Community Health Systems (CYH) Earnings Call

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DATE

Thursday, February 19, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Kevin Hammons
• Executive Vice President & Chief Financial Officer — Jason Johnson
• Vice President, Investor Relations — Anton Hie

TAKEAWAYS

• Same-store net revenue -- Increased 2.1% year over year, attributed primarily to rate growth and a slight improvement in acuity, with net revenue per adjusted admission up 2.4%.
• Same-store inpatient admissions and adjusted admissions -- Each declined 0.3%; surgeries were down 1.9%; emergency department visits fell 3.6%.
• After adjusting for divested Pennsylvania operations -- Same-store admissions and adjusted admissions were flat year over year, with surgeries down just 0.4%.
• Adjusted EBITDA -- $395,000,000 for the fourth quarter; margin reached 12.7%.
• Full year cash flows from operations -- Totaled $543,000,000 as reported, or $712,000,000 excluding $169,000,000 in divestiture-related cash taxes; adjusted free cash flow hit $150,000,000.
• Net leverage -- Reduced from 7.4x at year-end 2024 to 6.6x at year-end 2025, and further improved after February 2026 debt redemption.
• Recent and pending divestiture proceeds -- $152,000,000 from outreach lab asset divestiture; $623,000,000 gross from Tennova Healthcare Clarksville sale; $33,000,000 plus $15,000,000 note and contingent consideration from Pennsylvania hospitals; additional $450,000,000 expected from Huntsville, Alabama assets.
• Net debt outlook -- Anticipated to decrease to $9,200,000,000, down from $10,100,000,000 at end of 2025 and $11,400,000,000 at end of 2024 with Huntsville divestiture completion.
• Cost management -- Supply expense fell 110 basis points year over year to 14.4% of net revenue; contract labor spending remained essentially flat sequentially and year over year.
• Medical specialist fees -- $169,000,000 in Q4, up 4.6% year over year and standing at 5.4% of net revenue; guidance projects 5%-8% cost increase in 2026, especially for radiology and anesthesia.
• 2026 initial financial guidance -- Projected net revenue of $11.6-$12.0 billion, adjusted EBITDA of $1.34-$1.49 billion, operating cash flow of $600,000,000-$700,000,000, and capital expenditures of $350,000,000-$400,000,000, reflecting the impact of completed and announced divestitures and the absence of certain one-time 2025 items.
• Extra pay period impact -- Management expects a $140,000,000 headwind to 2026 cash flows from operations due to an additional payroll cycle.
• Operational improvements and investments -- Examples include a 20% birth increase at Grandview Medical Center, a 35% rise in inbound transfers at Carlsbad, and a 16% increase in heart surgeries at Longview, driven by targeted capital allocations.
• Technological efficiencies -- ERP implementation yielded approximately $50,000,000 in annual cost savings, with further savings expected as AI features are rolled out and mature.
• Exchange (HIX) headwind -- Guidance assumes a $20,000,000-$30,000,000 EBITDA reduction tied to lower healthcare exchange volumes, with exchanges comprising less than 5% of admissions and revenue.
• Divestiture strategy -- CEO Hammons stated management is "very comfortable with our portfolio as it stands" and intends to remain opportunistic regarding further asset sales.

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RISKS

• Guidance incorporates net revenue and EBITDA declines due to completed and pending divestitures, with management cautioning that "Any such additional transactions, if completed during 2026, would reduce net revenue and EBITDA for the year."
• CFO Johnson identified ongoing "upward pressure on medical specialist fees in excess of typical inflation, likely in the range of 5% to 8% growth for 2026."
• Management highlighted continued "uncertainty in both reimbursement and insurance coverage" from economic and regulatory disruptions, although these are believed to be temporary.
• Cash flow guidance for 2026 includes a $140,000,000 payroll cost headwind, and excludes any impact from unapproved state-directed payment programs, adding uncertainty to future inflows.

SUMMARY

Community Health Systems (NYSE:CYH) reported modest same-store net revenue growth and sequential margin expansion, accompanied by continued progress on deleveraging and asset sales. Management’s initial 2026 outlook projects lower net revenue and adjusted EBITDA due to completed and announced divestitures and excludes unapproved program impacts, while cost controls and technology investments are set to support core operational growth. Guidance reflects a significant headwind from an extra payroll period and recognizes the impact of lower healthcare exchange volumes but includes actions aimed at capturing margin and efficiency upside as the streamlined core portfolio matures.

• CFO Johnson detailed that the bridge from 2025 to 2026 EBITDA guidance adjusts for approximately $110,000,000-$130,000,000 in EBITDA reductions related to 2025-2026 divestitures and a further $45,000,000 from one-time items.
• Medicare inpatient rate increase of about 4% cited as a tailwind for 2026, the highest seen by management in recent memory and expected to benefit both revenue and payer mix.
• CEO Hammons explained the strategic divestiture focus has shifted to most of those hospitals, and even the smaller, more rural hospitals, fit within a network that includes a hospital in a larger suburban or mid-sized metropolitan area, and those smaller hospitals, although individually or on their own may operate at a different level, also serve as an access point or transfer point for higher acuity services that we are still able to capture within the network. So, really, as we are looking at and evaluating our portfolio, we have been divesting many more of the hospitals that kind of stand on their own where we do not have a network of care built up around it and focusing our efforts on those networks. targeting standalone hospitals for sale and consolidating assets around key regional networks.
• Management reported annual net revenue of $12.5 billion despite a 35% reduction in hospital count since 2019, citing hospital expansions and new outpatient facilities that helped preserve scale and cash generation.
• ERP and AI technology deployment delivered notable improvements in supply chain visibility, transactional efficiency, and administrative cost controls, with the potential for incremental benefits identified as system maturity continues.
• Guidance assumes low single-digit same-store volume growth in 2026, with management expecting improved contributions from commercial and Medicare payers driven by ongoing capital investments and service line expansion.

INDUSTRY GLOSSARY

• HIX: Refers to Health Insurance Exchange; state or federally run marketplaces enabling individuals to purchase health insurance as established under the Affordable Care Act.
• SDP: State-Directed Payment; government programs delivering supplemental Medicaid payments to providers, often subject to approval and ongoing regulatory changes.
• ERP: Enterprise Resource Planning; integrated management software facilitating finance, supply chain, HR, and operations, aimed at standardizing processes and enhancing organizational efficiency.

Full Conference Call Transcript

Operator: Good morning, and welcome to the Community Health Systems, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then two. We do ask that you please limit yourself to one question and a single follow-up. Please also note, today's event is being recorded. I would now like to turn the conference over to Anton Hie, Vice President, Investor Relations. Please go ahead. Thanks, Rocco.

Good morning, and welcome to Community Health Systems, Inc.'s fourth quarter 2025 conference call.

Anton Hie: Joining me on today's call are Kevin Hammons, Chief Executive Officer, and Jason Johnson, Executive Vice President and Chief Financial Officer. Before we begin, I will remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. Forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our Annual Report on Form 10-Ks and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements.

Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We have also posted a supplemental slide presentation on our website. All calculations we will discuss today exclude gains or losses from early extinguishment of debt, impairments, gains or losses on the sale of businesses, expense from business transformation costs, and changes in estimate for professional claims liability in the prior year period. With that said, I will turn the call over to Kevin Hammons, Chief Executive Officer. Thank you. Good morning, everyone. Thank you for joining our fourth quarter 2025 conference call and for your continued interest in CHS.

First, I would like to say I am honored to speak to you today as CEO of Community Health Systems, Inc. I want to express my sincere gratitude to our Board of Directors for their support and their confidence in appointing Jason and myself to our permanent roles as CFO and CEO, respectively. I would also like to thank many of the people on this call for offering your support and congratulations, which has meant so much to me personally. And, of course, I want to acknowledge our employees and physicians and everyone else who contributes to the quality care provided for our patients every day.

It is my honor and privilege to lead CHS forward at this point in time and to serve all of you in this role. Reflecting on these past few months, I used my time as Interim CEO to speak with many of our employees and physicians and, most importantly, to listen to their thoughts about the current state and future potential of our company. The feedback was candid, enlightening, and encouraging. And I entered this year excited and very optimistic about what lies ahead for CHS.

Today, I want to share some highlights of our 2025 operating results, but I also want to spend a minute talking about our vision and our top priorities for this year before turning the call over to Jason. Starting with our operating performance, the fourth quarter was in line with our updated expectation, reflecting sequential margin expansion with higher acuity, a slight improvement in payer mix, and continued cost controls. Same-store net revenue for the fourth quarter increased 2.1% year over year, reflecting a 2.4% increase in net revenue per adjusted admission. Some of our milestone achievements in 2025 were very much the result of focusing on the unique opportunities available in each of our markets.

For example, ER visits were up more than 13% at our Knoxville hospitals over the past two years, following a major investment in ER expansion at Tennova North Knoxville in 2024. A current investment at Tennova Turkey Creek in Knoxville, which will be completed this summer, will add more ER beds to the community and drive even more growth to our Tennessee hospitals. A 20% increase in births, more than 4,000 babies born at Grandview Medical Center in Birmingham, Alabama in 2025, was made possible by a recent $10,000,000 investment in women's services. That is the third expansion of women's services and maternity care services since we opened Grandview ten years ago.

In Carlsbad, New Mexico, more than 450 inbound transfers, a nearly 35% increase over the prior year, brought patients into our hospital for higher acuity care, coming from outlying communities as far as 30, 50, and even 100 miles away. And in Longview, Texas, heart surgeries were up 16% in 2025 as we developed a top-notch heart program that keeps patients close to home for high-quality, high-acuity care. High-acuity cardiac care. These are just a few examples of how we seek to understand and address the healthcare needs in our communities, and invest in our core portfolio for long-term growth.

We also made several divestitures in 2025, enabling us to invest proceeds back into our core portfolio or use them to reduce debt, continue to make improvements to our capital structure, with leverage down from 7.4 times at year-end 2024 to 6.6 times at year-end 2025, thus making materially more value available to our stockholders. And with proceeds from transactions completed, or due or to be completed in 2026, we are creating a path for additional debt reduction and deleveraging, which will further strengthen our balance sheet and continue to improve our capital structure.

As we discussed in prior quarters, and as has been discussed more broadly across our industry, we saw some disruptions in 2025 both from an economic standpoint impacting patient behavior, as well as a regulatory standpoint creating uncertainty in both reimbursement and insurance coverage. We believe these disruptions are temporary and there are plenty of things we can be doing, and that we are doing, to mitigate risks and ensure we are well positioned for the future. Finally, our vision at CHS is to make the healthcare experience exceptional for our patients, our communities, and each other. We know this is aspirational, but also believe it is possible and attainable.

To achieve this goal, healthcare experience that is exceptional, we have adopted five priorities. We intend to improve quality, physician experience,

Operator: patient experience,

Kevin Hammons: and employee satisfaction, and to grow our cash flows, enabling us to continue to invest in additional growth opportunities. We are working to differentiate ourselves in our market, and we believe doing so will lead to even greater consumer confidence and choice of our health systems, retention of our workforce, growth, and ultimately, enhanced financial performance and long-term success. At this point, I will turn the call over to our Chief Financial Officer, Jason Johnson, to review financial results in greater detail and discuss our initial guidance for 2026. Jason? Thank you, Kevin, and good morning, everyone. For the fourth quarter, CHS delivered results generally consistent with the expectations. The company continued to execute well on the controllable aspects.

The business was able to deliver expansion in adjusted EBITDA margin on a sequential basis, thus achieving the midpoint of our updated guidance for the full year 2025. Adjusted EBITDA for the fourth quarter was $395,000,000 with a margin of 12.7%. When adjusting for divestitures and out-of-period items, adjusted EBITDA was up slightly versus 2024. Same-store net revenue for the fourth quarter increased 2.1% year over year, driven primarily by rate growth and a slight improvement in acuity, as net revenue per adjusted admission was up 2.4% year over year. Same-store inpatient admissions and adjusted admissions were each down 0.3%. Same-store surgeries declined 1.9% and ED visits were down 3.6%.

When excluding the Pennsylvania operations that were divested on 02/01/2026, same-store admissions and adjusted admissions were flat year over year, and surgeries were down 0.4%. Meanwhile, CHS again performed well on cost controls. Labor was well managed, with growth in average hourly wage rate coming in within our expected range for the quarter and the full year, and contract labor spend was essentially flat on both a sequential and year-over-year basis. Supply expense continued to be well managed, declining 110 basis points year over year to 14.4% of net revenue in the fourth quarter and down 50 basis points for the full year 2025.

Medical specialist fees were $169,000,000 in the fourth quarter, which was up 4.6% year over year on a same-store basis, and healthy with recent quarters at 5.4% of net revenue. We continue to expect upward pressure on medical specialist fees in excess of typical inflation, likely in the range of 5% to 8% growth for 2026, driven by radiology and anesthesia. As we previously noted, we have seen operational improvements in areas such as throughput and safety metrics and physician practices that the company has insourced. We will continue to evaluate insourcing opportunities to combat this upward cost pressure when appropriate.

Cash flows from operations were $266,000,000 for the fourth quarter, bringing the full-year total to $543,000,000 versus $480,000,000 in 2024. Cash flows from operations for the full year 2025 as reported include $169,000,000 in outflows for taxes on gains on sales of hospitals, paid out of divestiture proceeds that are reported as investing cash flows. When excluding these cash taxes on divestiture gains, our adjusted cash flows from operations were $712,000,000 for 2025 and adjusted free cash flows were $150,000,000. As expected, during the fourth quarter CHS received $91,000,000 contingent cash consideration related to the 2024 divestiture of Tennova Cleveland, and net cash proceeds of approximately $152,000,000 from the divestiture of our outreach lab assets.

We used a portion of these proceeds to redeem $223,000,000 of the 10.75% senior secured notes due 2032 at 101.3 via a special call provision, and also redeemed the remaining $14,000,000 outstanding principal amount of the 2027 notes in mid-December. Subsequent to year-end, in early February, we completed the divestiture of our 80% ownership in Tennova Healthcare Clarksville in Tennessee for $623,000,000 in gross proceeds, and the three Pennsylvania hospitals for $33,000,000 in cash plus a $15,000,000 promissory note and additional contingent consideration. We used a portion of these proceeds to redeem another $223,000,000 of the 2032 notes at 101.3 via the special call provision on February 2.

As Kevin previously noted, our leverage at year-end 2025 was 6.6x, down from 7.4x at year-end 2024, and has since been further reduced by the second partial redemption of the 2032 notes earlier this month. We have simplified our capital structure by effectively eliminating the notes in 2025. Our next significant maturity is in 2029, and as of 12/31/2025, we had no amounts drawn on our ABL. The previously announced divestiture of our Huntsville, Alabama assets is on track to close in the second quarter and is expected to bring in an additional $450,000,000 in gross proceeds, further enhancing liquidity to fund growth investments and/or further reduce net debt and leverage.

It is worth noting that once the Huntsville divestiture is complete, our net debt will be approximately $9,200,000,000, down from the $10,100,000,000 at year-end 2025 and the $11,400,000,000 at year-end 2024. Now moving on to our initial 2026 financial guidance. We anticipate net revenue of $11,600,000,000 to $12,000,000,000, adjusted EBITDA of $1,340,000,000 to $1,490,000,000, cash flows from operations of $600,000,000 to $700,000,000, and capital expenditures of $350,000,000 to $400,000,000.

The guidance range, with net revenue and adjusted EBITDA both coming in below full-year 2025 levels, reflects the impact of divestitures completed in 2025 and those that have been announced and have been or are expected to be completed in early 2026, as well as the exclusion of one-time or out-of-period items that benefited 2025 results and are not expected to recur in 2026. In bridging from 2025 actuals to 2026 EBITDA guidance, the biggest factors are, of course, the divestitures. For those we completed during 2025, which comp includes the Cedar Park, Lake Norman, and ShorePoint, the partial-year impact that you have to take out of our as-reported EBITDA in 2025 is about $30,000,000 to $40,000,000. I am sorry.

Yes, $30,000,000 to $40,000,000. For the class of 2026 divestitures, which includes Clarksville, Pennsylvania, and Huntsville, it is about an $80,000,000 to $90,000,000 reduction to the baseline. And then, as you recall, we had the retroactive piece related to Tennessee SDPs and the opioid settlement, which together added about $45,000,000 of EBITDA in 2025. After adjusting for all these factors, we view the starting point for 2025 as EBITDA of about $1,360,000,000. Off that base, our initial guidance range for 2026 reflects core operations growth of about 4%, which is net of an estimated $20,000,000 to $30,000,000 EBITDA impact resulting from the reduction of HIX enrollment.

Our guidance does not include impacts from any new or inactive state-directed payment programs that may still be awaiting approval and, likewise, does not include any benefits from the rural health transformation program, as the states in which we operate are still in various stages of finalizing their program design. Additionally, the guidance considers only the impact of divestitures that have already been completed or announced to date. Any such additional transactions, if completed during 2026, would reduce net revenue and EBITDA for the year, and the associated proceeds would enable the company to further reduce net debt and leverage.

Final note, for many employers on a biweekly pay schedule, 2026 will include an extra pay period, meaning there will be 27 payment dates compared to the normal 26 payment dates. CHS is in this category. So while this has no impact to adjusted EBITDA, it will be an approximate $140,000,000 headwind to cash flows from operations in 2026 and is reflected in the guidance range. This concludes our prepared remarks. So at this time, we will return the call back over to the operator for Q&A. Rocco?

Operator: Yes, sir. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Once again, we do ask that you please limit yourself to one question and a single follow-up. Today's first question comes from Brian Gil Tanquilut with Jefferies. Hey. Good morning, guys.

Kevin Hammons: Thanks for all the color on the bridge. So maybe since you already gave us that, I will shift my question to just as I think about the divestitures. Right? I mean, you have announced a few that are pending here, baked in the guidance. How do we think about your perspective in terms of further divestitures and as you have pruned the portfolio, you now have an asset base that is comprised of fairly good hospitals. So how do you strat or feel okay. What is the philosophical view in terms of what is left to sell and how that impacts go-forward performance, and then just how much more are you willing to prune the hospital base from here?

Hey, Brian. This is Kevin. I will kick this off, and thank you for joining us today. We are getting, I would say, closer to the end of our programmatic divestitures. We still have some inbound interest as we continue, and probably will always have some inbound interest because we have some very good markets. There are a couple transactions right now that we are in some early stages of discussions, but we are not sure yet of whether those will proceed or whether we will be able to get those across the finish line. But I would say in terms of what we have the interest in selling, it is certainly tingly.

We are very comfortable with our portfolio as it stands, and we really want to be just opportunistic

Operator: about

Kevin Hammons: transacting hospitals that if there were ever to be a change in the economic environment or environment in which we are operating that would cause us to want to make a decision to divest, or if it is just an opportunistic transaction at a price point that would allow us to materially deleverage, then I think we would want to take advantage of that. No. I appreciate that. And then, hey, Jason. As I think about your bridge that you provided, when I think of the HIX adjustment there, just curious if you could share with us the assumptions that you have embedded in that number.

Whether it is shifting to bronze and employer plans, or just curious if there is anything you can share with us on that. Thanks. Yeah. Sure. Thank you for the question. As a reminder, healthcare exchanges represent less than 5% of our total adjusted admissions and net revenue, and our guidance does attempt to account for the potential impact from the reductions in enrollment in healthcare, health insurance exchanges, related to the administrative reforms, expirations of

Operator: enhanced

Jason Johnson: premium tax credits, etcetera. Obviously, it is difficult to predict currently what the ultimate outcome will be. It will be highly dependent upon the ACA plan effectuation rate, potential uptake into the employer-based plans, shifting into lower or middle-tier plans, or becoming self-pay, and the success of our company's eligibility screening service in assisting uninsured patients with obtaining coverage. We acknowledge, as the other peers have, there could be some negative impact to volume trends and payer mix. A 20% reduction in HIX volumes would have resulted in a $100,000,000 to $120,000,000 reduction in net revenue.

Based off of that where we are kicking off 2025 after excluding the divestitures, we think that could translate into a $20,000,000 to $30,000,000 reduction in EBITDA. Awesome. Thank you, guys.

Operator: Thank you. And our next question today comes from A.J. Rice at UBS. Please go ahead. Hi, everybody.

A.J. Rice: Maybe first just to ask, I do not think I have asked you about this in a while. The portfolio is obviously quite diverse. You have midsized city markets that make up a lot of the portfolio, but you also have a number of small community properties still. Has there been a meaningful difference in the way one side or the other of the portfolio, I am probably going to ask you geographically as well. Do you see meaningful difference as to how within the portfolio assets are performing over the course of the last quarter to last year? Any thoughts on that?

Operator: Thanks, AJ.

Kevin Hammons: You know, we do have a fairly wide range of performance across our portfolio. But, as we have trimmed and focused on networks of care, most of those hospitals, and even the smaller, more rural hospitals, fit within a network that includes a hospital in a larger suburban or mid-sized metropolitan area, and those smaller hospitals, although individually or on their own may operate at a different level, also serve as an access point or transfer point for higher acuity services that we are still able to capture within the network.

So, really, as we are looking at and evaluating our portfolio, we have been divesting many more of the hospitals that kind of stand on their own where we do not have a network of care built up around it and focusing our efforts on those networks.

A.J. Rice: Okay. And then maybe for the follow-up, I know you swung free cash flow positive. Congratulations. It has been a while for that. So that is a good thing. I wonder when you look at that, does that change your view on capital spending? And we certainly are hearing a lot about AI and how hospitals could benefit from AI. What are you doing there, and will that be a focus of spending?

Jason Johnson: Sure. Happy to address those. And thank you for recognizing that. It has been something we have been working towards and knowing we needed to get there, and we are glad to say that we kind of turned free cash flow positive this year as a result of a number of initiatives, including the divestiture program, which has helped us reduce some of our cash interest and has gotten rid of some of our cash flow headwinds. As we move forward, and as you saw in the guidance, our capital spending levels really are not changing from an absolute dollar amount from what we have spent these past couple years, even though we have

A.J. Rice: a smaller footprint of hospitals,

Jason Johnson: so we are spending more per hospital going forward, and I think we are able to do that now that we are improving our cash flow.

A.J. Rice: Those improvements allow us to

Jason Johnson: invest in some additional growth opportunities. And then, as you mentioned, as we look at AI, there are a number of use cases that we are already investing in for AI that we are already using, and some additional ones on the horizon. Many of those focus in some administrative areas that should drive some cost savings. Even in our revenue cycle, whether it is in the appeals process, some autonomous coding, in our prior authorization process. We have also implemented an AI-augmented tool for virtual patient sitters that has helped prevent falls and serious safety events. That is a little more on the clinical side.

We are in the process of rolling out ambient listening and some AI virtual assistants to improve documentation accuracy. And then we have some even more on the clinical side, with some AI-enabled maternal-fetal early warning systems that improve obstetric outcomes. So we are looking at it across the portfolio. And then, as we have talked a lot over the last couple years about our ERP, the Oracle tools from an administrative standpoint and process transactions are having more and more AI built into the software that will be available to us as we continue to mature our processes with our ERP.

A.J. Rice: Alright. Thanks so much.

Operator: Thank you. And our next question today comes from Ben Hendrix at RBC. Please go ahead.

Jason Johnson: Great. Thank you very much. I wanted to step back to the guidance bridge a little bit and kind of back it up to those elements to revenue, just so we can get an idea of the pass-through provider tax on that one-time Tennessee DPP item and then also profitability of the divestitures. If we could just get the bridge for revenue. Thanks. Sure, Ben. Thank you for the question. So I will kind of walk starting with the divestitures. For 2025, the partial-year impact, again that is ShorePoint that was divested on March 1, Lake Norman on April 1, and Cedar Park on June 30, that is about $210,000,000 to $230,000,000 of net revenue to take out of 2025.

And then for those divestitures that have been announced and have been completed or expected to be completed in early 2026, that is about a $1,000,000,000 reduction to net revenue. Keep in mind the three Pennsylvania hospitals that we divested on February 1 generated a lot of net revenue, about $500,000,000 annually, but they were basically breakeven to EBITDA. And then the two one-time items, the Tennessee SDP, the retroactive fees there, and the opioid settlement, that was about $60,000,000 net revenue. So if you kind of factor in all those items, then the jump-off point for 2025 net revenue was about $11,200,000,000.

Operator: Great. That is

Jason Johnson: very helpful. And then just in terms of the core growth that you are projecting,

Jason Paul Cassorla: if we think about the kind of consumer confidence issue that Kevin raised on his prepared remarks, how are we thinking about the impact there of that kind of early-year mix shift and how it could impact the pacing through the year? Thanks.

Kevin Hammons: Hey, Ben. This is Kevin. Yeah. So coming out of 2025, we saw a dip in consumer confidence in December, down to the level that the last time we saw that, I think, was in March of 2025. And following that, we had kind of a pretty soft quarter in terms of volume. So starting off the year, I think you are going to see a little bit of

A.J. Rice: of headwind

Kevin Hammons: not only with the reset of copays and deductibles, but consumer confidence being light. We do think that is temporary. We think that will improve throughout the year. As I think about cadence throughout the year, although we do not give quarterly guidance, I would expect the back half of the year to be a little stronger than the first half of the year in terms of EBITDA production.

Jason Paul Cassorla: Great. Thank you very much.

Operator: Thank you. And our next question today comes from Jason Paul Cassorla with Guggenheim. Please go ahead.

Jason Paul Cassorla: Great. Thanks. Good morning. Maybe just going back,

Stephen C. Baxter: you noted the exchange headwind on EBITDA to be $20,000,000 to $30,000,000. I guess if you were just to back that out, you are suggesting close to, call it, like, 6% same-facility EBITDA growth for remaining business. Can you walk us through that growth rate? Is that more payer flow-through? Is that favorable Medicare rates? Just any thoughts there when you kind of back out the exchange in the remaining business would be helpful.

Jason Johnson: Sure. Thanks, Jason. The kind of the pure rate increase assumption there is about 2.5% to 3.5% of the growth, and the remainder is the mix of payer mix, acuity, and volume to get to that as low as that 5.3% increase. Yeah. I might just add, if I can jump in with some color too. If you think about Medicare rates this year, we are looking on the inpatient side at about a 4% Medicare rate increase for 2026. That is the highest increase we have seen in Medicare in as long as I can remember. That is going to be helpful. This will help drive.

We did see some pretty good rate increase in the fourth quarter; that Medicare inpatient rate went into effect October 1. So we do think that will pull through, as well as some of the capital and growth investments that we have made throughout this past year. Will also be helpful in driving some higher-acuity services and some payer mix improvement.

Jason Paul Cassorla: Great. Thanks.

Stephen C. Baxter: Very helpful. Maybe just a follow-up on the divestiture front. I mean, your hospital footprint is down about a third since 2019. I guess as you evaluate the future deals or opportunities, how are you factoring any potential headwinds that may come from fixed cost leverage leakage as your facility base gets smaller? Just curious how you are thinking about that and how you are factoring that as you look to perhaps sell more assets. Thanks. Yeah. We keep a close eye on our overhead costs here, and I think our overhead costs—we have been very efficient with those costs. Many of our centralized services are volume-related.

Jason Johnson: Like revenue cycle, like our new shared business center where we have moved accounting, finance, HR, now that we have put in a new ERP. All of those things can be flexed because they are very transactional-related. So as we divest facilities and reduce the number of transactions we are processing, we can scale those accordingly. Also, keep in mind, we have been adding significant numbers of beds to our existing hospitals even though we have been divesting some hospitals with our

Stephen C. Baxter: capital projects over the last several years. I think over the last

Jason Johnson: maybe three to four years, we have added 500 to 600 beds to our

Stephen C. Baxter: core portfolio.

Jason Johnson: We are adding freestanding EDs, surgery centers, clinics, and we would continue to be looking at opportunities to do that. You go back in 2019, our net revenues, I think, were approximately $13,000,000,000 and, to your point, we have sold about 35% of our portfolio, but our net revenues this past year were $12,500,000,000. And EBITDA is also relatively close, even though we have 35% fewer facilities. That is kind of how we are looking at it.

Stephen C. Baxter: Great. Thank you so much.

Operator: Thank you. And our next question today comes from Joshua Richard Raskin at Nephron Research. Please go ahead.

Jason Johnson: Hi. Thanks. I just wanted to go back to that technology agenda that you are talking about. And maybe if you could give a little more details around some of the system changes, ERP, and how that has gone and where you are targeting more additional

Stephen C. Baxter: efficiencies and savings in light of some of the divestitures. And then I am curious, any new efforts around revenue optimization or anything else on the revenue side?

Jason Johnson: Thanks, Josh. You know, the ERP

Stephen C. Baxter: implementation and transformation, I would say, went extremely well.

Jason Johnson: It was a multiyear process and one that was a big heavy lift for us as an organization. But we did complete that on time, and we fully went live across the entire portfolio effectively 01/01/2025. So we have been up now for a full year on the new systems. They are working as designed. We did not have any issues in terms of closing our books or any expense issues that were of the surprise or that came through that got identified. As oftentimes is the case when you go through a big system conversion like that, you find things, and we did not find any big surprises.

We are still in the process of what I would call maturing the new system. We have had some big successes. By our tracking, it has saved us approximately $50,000,000 this past year, and I think there is runway over the next couple years for us to continue to increase the savings that we are getting out of that. Now those savings have come from a couple different areas. One, it has been reducing the number of

Stephen C. Baxter: other systems.

Jason Johnson: So we have replaced multiple systems, multiple financial platforms, with a single platform. And as we get rid of some of those duplicative systems, we are saving money. We are getting better decision support. We have better insights now that we have a single integrated system and standardized data across the entire enterprise. So we are able to see more.

For instance, in the supply chain area, we have a single item master across the entire enterprise, and, you know, pick an item that you purchase, we have almost instantaneous visibility into how many of those items are purchased across the entire system, as opposed to trying to cobble together multiple systems to see what we purchased as a single item. So that all provides better decision support, allows us to leverage our scale better, and as that whole process matures, we believe we will be able to extract more savings going forward.

Then with the AI components that are baked into the new platform and that are being rolled out, a lot of this AI was not in Oracle when we initially acquired and began implementing it. But as Oracle is building out their product, and now that we are in a

A.J. Rice: kind of a cloud environment,

Jason Johnson: we get updates every quarter with new functionality. They are rolling out new functionality that we can then take advantage of going forward that will allow us to be able to

Operator: to

Jason Johnson: gain significant efficiencies that I would expect in 2026 and forward we will be able to take advantage of.

Stephen C. Baxter: Perfect. And anything new on the revenue side? From a tech perspective?

Jason Paul Cassorla: Yes. On the revenue side, we are

Andrew Mok: continuing to, and as I mentioned, we are already using

Jason Johnson: some AI in our appeals process and some autonomous coding. We are looking at additional use cases to further expand some of those products, and some of the software that we are using in our revenue cycle is also—those vendors are building out some AI technology or components within their products that we will be able to take advantage of. This should help us with charge capture and as well as some prior authorization.

Andrew Mok: Thank you.

Operator: Thank you. And our next question today comes from Andrew Mok with Barclays. Please go ahead.

Jason Johnson: Hi, good morning. Wanted to follow up on the ACA headwind. The $20,000,000 to $30,000,000 EBITDA call-out strikes me as a bit low on a potential $100,000,000 to $120,000,000 impact to revenue. So can you help us understand the offsetting factors there and whether that headwind figure is net of any planned cost reductions? Thanks. Yeah. Sure. So the, I mean, first, the deductibles and copays that those patients have are generally—we collect many of those. And so the $20,000,000 to $30,000,000 was, we started by applying what are their normal 12% EBITDA margin, and then in that there are some fixed costs that remain.

We took that up to more than $20,000,000 to $30,000,000 range, because, obviously, you do not incur the cost if those patients do not present in supplies, salaries, etcetera. Yeah. I would just add on to that, and I think Jason brought up a very good point, that our experience has been that a number—the utilization of healthcare exchange patients is in the ED. And oftentimes, those individuals do not pay their copays and deductibles. Our collection of copays and deductibles is very low on that group of patients. So factoring that in, we do not believe that there is this

Stephen C. Baxter: big a

Jason Johnson: headwind for that business being lumpy.

Andrew Mok: Got it. Okay.

Jason Johnson: If I could follow up on the cash flow. The operating cash flow guidance seems to embed a meaningfully positive contribution from working capital, despite the negative call-out on the extra payroll cycle. Can you help us understand what is driving that favorable contribution? Thanks. Sure. There is probably five to seven different items that we have identified, categories, to step over that additional pay period. One is improving our AR collections, and the goal to reduce by a day. AP remains a focus. We did have in 2025 some payments of AP from our conversions from old systems that built up and were paid earlier in the year that we should not have to step over in 2026.

And then also just focusing generally on AP management. Inventory turnover is a focus of ours. Again, this is kind of that next step of being on a single ERP and maturing our processes. We have got expected a lower amount of payments in medical

Joshua Richard Raskin: malpractice,

Jason Johnson: and there is continued collections on the divested AR that we do not sell to the buyers. So while we will not have that income coming in, we will continue to collect on the AR. The cash will still come in. And then there is always the state-directed payment program timing as to when the payments come in versus the recognition of the revenue.

Joshua Richard Raskin: Great. Thank you.

Operator: Thank you. And our next question today comes from Stephen Baxter at Wells Fargo. Please go ahead.

Joshua Richard Raskin: Yeah. Hi. Thanks. Not to

Stephen Baxter: belabor the exchange points too much, I guess I am just trying to understand a little bit better. On one hand, I think everyone kind of understands that this exchange population does feel like there is a great deal of ER utilization happening. I guess I am just wondering, when you think about sort of the decremental margins here, just philosophically, it seems like in a lot of these situations, you might actually keep the cost—people continue to use the ER—but just do not actually have the revenue anymore associated with that. So just trying to understand, I guess, why you would not see a much potentially higher decremental revenue drop-through on that.

And then maybe just to help kind of square it, what percentage of the exchange enrollment loss do you assume goes to other coverage sources? Thank you.

Jason Johnson: So, Kim, sorry. I did not catch the last part of that. Just— Yes. I think the last part was what percentage do you expect to

Andrew Mok: do we expect? Like, if you expect the exchange market to shrink 20%,

Stephen Baxter: like, of that shrink, how much of that do you think ends up in another source of coverage? Therefore, like, what percentage of this starting—yeah—$100,000,000 to $120,000,000 just kind of is not an issue to deal with at all. And then of what is left, that is kind of where the question on the avoided cost and the decremental margin comes in. Thank you.

Jason Johnson: It is frankly a little too early to really accurately predict what is ultimately going to happen with these folks that will just be able to pay their own premiums or to downgrade, with all the things that we talked about earlier, or will still just go to self-pay and not be able to get coverage. So we did not attempt to

Andrew Mok: to

Jason Johnson: determine exactly how much is going to come back in, because it kind of came back to, ultimately, it is less than 5% of our net revenues, and when we were kind of sizing it, we took an approach of starting there and then using the—to start at 20% and trying to apply what kind of margin that could end up slowing down to. Yeah. We think we are generating relatively low margin on that business to begin with. And to your point, some of those folks that lose

Stephen C. Baxter: or drop out of the exchange will actually come back with commercial coverage.

Jason Johnson: That will get a better margin

Andrew Mok: on. If they are commercially covered,

Jason Johnson: some of them may move into Medicaid. Some of them may move into uninsured status. We took a blended rate of 20%. But as we think about, given the fact that a lot of the copays are not collected, our current margin on that business is pretty low.

A.J. Rice: So that is where we came up with

Stephen C. Baxter: a twenty to thirty

Jason Johnson: percent EBITDA hit on that revenue.

Stephen Baxter: And then just to follow up, I think you might have said this, but just to clarify, the same-store volume growth assumption that is embedded in this guidance. And then as we think about the step from the same-store volume growth this year to what you are looking for in 2026, what payer category should we think about as driving that step-up? Thank you.

Jason Johnson: We think same-store volume growth would be low single-digit expectation for 2026.

Stephen C. Baxter: And what was the second part of that question, Steven? Sorry.

Stephen Baxter: Yeah. Just to the extent you were looking for improvement, what payer classes you might call out as expecting a better volume performance than what you actually realized in 2025?

Andrew Mok: Certainly commercial.

Stephen C. Baxter: You know, I think we saw some improvement in commercial mix this year. And as we think about

Kevin Hammons: where we are making some of our capital investments and service line investments, we would anticipate capturing both some additional Medicare, but also commercial business continuing to ramp up.

Operator: Thank you. That concludes our question and answer session. I would like to turn the conference back over to Mr. Hammons for any closing remarks.

Stephen C. Baxter: Rocco, thank you, and thank you, everyone,

Kevin Hammons: for joining the call today. I want to close by reiterating my thanks for our team members for their commitment to our shared vision for CHS and their combined efforts in putting our values into action. If you have additional questions, you can always reach us at (615) 465-7000. Have a good day, everyone.

Operator: Thank you, sir. And that concludes today's conference call.

Andrew Mok: We thank you all for attending today's presentation.

Operator: You may now disconnect your lines and have a wonderful day.

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