munity Health Systems(US:CYH)2025-07-24 16:00Financial Data and Key Metrics Changes - In the second quarter, same store net revenue increased by 6.5% year over year, primarily driven by rate growth and recognition of revenue under Medicaid state directed payment programs in New Mexico and Tennessee [9][15][16] - Adjusted EBITDA for the second quarter was $380 million compared to $387 million in the prior year, with a margin of 12.1% versus 12.3% in the prior year [16][17] - Cash flows from operations were reported at $87 million for the second quarter and $282 million year to date, with free cash flows for the second quarter being marginally positive [17][18] Business Line Data and Key Metrics Changes - Inpatient admissions increased by 0.3% year over year, while adjusted admissions declined by 0.7%, with same store surgeries down by 2.5% and emergency department visits down by 1.9% [9][15][16] - The company has over 200 providers scheduled to commence in the second half of 2025, indicating a focus on expanding service lines and capacity [10][11] Market Data and Key Metrics Changes - The company noted a decline in consumer confidence, which has affected demand for healthcare services, particularly elective surgical procedures [13][25] - The company is experiencing a softer demand for elective surgeries, particularly in the commercial book, which has led to a loss of operating leverage [13][14] Company Strategy and Development Direction - The company is focused on expanding its physical capacity and service lines, with ongoing recruitment of primary care and specialty physicians [10][11] - Recent service line and capacity expansions in key markets are expected to ramp up and gain market share, with new outpatient access points set to open [11] - The company completed the divestiture of Cedar Park Regional Medical Center for $436 million and is working on improving its leverage profile through successful debt refinancing [11][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that past development and capital investment strategies have positioned the company well to capture patient demand once consumer confidence returns [9][10] - The company anticipates that the impacts from the recently signed budget reconciliation for the One Big Beautiful Bill Act will phase in beginning in 2027, projecting a cumulative reduction in EBITDA of approximately $300 to $350 million over the next thirteen years [19][20] - Management is taking a conservative approach to the underlying business given the impact from macro factors observed in the second quarter [22] Other Important Information - The CEO announced plans to retire in September, with the President and CFO expected to take over leadership [5][8] - The company is actively pursuing legislative and administrative fixes to mitigate the impacts of the One Big Beautiful Bill Act [20][21] Q&A Session Summary Question: Volume expectations and dynamics - Management noted a decline in consumer confidence affecting volumes, with a revised guidance for adjusted admissions for the year now expected to be 0% to 1% [25][26] Question: Updates on state directed payment programs - Management provided updates on pending DPP programs in Indiana and Florida, expecting material benefits from these programs once approved [30][31] Question: Run rate for EBITDA going forward - Management indicated that the real run rate for EBITDA is likely in the range of $360 million to $375 million, considering the current volume trends [36] Question: Impact of the One Big Beautiful Bill Act - Management explained the complexities of estimating the impact of the bill, emphasizing ongoing lobbying efforts to address potential funding cuts [19][20][92] Question: Medicare volume trends - Management reported no significant changes in the Medicare book of business, indicating that this segment is less impacted by consumer confidence issues [76] Question: Differences in volume trends compared to peers - Management suggested that geographic differences and types of markets may contribute to the volume discrepancies observed compared to peers [80][81]