Community Health Systems, Inc. Announces Third Quarter Ended September 30, 2024 Results

Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today announced financial and operating results for the three and nine months ended September 30, 2024.

The following highlights the financial and operating results for the three months ended September 30, 2024.

• Net operating revenues totaled $3.090 billion.
• Net loss attributable to Community Health Systems, Inc. stockholders was $(391) million, or $(2.95) per share (diluted), compared to $(91) million, or $(0.69) per share (diluted), for the same period in 2023. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to Community Health Systems, Inc. stockholders was $(0.30) per share (diluted), compared to $(0.33) per share (diluted) for the same period in 2023.
• Adjusted EBITDA was $347 million.
• Net cash provided by operating activities was $67 million for the three months ended September 30, 2024, compared to $29 million for the same period in 2023.
• On a same-store basis, admissions increased 2.4 percent and adjusted admissions increased 2.6 percent, compared to the same period in 2023.

Commenting on the results, Tim L. Hingtgen, chief executive officer of Community Health Systems, Inc., said, “Our teams continued to execute well in a number of areas, advancing key priorities related to volume growth, operational improvements and patient outcome success. I especially want to express gratitude for the extraordinary efforts made across many of our health systems to ensure the safety of our patients during back-to-back hurricanes that affected many of our communities.”

Three Months Ended September 30, 2024

Net operating revenues for the three months ended September 30, 2024, totaled $3.090 billion, a 0.1 percent increase compared to $3.086 billion for the same period in 2023. On a same-store basis, net operating revenues increased 5.1 percent for the three months ended September 30, 2024, compared to the same period in 2023. Net operating revenues for the three months ended September 30, 2024, reflect a 4.1 percent decrease in admissions and a 3.7 percent decrease in adjusted admissions, compared to the same period in 2023. On a same-store basis, admissions increased 2.4 percent and adjusted admissions increased 2.6 percent for the three months ended September 30, 2024, compared to the same period in 2023.

Net loss attributable to Community Health Systems, Inc. stockholders was $(391) million, or $(2.95) per share (diluted), for the three months ended September 30, 2024, compared to $(91) million, or $(0.69) per share (diluted), for the same period in 2023. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to Community Health Systems, Inc. stockholders was $(0.30) per share (diluted) for the three months ended September 30, 2024, compared to $(0.33) per share (diluted) for the same period in 2023.

Adjusted EBITDA for the three months ended September 30, 2024, was $347 million compared to $360 million for the same period in 2023.

The increase in net loss attributable to Community Health Systems, Inc. stockholders for the three months ended September 30, 2024, compared to the same period in 2023, was driven by the change in estimate to increase the professional liability claims accrual and period-over-period changes in impairment and (gain) loss on the sale of businesses, partially offset by having a benefit from income taxes in the current period compared to a provision for income taxes in the prior period. In addition, the increase in net loss attributable to Community Health Systems, Inc. stockholders and the decrease in Adjusted EBITDA for the three months ended September 30, 2024, compared to the same period in 2023, was driven by increased expense for salaries and benefits, increased costs for outsourced medical specialists, losses resulting from Hurricane Helene and increased patient claim denials, partially offset by higher same-store volumes, increased reimbursement rates, a higher net benefit from supplemental reimbursement programs, reduced expense for contract labor and reductions in supplies expense.

Nine Months Ended September 30, 2024

Net operating revenues for the nine months ended September 30, 2024, totaled $9.369 billion, a 0.7 percent increase compared to $9.308 billion for the same period in 2023. On a same-store basis, net operating revenues increased 5.2 percent for the nine months ended September 30, 2024, compared to the same period in 2023. Net operating revenues for the nine months ended September 30, 2024, reflect a 3.1 percent decrease in admissions and a 3.4 percent decrease in adjusted admissions, compared to the same period in 2023. On a same-store basis, admissions increased 3.0 percent and adjusted admissions increased 2.5 percent for the nine months ended September 30, 2024, compared to the same period in 2023.

Net loss attributable to Community Health Systems, Inc. stockholders was $(446) million, or $(3.38) per share (diluted), for the nine months ended September 30, 2024, compared to $(180) million, or $(1.38) per share (diluted), for the same period in 2023. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to Community Health Systems, Inc. stockholders was $(0.61) per share (diluted) for the nine months ended September 30, 2024, compared to $(0.98) per share (diluted) for the same period in 2023.

Adjusted EBITDA for the nine months ended September 30, 2024, was $1.112 billion compared to $1.068 billion for the same period in 2023.

The increase in net loss attributable to Community Health Systems, Inc. stockholders for the nine months ended September 30, 2024, compared to the same period in 2023, is primarily attributable to period-over-period changes in impairment and (gain) loss on the sale of businesses and a change in estimate to increase the professional liability claims accrual, partially offset by a gain from early extinguishment of debt, having a benefit from income taxes in the current period compared to a provision for income taxes in the prior period and the factors that contributed to the increase in Adjusted EBITDA as noted below. In addition, the increase in Adjusted EBITDA for the nine months ended September 30, 2024, compared to the same period in 2023, was driven by higher same-store volumes, increased reimbursement rates, favorable changes in payor mix, a higher net benefit from supplemental reimbursement programs, reduced expense for contract labor and reductions in supplies expense, partially offset by lower acuity and increased patient claim denials.

Financing Activity

During the three months ended September 30, 2024, the Company extinguished approximately $143 million principal value of its 5⅝% Senior Secured Notes due 2027 through open market repurchases utilizing cash on hand.

Other

During 2024, through the date of this press release, the Company has completed two hospital divestitures including one on August 1, 2024 and the other on October 1, 2024.

Certain of the Company’s facilities in Florida, Georgia and Tennessee have experienced an interruption in their business and incurred additional costs as a direct result of Hurricane Helene, which made landfall in late September 2024, and Hurricane Milton, which made landfall in early October 2024. Hurricane Helene resulted in an estimated loss of operating revenues together with incremental expenses directly related to hurricane response efforts of approximately $7 million on a pre-tax basis during the three months ended September 30, 2024. No insurance proceeds related to Hurricane Helene were received or recognized during the three months ended September 30, 2024. Further, taking into account the timing of these events, it is expected that additional net operating revenues will be lost and incremental operating expenses will be incurred for remediation and restoration efforts in the fourth quarter of 2024 and one or more future periods. Insurance proceeds, which are expected to cover substantially all of the Company’s costs related to these events, are expected to be received in one or more future periods.

Financial and statistical data presented in this press release includes the operating results of divested or closed businesses for the periods prior to the consummation of the respective divestiture or closure. Same-store operating results and statistical information include operating results of businesses operated in the comparable current year and prior year periods and exclude businesses divested in 2024 and 2023.

Information About Non-GAAP Financial Measures

This press release presents Adjusted EBITDA, a non-GAAP financial measure, which is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of businesses, expense related to the Business Transformation Costs (as defined in footnote (c) to the Financial Highlights, Financial Statements and Selected Operating Data below), expense related to government and other legal matters and related costs, expense related to employee termination benefits and other restructuring charges, the impact of a change in estimate to increase the professional liability claims accrual recorded during the fourth quarter of 2022 with respect to claims incurred in prior years related to divested locations as well as a change in estimate to increase such accrual recorded during the third quarter of 2024 as further described in footnote (c) to the Financial Highlights, Financial Statements and Selected Operating Data below, and the gain on sale by HealthTrust Purchasing Group, L.P. (“HealthTrust”) of a majority interest in CoreTrust Holdings, LLC (“CoreTrust”) completed during the fourth quarter of 2022. For information regarding why the Company believes Adjusted EBITDA provides useful information to investors, and for a reconciliation of Adjusted EBITDA to net loss attributable to Community Health Systems, Inc. stockholders, see footnote (c) to the Financial Highlights, Financial Statements and Selected Operating Data below.

Additionally, this press release presents adjusted net loss attributable to Community Health Systems, Inc. stockholders per share (diluted), a non-GAAP financial measure, to reflect the impact on net loss attributable to Community Health Systems, Inc. stockholders per share (diluted) from the selected items used in the calculation of Adjusted EBITDA. For information regarding why the Company believes this non-GAAP financial measure provides useful information to investors, and for a reconciliation of this non-GAAP financial measure to net loss attributable to Community Health Systems, Inc. stockholders per share (diluted), see footnote (e) to the Financial Highlights, Financial Statements and Selected Operating Data below.

The non-GAAP financial measures set forth above are not measurements of financial performance under U.S. GAAP, and should not be considered in isolation or as a substitute for any financial measure calculated in accordance with U.S. GAAP. Additionally, the calculation of these non-GAAP financial measures may not be comparable to similarly titled measures disclosed by other companies.

Included on pages 16, 17, 18, 19 and 20 of this press release are tables setting forth the Company’s 2024 updated annual earnings guidance. The 2024 guidance is based on the Company’s historical operating performance, current trends and other assumptions the Company believes are reasonable at this time as more specifically discussed below.

About Community Health Systems, Inc.

Community Health Systems, Inc. is one of the nation’s largest healthcare companies. The Company’s affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 39 distinct markets across 15 states. As of October 23, 2024, the Company’s subsidiaries own or lease 69 affiliated hospitals with more than 11,000 beds and operate more than 1,000 sites of care, including physician practices, urgent care centers, freestanding emergency departments, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

The Company’s headquarters are located in Franklin, Tennessee, a suburb south of Nashville. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol “CYH.” More information about the Company can be found on its website at www.chs.net.

Community Health Systems, Inc. will hold a conference call on Thursday, October 24, 2024 at 10:00 a.m. Central, 11:00 a.m. Eastern, to review financial and operating results for the third quarter ended September 30, 2024. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company’s website at www.chs.net. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately 30 days. Copies of this press release and conference call slide show, as well as the Company’s Current Report on Form 8-K (including this press release), will be available on the Company’s website at www.chs.net.

Footnotes to Financial Highlights, Financial Statements and Selected Operating Data

Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)

The Company believes it is useful to provide investors and other users of the Company’s financial statements this performance measure to align with how management assesses the Company’s results of operations. Adjusted EBITDA also is comparable to a similar metric called Consolidated EBITDA, as defined in the Company’s asset-based loan facility (the “ABL Facility”) and the Company’s existing note indentures, which is a key component in the determination of the Company’s compliance with certain covenants under the ABL Facility and such note indentures (including the Company’s ability to service debt and incur capital expenditures), and is used to determine the interest rate and commitment fee payable under the ABL Facility (although Adjusted EBITDA does not include all of the adjustments described in the ABL Facility). Adjusted EBITDA includes the Adjusted EBITDA attributable to hospitals that were divested during the course of such year, but in each case solely to the extent relating to the period prior to the consummation of the applicable divestiture.

Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, or any other performance measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance. The Company believes such adjustments are appropriate as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Additionally, this calculation of Adjusted EBITDA may not be comparable to similarly titled measures disclosed by other companies.

The following table reflects the reconciliation of Adjusted EBITDA, as defined, to net loss attributable to Community Health Systems, Inc. stockholders as derived directly from the condensed consolidated financial statements (in millions):

Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)

The Company generated a net loss attributable to Community Health Systems, Inc. stockholders for the three and nine months ended September 30, 2024 and 2023, so the effect of dilutive securities is not considered because their effect would be antidilutive. If the Company had generated net income, the effect of stock awards and options on the diluted shares calculation would have been an increase of 1,883,693 shares and 224,178 shares during the three months ended September 30, 2024 and 2023, respectively, and 1,064,103 shares and 298,184 shares during the nine months ended September 30, 2024 and 2023, respectively.

Regulation FD Disclosure

Set forth below is selected information concerning the Company’s projected consolidated operating results for the year ending December 31, 2024. These projections update selected guidance provided on July 24, 2024, and are based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time. This 2024 guidance should be considered in conjunction with the assumptions included herein. See pages 18, 19 and 20 for a list of factors that could affect the future results of the Company or the healthcare industry generally. The following is provided as guidance to analysts and investors:

The following assumptions were used in developing the 2024 guidance provided above:

• The Company’s projections exclude the following:

• Effect of debt refinancing activities, including gains and losses from early extinguishment of debt;
• Impairment of goodwill and long-lived assets;
• The impact of any potential future divestitures;
• Gains or losses from the sales of businesses;
• Employee termination benefits and restructuring costs;
• Resolution of government investigations or other significant legal settlements;
• Costs incurred in connection with divestitures;
• Expense for third-party consulting costs associated with significant process and systems redesign across multiple functions as part of the Company’s previously disclosed business transformation initiative; and
• Other significant gains or losses that neither relate to the ordinary course of business nor reflect the Company’s underlying business performance.

Other assumptions used in the above guidance:

• Expressed as a percentage of net operating revenues, depreciation and amortization of approximately 3.7% to 3.8% for 2024. Additionally, this is a fixed cost and the percentages may vary based on changes in net operating revenues. Such amounts exclude the possible impact of any future hospital fixed asset impairments.
• Interest expense is estimated to be between $850 million and $860 million while cash paid for interest, which excludes the amortization of deferred financing costs, is expected to be $730 million to $740 million. Total fixed rate debt is expected to average approximately 97% of total debt during 2024.
• Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests of approximately 1.2% to 1.3% for 2024.
• Expressed as a percentage of net operating revenues, provision for income taxes of approximately 0.8% to 0.9% for 2024.

A reconciliation of the Company’s projected 2024 Adjusted EBITDA, a forward-looking non-GAAP financial measure, to the Company’s projected net loss attributable to Community Health Systems, Inc. stockholders, the most directly comparable GAAP financial measure, is shown below (in millions):

• Capital expenditures are projected as follows (in millions):

• Net cash provided by operating activities, including estimated cash payments for income taxes of $150 million to $200 million, are projected as follows (in millions):

• Diluted weighted-average shares outstanding are projected to be approximately 132 million to 133 million for 2024.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this press release other than statements of historical fact, including statements regarding projections, expected operating results, and other events that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similar expressions, are forward-looking statements. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this press release.

These factors include, among other things:

• general economic and business conditions, both nationally and in the regions in which we operate, including the impact of current negative macroeconomic conditions, inflationary conditions, the current high interest rate environment, and current geopolitical instability, as well as the potential impact on us of political, financial, credit and capital conditions;
• the impact of current or future federal and state health reform initiatives;
• the extent to and manner in which states adopt changes to Medicaid programs, implement health insurance exchanges or alter or reduce the provision of, or payment for, healthcare to state residents through legislation, regulation or otherwise;
• changes related to health insurance enrollment, including those affecting the beneficiary enrollment process and the stability of health insurance exchanges;
• risks associated with our substantial indebtedness, leverage and debt service obligations, including our ability to refinance such indebtedness on acceptable terms or to incur additional indebtedness, and our ability to remain in compliance with debt covenants;
• demographic changes;
• changes in, or the failure to comply with, federal, state or local laws or governmental regulations affecting our business;
• judicial developments impacting the Company or the healthcare industry, including the potential impact of the recent decisions of the U.S. Supreme Court regarding the actions of federal agencies;
• potential adverse impact of known and unknown legal, regulatory and governmental proceedings and other loss contingencies, including governmental investigations and audits, and federal and state false claims act litigation;
• our ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further affected by the increasing consolidation of health insurers and managed care companies and vertical integration efforts involving payors and healthcare providers;
• changes in, or the failure to comply with, contract terms with payors and changes in reimbursement policies, methodologies or rates paid by federal or state healthcare programs or commercial payors;
• security breaches, cyber-attacks, loss of data, other cybersecurity threats or incidents, including those experienced with respect to our information systems or the information systems of third parties with whom we conduct business, and any actual or perceived failures to comply with legal requirements governing the privacy and security of health information or other regulated, sensitive or confidential information, or legal requirements regarding data privacy or data protection;
• the development, adoption and use of emerging technologies, including artificial intelligence and machine learning;
• any potential impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets;
• the effects related to the sequestration spending reductions pursuant to both the Budget Control Act of 2011 and the Pay-As-You-Go Act of 2010 and the potential for future deficit reduction legislation;
• increases in the amount and risk of collectability of patient accounts receivable, including decreases in collectability which may result from, among other things, self-pay growth and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles;
• the efforts of insurers, healthcare providers, large employer groups and others to contain healthcare costs, including the trend toward value-based purchasing;
• the impact of competitive labor market conditions, including in connection with our ability to hire and retain qualified nurses, physicians, other medical personnel and key management, and increased labor expenses arising from inflation and/or competition for such positions;
• the inability of third parties with whom we contract to provide hospital-based physicians and the effectiveness of our efforts to mitigate such non-performance including through acquisitions of outsourced medical specialist businesses, engagement with new or replacement providers, employment of physicians and re-negotiation or assumption of existing contracts;
• any failure to obtain medical supplies or pharmaceuticals at favorable prices;
• liabilities and other claims asserted against us, including self-insured professional liability claims;
• competition;
• trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty hospitals or via telehealth;
• changes in medical or other technology;
• any failure of our ongoing process of redesigning and consolidating key business functions, including through the implementation of a new core enterprise resource planning system, to proceed as expected or to be completed successfully;
• changes in U.S. GAAP;
• the availability and terms of capital to fund any additional acquisitions or replacement facilities or other capital expenditures;
• our ability to successfully make acquisitions or complete divestitures, our ability to complete any such acquisitions or divestitures on desired terms or at all, the timing of the completion of any such acquisitions or divestitures, and our ability to realize the intended benefits from any such acquisitions or divestitures;
• the impact that changes in our relationships with joint venture or syndication partners could have on effectively operating our hospitals or ancillary services or in advancing strategic opportunities;
• our ability to successfully integrate any acquired hospitals and/or outpatient facilities, or to realize expected benefits from acquisitions such as increased growth in patient service revenues;
• the impact of severe weather conditions and climate change, as well as the timing and amount of insurance recoveries in relation to severe weather events;
• our ability to obtain adequate levels of insurance, including general liability, professional liability, cyber liability and directors and officers liability insurance;
• timeliness of reimbursement payments received under government programs;
• effects related to pandemics, epidemics, or outbreaks of infectious diseases on our business, results of operations, financial condition, and/or cash flows;
• any failure to comply with our obligations under license or technology agreements;
• challenging economic conditions in non-urban communities in which we operate;
• the concentration of our revenue in a small number of states;
• our ability to realize anticipated cost savings and other benefits from our current strategic and operational cost savings initiatives;
• any changes in or interpretations of income tax laws and regulations; and
• the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2024 and other filings filed with the SEC.

The consolidated operating results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that may be experienced for any future periods. The Company cautions that the projections for calendar year 2024 set forth in this press release are given as of the date hereof based on currently available information. The Company undertakes no obligation to revise or update any forward-looking statements (including such guidance), or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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