and average length of stay are significant challenges, with patient days dropping by 4.6% year over year in 2023 and 5.3% in 2024, and average length of stay falling by 4.3% in 2023 and 2.2% in 2024 [6] - The company expects a net loss per share to be between 55 cents and breakeven in 2025 [6] - As of December 31, 2024, CYH had cash and cash equivalents of $37 million against long-term debt of $11.4 billion, resulting in a net debt to EBITDA ratio of 9.11X, significantly higher than the industry average of 3.29X [7] - Net interest expense increased by 3.6% in 2024 to $860 million [7] CYH's Earnings Surprise History - Community Health's earnings have only outpaced the Zacks Consensus Estimate in one of the last four quarters, with three misses and an average surprise of negative 263.9% [8]