Community Health Systems, Inc. Q1 FY2026 earnings call

Kevin Hammons acknowledged employees, physicians, and teammates. Earlier this week, announced significant investments in ambulatory surgery centers including pending acquisition of Surgical Institute of Alabama. Top priorities include enhancing quality, patient experience, physician experience, and employee satisfaction. Realizing operational improvements at accelerating pace. Expect 80% of CHS's hospitals to receive leapfrog A or B grade next month, up from 48% a year ago. 56% of hospitals to receive CMS rating of three or more stars, up from 45% in 2025. Deploying ambient listening technology in clinics and hospitals to reduce administrative burdens. Jason Johnson reviewed financial results, noted adjusted EBITDA was low end of expectations, divestitures had negative impact, same-store net revenue increased, labor cost managed, supplies expense controlled, cash flows from operations were use of $297 million. Completed divestitures, redeemed notes, announced divestiture of Arkansas hospitals, made ASC investments

Adjusted EBITDA for the first quarter was 309 million with margin of 10.4%. Recently divested hospitals produced approximately $25 million of negative adjusted EBITDA in the first quarter. Same-store net revenue increased 3.1% year-over-year, driven by 3.7% growth in net revenue per adjusted admission, partly offset by a 0.5% decline in same-store adjusted admissions. Labor cost was well managed overall with approximately 2% year-over-year growth in average hourly rate and same-store contract labor spend down 11%. Supplies expense remained well controlled, declining 60 basis points year over year to 14.9% net revenue. Medical specialist fees were up approximately 11% year over year

Financial guidance for 2026 remains unchanged. Initial range for adjusted EBITDA $1.34 to $1.49 billion. New developments like Georgia's State Director Payment Program, Arkansas divestiture, and ASC investments captured within range. Multiple items on horizon could affect guidance, like potential new state drug repayment programs and Rural Health Transformation Program

Forward-looking statements subject to known and unknown risks described in risk factors in annual report on Form 10-K and other SEC filings. Volume and impairments below expectations, softness in procedures like hips and knees, negative contribution from divested operations, macroeconomic disruptions, consumer fears related to geopolitical instability and increased cost of living, aggressive practices by managed care companies delaying payments

First question on payer mix and volume pressures, response on broad volume pressure, macroeconomic issues, managed care behavior, guidance on volume growth. Follow-up on operating cash flow, timing related items like Medicaid payments, provider taxes, Medicare Advantage AR buildup, bonus payment, AP timing, initial interest payment on 2034 note. Second question on Hicks Exchange headwind, no changes to assumptions yet. Third question on acquisitions, characterized as part of existing networks, labor, hourly wages, contract labor, professional fees. Fourth question on financial profile of Arkansas hospitals and ASC investment, proceeds from Arkansas divestiture not reflected in initial guidance, ASC investment a wash. Fifth question on uncompensated care and self-pay mix, increase in self-paid volumes, contribution of normal course rate increases, state-directed payments, volume impairments