Community Health Systems Q4 Earnings Call Highlights

Community Health Systems (NYSE:CYH) executives said the hospital operator’s fourth-quarter results came in line with updated expectations, citing sequential margin expansion, a modest improvement in payer mix, and continued cost controls. On the company’s fourth-quarter and full-year 2025 earnings call, newly appointed Chief Executive Officer Kevin Hammons and Chief Financial Officer Jason Johnson also outlined a portfolio strategy that is moving toward the “end” of programmatic divestitures while emphasizing targeted investments in core markets and further debt reduction.

Fourth-quarter performance and volume trends

Johnson said adjusted EBITDA in the fourth quarter totaled $395 million, representing a 12.7% margin, and that results were “generally consistent with expectation.” The company achieved the midpoint of its updated full-year 2025 guidance, he said, aided by sequential margin improvement.

Same-store net revenue increased 2.1% year-over-year in the quarter, driven primarily by rate growth and slightly higher acuity. Net revenue per adjusted admission rose 2.4% on a same-store basis. At the same time, volumes were mixed:

• Same-store inpatient admissions and adjusted admissions each declined 0.3%.
• Same-store surgeries fell 1.9%.
• Same-store emergency department (ED) visits declined 3.6%.

When excluding Pennsylvania operations that were divested on Feb. 1, 2026, management said same-store admissions and adjusted admissions were flat year over year and surgeries were down 0.4%.

Cost controls, labor, and specialist fee pressure

Management highlighted ongoing cost discipline. Johnson said labor was “well managed,” with average hourly wage growth within the company’s expected range for both the quarter and full year, and contract labor spending essentially flat on both a sequential and year-over-year basis.

Supply expense declined 110 basis points year over year to 14.4% of net revenue in the fourth quarter and was down 50 basis points for the full year 2025, according to Johnson.

Medical specialist fees were $169 million in the quarter, up 4.6% year over year on a same-store basis, and remained 5.4% of net revenue. Johnson said the company expects continued upward pressure in 2026—“likely in the range of 5%–8% growth”—driven by radiology and anesthesia. He added that CHS has seen operational improvements in areas such as throughput and safety metrics in physician practices it has insourced, and that the company will continue evaluating insourcing opportunities to address specialist fee inflation.

Capital allocation: divestitures, debt reduction, and leverage

Hammons said CHS made several divestitures in 2025 that enabled the company to reinvest proceeds into its core portfolio or reduce debt. He also said leverage declined to 6.6x at year-end 2025 from 7.4x at year-end 2024, describing the change as making “materially more value” available to stockholders.

Johnson provided additional details on cash flow and financing actions. Cash flow from operations was $266 million in the fourth quarter and $543 million for the full year, compared with $480 million in 2024. He noted full-year 2025 operating cash flow included $159 million of tax outflows related to gains on hospital sales; excluding those cash taxes, he said adjusted operating cash flow was $712 million and adjusted free cash flow was $150 million.

During the fourth quarter, CHS received $91 million in contingent cash consideration tied to the 2024 divestiture of Tennova Cleveland and approximately $152 million in net proceeds from the sale of outreach lab assets. The company used proceeds to redeem $223 million of its 10 7/8% senior secured notes due 2032 at 103 through a special call provision and redeemed the remaining $14 million principal of 2027 notes in mid-December.

After year-end, CHS completed the divestiture of its 80% ownership in Tennova Healthcare-Clarksville for $623 million in gross proceeds and sold three Pennsylvania hospitals for $33 million in cash plus a $15 million promissory note and additional contingent consideration. CHS used a portion of the proceeds to redeem another $223 million of the 2032 notes at 103 on Feb. 2.

Johnson said the previously announced divestiture of Huntsville, Alabama, assets is expected to close in the second quarter and is projected to generate $450 million in gross proceeds. He added that once the Huntsville transaction closes, CHS expects net debt to be approximately $9.2 billion, down from $10.1 billion at year-end 2025 and $11.4 billion at year-end 2024.

2026 guidance: divestiture impact, exchange uncertainty, and pay-period headwind

For 2026, CHS guided to:

• Net revenue of $11.6 billion to $12.0 billion
• Adjusted EBITDA of $1.34 billion to $1.49 billion
• Cash flow from operations of $600 million to $700 million
• Capital expenditures of $350 million to $400 million

Johnson said the 2026 revenue and EBITDA ranges are below full-year 2025 levels largely due to divestitures completed in 2025 and those completed or expected in early 2026, along with the exclusion of certain one-time or out-of-period benefits present in 2025.

In discussing the EBITDA bridge, Johnson said the partial-year 2025 divestiture impact for Cedar Park, Lake Norman, and ShorePoint reduced 2025 EBITDA by about $30 million to $40 million on an “as-reported” basis. Divestitures completed or expected in early 2026—Clarksville, Pennsylvania, and Huntsville—represented about an $80 million to $90 million reduction to the baseline. He also cited approximately $45 million of EBITDA in 2025 tied to the retroactive Tennessee state-directed payment (SDP) item and an opioid settlement benefit. After adjusting for those items, he said the “starting point” for 2025 EBITDA was about $1.36 billion.

Management also discussed uncertainty around health insurance exchanges (HIX). Johnson said exchanges represent less than 5% of CHS adjusted admissions and net revenue, and that the company’s guidance assumes a $20 million to $30 million EBITDA impact tied to reduced enrollment. He said outcomes could depend on factors including plan effectuation rates, shifts into employer coverage, movement to lower-tier plans or self-pay, and the company’s eligibility screening services. He also stated that a 20% reduction in CHS volumes tied to exchanges would equate to a $100 million to $120 million net revenue reduction, translating to a $20 million to $30 million EBITDA reduction.

On cash flow, Johnson highlighted a calendar-related headwind: CHS will have 27 pay periods in 2026 due to a biweekly pay schedule, which he said will not affect adjusted EBITDA but will be an approximately $140 million headwind to operating cash flow and is reflected in guidance.

Strategy and operational initiatives, including AI and ERP savings

Hammons said his vision is to “make the healthcare experience exceptional” and outlined five priorities: improving quality, physician experience, patient experience, employee satisfaction, and growing cash flows to fund investment and growth opportunities.

In Q&A, management said the company is nearing the end of its “programmatic divestitures,” with some inbound interest and early-stage discussions ongoing, but with “interest in selling” diminishing. Hammons said future divestitures would be approached opportunistically—either if conditions change or if pricing supports material deleveraging.

Executives also discussed technology initiatives. Management said its Oracle enterprise resource planning (ERP) transformation went live across the portfolio on Jan. 1, 2025, and that the first year of operation produced approximately $50 million of savings, with additional runway in coming years as the system matures. They also described AI use cases, including administrative applications in revenue cycle activities such as appeals processes and coding, as well as clinical tools like virtual patient sitters to help prevent falls, ambient listening to improve documentation, and AI-enabled maternal-fetal early warning systems.

Looking to 2026, Hammons said consumer confidence dipped in December and that the company experienced a “pretty soft” quarter in volume following the decline. He added that management expects the back half of 2026 to be stronger than the first half in terms of EBITDA production, citing early-year headwinds such as the reset of copays and deductibles.

About Community Health Systems (NYSE:CYH)

Community Health Systems, Inc (NYSE: CYH) is one of the largest publicly traded hospital operators in the United States. Headquartered in Franklin, Tennessee, the company owns, leases and manages general acute care hospitals and outpatient facilities, primarily in non-urban and mid-market communities. CHS is focused on delivering locally accessible healthcare services through its network of affiliated hospitals, clinics and post-acute providers.

The company’s core offerings include inpatient medical and surgical care, emergency services, critical care, diagnostic imaging and laboratory testing.