COMMUNITY HEALTH SYSTEMS INC

Previous wording

Throughout this Form 10-Q, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified manner and on a collective basis, using words like “we,” “our,” “us” and the “Company.” This drafting style is suggested by the Securities and Exchange Commission, or SEC, and is not meant to indicate that the publicly-traded Parent Company or any particular subsidiary of the Parent Company owns or operates any asset, business or property. The hospitals, operations and businesses described in this filing are owned and operated by distinct and indirect subsidiaries of Community Health Systems, Inc.

Current wording

Throughout this Quarterly Report on Form 10-Q, or Form 10-Q, we refer to Community Health Systems, Inc., or the Parent Company, and its consolidated subsidiaries in a simplified manner and on a collective basis, using words like “we,” “our,” “us” and the “Company.” This drafting style is suggested by the Securities and Exchange Commission, or SEC, and is not meant to indicate that the publicly-traded Parent Company or any particular subsidiary of the Parent Company owns or operates any asset, business or property. The hospitals, operations and businesses described in this filing are owned and operated by distinct and indirect subsidiaries of Community Health Systems, Inc.

Previous wording

We are one of the nation’s largest healthcare companies. Our affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 39 distinct markets across 15 states. As of September 30, 2024, our subsidiaries own or lease 70 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. We generate revenues by providing a broad range of general and specialized hospital healthcare services and outpatient services to patients in the communities in which we are located. For the hospitals and other sites of care that we own and operate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve.

Current wording

We are one of the nation’s largest healthcare companies. Our affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 37 distinct markets across 15 states. As of March 31, 2025, our subsidiaries own or lease 73 affiliated hospitals, with more than 10,000 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. We generate revenues by providing a broad range of general and specialized hospital healthcare services and outpatient services to patients in the communities in which we are located. For the hospitals and other sites of care that we own and operate, we are paid for our services by governmental agencies, private insurers and directly by the patients we serve.

Previous wording

During the nine months ended September 30, 2024, we paid approximately $1 million to acquire the operating assets and related businesses of certain physician practices and clinics that operate within the communities served by our hospitals. The purchase price for these transactions was primarily allocated to working capital and property and equipment.

Current wording

During the three months ended March 31, 2025, we paid less than $1 million to acquire the operating assets and related businesses of certain physician practices and clinics that operate within the communities served by our hospitals. The purchase price for these transactions was primarily allocated to working capital and property and equipment.

Previous wording

During the nine months ended September 30, 2024, as reflected in the table below, we completed the divestiture of one hospital in Tennessee. This hospital represented annual net operating revenues in 2023 of approximately $188 million and we received total net proceeds of approximately $161 million in connection with this disposition.

Current wording

During the three months ended March 31, 2025, as reflected in the table below, we completed the divestiture of two hospitals in Florida and sold our 50% ownership interest in a hospital in Mississippi. These hospitals represented annual net operating revenues in 2024 of approximately $359 million and we received total net proceeds of approximately $276 million in connection with these dispositions.

Previous wording

The following table provides a summary of hospitals that we divested (or, in the case of Lutheran Rehabilitation Hospital, in which we sold a majority interest) during the nine months ended September 30, 2024 and the year ended December 31, 2023.

Current wording

The following table provides a summary of hospitals that we divested (or, in the case of Merit Health Biloxi, in which we sold our 50% ownership interest) during the three months ended March 31, 2025 and the year ended December 31, 2024.

Previous wording

There can be no assurance that this potential disposition will be completed, or if this potential disposition is completed, the ultimate timing of the completion of this potential disposition.

Current wording

In addition to hospitals divested as reflected above, we have entered into definitive agreements to sell our ownership interest in one hospital in Mississippi and our ownership interest in one hospital in Texas as further described below, where the divestitures have not yet been completed. On January 29, 2025, we entered into a definitive agreement for the sale of our 50% interest in Merit Health Madison (67 licensed beds) in Canton, Mississippi, to an affiliate of the University of Mississippi Medical Center, which currently has a 50% ownership interest in Merit Health Madison. On April 15, 2025, we entered into a definitive agreement to sell our collective 80% ownership interest in Cedar Park Regional Medical Center (126 licensed beds) and certain ancillary businesses located in Cedar Park, Texas, to subsidiaries of Ascension Health. Ascension Health currently holds a 20% ownership interest in Cedar Park Regional Medical Center and would purchase the remaining ownership interest through this transaction. The total purchase price payable to us at the closing of this transaction is $460 million, subject to certain purchase price adjustments. For additional information regarding this definitive agreement, see the Current Report on Form 8-K filed by us on April 15, 2025. There can be no assurance that these potential dispositions will be completed, or if these potential dispositions are completed, the ultimate timing of the completion of these potential dispositions.

Previous wording

Net operating revenues increased from $3.086 billion for the three months ended September 30, 2023 to $3.090 billion for the three months ended September 30, 2024. On a same-store basis, net operating revenues for the three months ended September 30, 2024 increased $150 million compared to the same period in 2023.

Current wording

Net operating revenues increased from $3.140 billion for the three months ended March 31, 2024 to $3.159 billion for the three months ended March 31, 2025. On a same-store basis, net operating revenues for the three months ended March 31, 2025 increased $94 million compared to the same period in 2024.

Previous wording

We had net loss of $(355) million during the three months ended September 30, 2024, compared to $(52) million for the same period in 2023. Net loss for the three months ended September 30, 2024 included the following:

Current wording

We had net income of $25 million during the three months ended March 31, 2025, compared to net loss of $(6) million for the same period in 2024. Net income for the three months ended March 31, 2025 included the following:

Previous wording

an after-tax charge of $223 million resulting from the impairment of certain long-lived assets that were idled, disposed of or held-for-sale as well as divestiture related costs, partially offset by the gain related to the sale of a hospital, and

Current wording

an after-tax charge of $2 million resulting from a gain related to the sale of two hospitals, partially offset by a loss on the sale of our 50% ownership interest in one hospital and the impairment of certain long-lived assets that were idled, disposed of or held-for-sale as well as divestiture related costs.

Previous wording

an after-tax charge of $10 million for expense related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes,

Current wording

an after-tax charge of $10 million for expense related to costs associated with our multi-year initiative to modernize and consolidate technology platforms and associated processes, and

Previous wording

an after-tax charge of $24 million for the gain related to the sale of a hospital and the impairment of long-lived assets that were idled, disposed of or held-for-sale, and

Current wording

an after-tax charge of $13 million resulting from impairment of long-lived assets that were idled, disposed of or held-for-sale.

Previous wording

Consolidated inpatient admissions for the three months ended September 30, 2024, decreased 4.1%, compared to the same period in 2023. Consolidated adjusted admissions for the three months ended September 30, 2024, decreased 3.7%, compared to the same period in 2023. Same-store inpatient admissions for the three months ended September 30, 2024, increased 2.4%, compared to the same period in 2023, and same-store adjusted admissions for the three months ended September 30, 2024, increased 2.6%, compared to the same period in 2023.

Current wording

Consolidated inpatient admissions for the three months ended March 31, 2025, decreased 1.0%, compared to the same period in 2024. Consolidated adjusted admissions for the three months ended March 31, 2025, decreased 2.3%, compared to the same period in 2024. Same-store inpatient admissions for the three months ended March 31, 2025, increased 4.0%, compared to the same period in 2024, and same-store adjusted admissions for the three months ended March 31, 2025, increased 2.6%, compared to the same period in 2024.

Previous wording

Self-pay revenues represented approximately 1.1% and 1.5% of net operating revenues for the three months ended September 30, 2024 and 2023, respectively, and 1.4% and 1.0% for the nine months ended September 30, 2024 and 2023, respectively. The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 9.8% and 11.5% for the three months ended September 30, 2024 and 2023, respectively, and 9.7% and 10.8% for the nine months ended September 30, 2024 and 2023, respectively. Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.0% and 1.3% for the three months ended September 30, 2024 and 2023, respectively, and 1.0% and 1.2% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Self-pay revenues represented approximately 0.6% and 1.4% for the three months ended March 31, 2025 and 2024, respectively. The amount of foregone revenue related to providing charity care services as a percentage of net operating revenues was approximately 9.7% and 10.1% for the three months ended March 31, 2025 and 2024, respectively. Direct and indirect costs incurred in providing charity care services as a percentage of net operating revenues was approximately 1.1% and 1.0% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The healthcare industry is subject to changing political, regulatory, and economic influences that may affect our business. In recent years, the U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation affecting the healthcare system, including laws intended to impact access to health insurance and reduce healthcare costs and government spending. The most prominent of these efforts, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed, and expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms. The Affordable Care Act has been, and continues to be, subject to legislative and regulatory changes and court challenges. To increase access to health insurance during the COVID-19 pandemic, the American Rescue Plan Act of 2021, or the ARPA, temporarily enhanced subsidies for individuals eligible to purchase coverage through Affordable Care Act marketplaces. Subsequent legislation extended these enhanced subsidies, but absent further congressional action, the enhanced subsidies will expire at the end of 2025. In addition, COVID-related legislation enacted during the early stages of the pandemic required states to maintain continuous Medicaid enrollment, among other conditions, in order to receive a temporary increase in federal funds for Medicaid expenditures. The expiration of this “continuous coverage” requirement in April 2023 has resulted in significant Medicaid coverage disruptions and disenrollments. Although it was originally anticipated that states would complete unwinding-related Medicaid renewals by June 2024, the Centers for Medicare & Medicaid Services, or CMS, required certain states to pause procedural disenrollments due to noncompliant renewal systems, and CMS has approved state implementation of other flexibilities and mitigation strategies that extended timelines for completion. These and other changes and initiatives may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if obtained.

Current wording

In recent years, the U.S. Congress and certain state legislatures have introduced and passed a large number of proposals and legislation affecting the healthcare system, including laws intended to increase access to health insurance and reduce healthcare costs and government spending. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed, and expanded health insurance coverage through a combination of public program expansion and private sector health insurance reforms. However, changes in the law’s implementation, subsequent legislation and regulations, state initiatives and other factors have affected or may affect the number of individuals that elect or are able to obtain public or private health insurance and the scope of such coverage, if obtained. For example, COVID-19 relief legislation temporarily enhanced subsidies available for individuals to purchase coverage through Affordable Care Act marketplaces. Subsequent legislation extended these enhanced subsidies through 2025, but further extension is uncertain, and expiration of the enhanced subsidies may significantly increase the uninsured rate. Other legislative and executive branch initiatives related to health insurance could also result in increased prices for consumers purchasing health insurance coverage or may permit the sale of insurance plans that do not satisfy current Affordable Care Act consumer protections, which could increase rates of uninsured and underinsured individuals and destabilize insurance markets.

Previous wording

Of critical importance to us is the potential impact of any changes specific to the Medicaid program, including the funding and expansion provisions of the Affordable Care Act and subsequent legislation or agency initiatives. Historically, the states with the greatest reductions in the number of uninsured adult residents have been those that have expanded Medicaid under the Affordable Care Act. A number of states have opted out of the Medicaid coverage expansion provisions, but could ultimately decide to expand their programs at a later date. Of the 15 states in which we operated hospitals as of September 30, 2024, nine states have taken action to expand their Medicaid programs. The other six states have not, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of September 30, 2024. Some states use, or have applied to use, waivers granted by CMS to implement expansion, impose different eligibility or enrollment conditions, or otherwise implement programs that vary from federal standards.

Current wording

Of critical importance to us is the potential impact of any changes specific to the Medicaid program, including changes resulting from legislative and administrative actions at the federal and state levels. Federal actions may impact funding for, or the structure of, the Medicaid program and may shape provider reimbursement rates, eligibility and coverage policies and other aspects of the state Medicaid programs in a manner that could materially and adversely affect us. Currently, the federal government pays a percentage match for state Medicaid expenditures that varies by state and other factors, with no pre-set limit on federal spending. However, some members of Congress and the presidential administration have raised, and Congress may in the future adopt, proposals intended to reduce Medicaid expenditures such as restructuring the Medicaid program to give states a “block grant” or fixed amount of overall funding for their respective Medicaid programs or to impose spending caps such as per Medicaid beneficiary limits on federal contributions. Reductions in federal funding or changes to the federal funding formula for Medicaid could have a particularly significant impact in states that expanded Medicaid under the Affordable Care Act, especially if federal contributions for Medicaid expansion populations decrease and states are unable to offset the reductions. Further, some states have trigger laws that would end their Medicaid expansion or require other changes if federal funding is reduced. Of the 15 states in which we operated hospitals as of March 31, 2025, nine states have taken action to expand their Medicaid programs. At this time, the other six states have opted out of Medicaid expansion, including Florida, Alabama, Tennessee, Mississippi and Texas, where we operated a significant number of hospitals as of March 31, 2025. In addition to changes related to federal funding, Centers for Medicare & Medicaid Services, or CMS, administrators may make changes to Medicaid payment models and may grant states additional flexibilities in the administration of Medicaid programs, including by allowing additional states to condition Medicaid enrollment on work or other community engagement or to impose other eligibility or coverage restrictions.

Previous wording

Other recent reform initiatives and proposals at the federal and state levels include those focused on price transparency and limiting out-of-network charges, which may impact prices, our competitive position and the relationships between hospitals, insurers, patients, and ancillary providers (such as anesthesiologists, radiologists, and pathologists). For example, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise” medical bills. Among other restrictions and requirements, the law prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions. For services for which balance billing is prohibited (even when no balance billing occurs), the No Surprises Act may limit the amounts received by out-of-network providers from health plans, and also establishes a dispute resolution process for providers and payors to handle payment disputes that cannot be resolved through direct negotiations. The regulations and related guidance implementing the No Surprises Act have been and continue to be subject to legal challenges. The No Surprises Act also requires providers to provide a good faith estimate of expected charges to uninsured or self-pay patients for scheduled items and services, in advance of the date of the scheduled item or service or upon request. Based on these estimates, patients may invoke a patient-provider dispute resolution process established by the regulations to challenge charges in certain circumstances.

Current wording

There is a trend across the healthcare industry toward value-based purchasing. CMS adjusts Medicare reimbursement for hospitals and other providers based on quality measures and administers various accountable care organizations and alternative payment model demonstration projects. Other recent reform initiatives and proposals at the federal and state levels include those focused on price transparency, and limiting out-of-network billing. For example, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise” medical bills.

Previous wording

The federal deficit and other federal and state budgetary pressures have affected government healthcare program expenditures, and we anticipate these effects will continue. For example, the payment reductions required by the Budget Control Act of 2011 and subsequent legislation are currently set to continue through April 2032. Further, the ARPA increased the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You Go Act of 2010. As a result, an additional Medicare spending reduction of up to 4% was required to take effect in January 2022. However, Congress has delayed implementation of this payment reduction until 2025. It is possible that future deficit reduction legislation will impose additional spending reductions.

Current wording

The federal deficit and other federal and state budgetary pressures have affected government healthcare program expenditures, and we anticipate these effects will continue. For example, the payment reductions required by the Budget Control Act of 2011 and subsequent legislation are currently set to continue through the first ten months of federal fiscal year 2032. It is possible that future deficit reduction legislation will impose additional spending reductions.

Previous wording

Reimbursement by government programs may be affected by broad shifts in payment policy. For example, recent changes related to the 340B Drug Pricing Program have implications for all hospitals reimbursed under the outpatient prospective payment system, or PPS, including those, like ours, that do not participate in the program. In 2018, CMS implemented a payment policy that reduced Medicare payments for 340B hospitals for most drugs obtained at 340B-discounted rates and that resulted in increased payments for non-340B hospitals. In June 2022, the U.S. Supreme Court, in American Hospital Association v. Becerra, invalidated past payment cuts for hospitals participating in the 340B Drug Pricing Program. In light of the U.S. Supreme Court decision and to achieve budget neutrality, CMS implemented a reduction of approximately 3.1% to payment rates for non-drug services under the outpatient PPS for calendar year 2023. In addition, HHS directed that $9 billion be paid to affected 340B providers in one-time lump sum payments as the remedy for calendar years 2018 through 2022. Moreover, in order to comply with budget neutrality requirements, HHS finalized a corresponding offset in future non-drug item and service payments for all outpatient PPS providers (except new providers) that will reduce the outpatient PPS conversion factor by 0.5% annually. This adjustment will start in calendar year 2026 and continue for approximately 16 years. This reduction to payment rates adversely affected our results for the nine months ended September 30, 2024, and the reduction to the outpatient PPS conversion factor as noted above is anticipated to adversely impact our future results.

Current wording

Reimbursement by government programs may be affected by broad shifts in payment policy. For example, recent changes related to the 340B Drug Pricing Program have implications for all hospitals reimbursed under the outpatient prospective payment system, or PPS, including those, like ours, that do not participate in the program. In 2018, CMS implemented a payment policy that reduced Medicare payments for 340B hospitals for most drugs obtained at 340B-discounted rates and that resulted in increased payments for non-340B hospitals. In June 2022, the U.S. Supreme Court, in American Hospital Association v. Becerra, invalidated past payment cuts for hospitals participating in the 340B Drug Pricing Program. In light of the U.S. Supreme Court decision and to achieve budget neutrality, CMS reduced payment rates for non-drug services under the outpatient PPS for calendar year 2023, and lump sum payments were distributed to affected 340B providers as the remedy for calendar years 2018 through 2022. Moreover, in order to comply with budget neutrality requirements, HHS finalized a corresponding offset in future non-drug item and service payments for all outpatient PPS providers (except new providers) that will reduce the outpatient PPS conversion factor by 0.5% annually. This adjustment will start in calendar year 2026 and continue for approximately 16 years. This reduction to payment rates adversely affected our results for the three months ended March 31, 2025, and the reduction to the outpatient PPS conversion factor as noted above is anticipated to adversely impact our results beginning in 2026.

Previous wording

As shown above, we receive a substantial portion of our revenues from the Medicare, Medicare Managed Care and Medicaid programs. Included in Managed Care and other third-party payors is net operating revenues from insurance companies with which we have insurance provider contracts, insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as gain (loss) on investments, rental income and cafeteria sales. We generally expect the portion of revenues received from the Medicare, Medicare Managed Care and Medicaid programs to increase over the long-term due to the general aging of the population and other factors, including health reform initiatives. There has been a trend toward increased enrollment in Medicare Managed Care and Medicaid managed care programs, which may adversely affect our net operating revenues. We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements. Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals. Our relationships with payors may be impacted by price transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act. There can be no assurance that we will retain our existing reimbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for our services.

Current wording

As shown above, we receive a substantial portion of our revenues from the Medicare, Medicare Managed Care and Medicaid programs. Included in Managed Care and other third-party payors is net operating revenues from insurance companies with which we have insurance provider contracts, insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as gain (loss) on investments, rental income and cafeteria sales. We generally expect the portion of revenues received from the Medicare, Medicare Managed Care and Medicaid programs to increase over the long-term due to the general aging of the population and other factors. There has been a trend toward increased enrollment in Medicare Managed Care and Medicaid managed care programs, which may adversely affect our net operating revenues. We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements. Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals. Our relationships with payors may be impacted by price transparency initiatives and out-of-network billing restrictions, including those in the No Surprises Act. There can be no assurance that we will retain our existing reimbursement arrangements or that third-party payors will not attempt to further reduce the rates they pay for our services.

Previous wording

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than our standard billing rates. We account for the differences between the estimated program reimbursement rates and our standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known. Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount in each of the three- and nine-month periods ended September 30, 2024 and 2023.

Current wording

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than our standard billing rates. We account for the differences between the estimated program reimbursement rates and our standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known. Contractual allowance adjustments related to final settlements and previous program reimbursement estimates impacted net operating revenues by an insignificant amount in each of the three-month periods ended March 31, 2025 and 2024.

Previous wording

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems, which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors. These rates are indexed for inflation annually, although increases have historically been less than actual inflation. CMS has published the final rule establishing payment rates for federal fiscal year 2025 (which began October 1, 2024) for hospital inpatient acute care services reimbursed under the prospective system, increasing payment rates by approximately 2.9%. This increase reflects a market basket increase of 3.4%, reduced by a 0.5 percentage point productivity adjustment. Hospitals that do not submit required patient quality data are subject to a reduction in payments. We are complying with this data submission requirement. Payments may also be affected by various other adjustments, including those that depend on patient-specific or hospital specific factors. For example, the “two midnight rule” establishes admission and medical review criteria for inpatient services limiting when services to Medicare beneficiaries are payable as inpatient hospital services. Reductions in the rate of increase or overall reductions in Medicare reimbursement may cause a decline in the growth of our net operating revenues.

Current wording

The payment rates under the Medicare program for hospital inpatient and outpatient acute care services are based on prospective payment systems, which depend upon a patient’s diagnosis or the clinical complexity of services provided to a patient, among other factors. These rates are indexed for inflation annually, although increases have historically been less than actual inflation. In its final rule establishing payment rates for federal fiscal year 2025 (which began October 1, 2024) for hospital inpatient acute care services reimbursed under the prospective system, CMS increased payment rates by approximately 2.9%. This increase reflects a market basket increase of 3.4%, reduced by a 0.5 percentage point productivity adjustment. Hospitals that do not submit required patient quality data are subject to payment reductions. We are complying with this data submission requirement. Payments may also be affected by various other adjustments, including those that depend on patient-specific or hospital specific factors. For example, the “two midnight rule” establishes admission and medical review criteria for inpatient services limiting when services to Medicare beneficiaries are payable as inpatient hospital services. Reductions in the rate of increase or overall reductions in Medicare reimbursement may cause a decline in the growth of our net operating revenues.

Previous wording

Net operating revenues increased to $3.090 billion for the three months ended September 30, 2024, compared to $3.086 billion for the same period in 2023. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $150 million, or 5.1%, during the three months ended September 30, 2024, compared to the same period in 2023. On a period-over-period basis, the increase in same-store net operating revenues was primarily attributable to higher inpatient and outpatient volumes, increased reimbursement rates, favorable changes in payor mix and higher revenues from supplemental reimbursement programs, partially offset by lower acuity and increased patient claim denials. Non-same-store net operating revenues decreased $146 million during the three months ended September 30, 2024, compared to the same period in 2023, due to the divestiture of hospitals in 2024 and 2023. On a consolidated basis, inpatient admissions decreased by 4.1% and adjusted admissions decreased by 3.7% during the three months ended September 30, 2024, compared to the same period in 2023. On a same-store basis, net operating revenues per adjusted admission increased 2.5%, while inpatient admissions increased by 2.4% and adjusted admissions increased by 2.6% for the three months ended September 30, 2024, compared to the same period in 2023.

Current wording

Net operating revenues increased to $3.159 billion for the three months ended March 31, 2025, compared to $3.140 billion for the same period in 2024. Net operating revenues on a same-store basis from hospitals that were operated throughout both periods increased $94 million, or 3.1%, during the three months ended March 31, 2025, compared to the same period in 2024. On a period-over-period basis, the increase in same-store net operating revenues was primarily attributable to higher volumes, increased reimbursement rates and supplemental reimbursement program revenue, partially offset by declines in acuity and non-patient revenue and increased patient claim denials. Non-same-store net operating revenues decreased $75 million during the three months ended March 31, 2025, compared to the same period in 2024, due to the divestiture of hospitals in 2025 and 2024. On a consolidated basis, inpatient admissions decreased by 1.0% and adjusted admissions decreased by 2.3% during the three months ended March 31, 2025, compared to the same period in 2024. On a same-store basis, net operating revenues per adjusted admission increased 0.5%, while inpatient admissions increased by 4.0% and adjusted admissions increased by 2.6% for the three months ended March 31, 2025, compared to the same period in 2024.

Previous wording

Operating expenses, as a percentage of net operating revenues, increased from 94.4% during the three months ended September 30, 2023 to 106.6% during the three months ended September 30, 2024. Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, increased from 89.5% for the three months ended September 30, 2023 to 94.2% for the three months ended September 30, 2024. Salaries and benefits, as a percentage of net operating revenues, increased from 43.4% for the three months ended September 30, 2023 to 44.0% for the three months ended September 30, 2024, primarily due to inflationary wage increases. Supplies, as a percentage of net operating revenues, decreased from 15.8% for the three months ended September 30, 2023 to 15.2% for the three months ended September 30, 2024, primarily due to changes in the mix of services and the benefit of cost savings initiatives. Other operating expenses, as a percentage of net operating revenues, increased from 27.7% for the three months ended September 30, 2023 to 32.6% for the three months ended September 30, 2024, primarily due to a change in estimate for the professional liability claims accrual and increased costs for outsourced medical specialists, partially offset by decreased costs for contract labor. Lease cost and rent, as a percentage of net operating revenues, decreased from 2.6% for the three months ended September 30, 2023 to 2.4% for the three months ended September 30, 2024.

Current wording

Operating expenses, as a percentage of net operating revenues, decreased from 92.6% during the three months ended March 31, 2024 to 91.0% during the three months ended March 31, 2025. Operating expenses, excluding depreciation and amortization and impairment and (gain) loss on sale of businesses, as a percentage of net operating revenues, increased from 88.4% for the three months ended March 31, 2024 to 88.5% for the three months ended March 31, 2025. Salaries and benefits, as a percentage of net operating revenues, decreased from 43.5% for the three months ended March 31, 2024 to 43.4% for the three months ended March 31, 2025. Supplies, as a percentage of net operating revenues, remained consistent at 15.5% for both of the three months ended March 31, 2025 and 2024. Other operating expenses, as a percentage of net operating revenues, increased from 26.9% for the three months ended March 31, 2024 to 27.4% for the three months ended March 31, 2025, primarily due to higher medical specialist fees and increased supplemental reimbursement program expense, partially offset by reduced expense for contract labor. Lease cost and rent, as a percentage of net operating revenues, decreased from 2.5% for the three months ended March 31, 2024 to 2.2% for the three months ended March 31, 2025.

Previous wording

Depreciation and amortization, as a percentage of net operating revenues, decreased to 3.8% for the nine months ended September 30, 2024 from 4.1% for the same period in 2023, primarily due to an increase in net operating revenues and a reduction in the amortization of capitalized internal-use software.

Current wording

Depreciation and amortization, as a percentage of net operating revenues, decreased from 3.7% for three months ended March 31, 2024 to 3.3% for the three months ended March 31, 2025, primarily due to an increase in net operating revenues and the impact of hospital divestitures in 2025 and 2024.

Previous wording

Impairment and (gain) loss on sale of businesses, net was an expense of $267 million for the three months ended September 30, 2024, compared to $26 million for the same period in 2023. The expense recognized during the three months ended September 30, 2024 was comprised of (i) an approximate $259 million impairment charge recorded to reduce the carrying value of four hospitals that were deemed held-for-sale based on the difference between carrying value of the hospital disposal group compared to the estimated fair value less costs to sell, and (ii) an approximate $12 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale, partially offset by of a gain of approximately $4 million related to the sale of one hospital. The expense recognized during the three months ended September 30, 2023 related primarily to divestiture activity during the respective period as discussed more specifically under “Acquisition, Divestiture and Closure Activity” herein.

Current wording

Impairment and (gain) loss on sale of businesses, net was a gain of $24 million for the three months ended March 31, 2025, compared to expense of $17 million for the same period in 2024. The net gain recognized during the three months ended March 31, 2025 was comprised of a gain of approximately $50 million related to the sale of two hospitals, partially offset by (i) an approximate $10 million impairment charge recorded to reduce the carrying value of a hospital that was deemed held-for-sale based on the difference between the carrying value of the hospital disposal group compared to the estimated fair value less costs to sell, (ii) an approximate $11 million impairment charge to adjust the carrying value of long-lived assets at a hospital that was sold at a sales price below carrying value, and (iii) an approximate $5 million impairment charge recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale. The expense recognized during the three months ended March 31, 2024 was recorded to reduce the carrying value of several assets that were idled, disposed of or held-for-sale.

Previous wording

Interest expense, net, increased by $8 million to $216 million for the three months ended September 30, 2024, compared to $208 million for the same period in 2023 due primarily to financing activities in 2023 and 2024.

Current wording

Interest expense, net, increased by $8 million to $219 million for the three months ended March 31, 2025, compared to $211 million for the same period in 2024 due primarily to financing activities in 2024.

Previous wording

The net results of the above-mentioned changes resulted in loss before income taxes increasing $386 million to $(419) million for the three months ended September 30, 2024 from $(33) million for the same period in 2023.

Current wording

The net results of the above-mentioned changes resulted in income before income taxes increasing $45 million to $67 million for the three months ended March 31, 2025, compared to $22 million for the same period in 2024.

Previous wording

Our (benefit from) provision for income taxes for the three months ended September 30, 2024 and 2023 was $(64) million and $19 million, respectively, and the effective tax rates were 15.3% and (57.6)% for the three months ended September 30, 2024 and 2023, respectively. The decrease in the (benefit from) provision for income taxes and the difference in our effective tax rate for the three months ended September 30, 2024, compared to the same period in 2023 was due to an increase in tax benefit associated with impairment and (gain) loss on sale of businesses, net for the three months ended September 30, 2024 compared to the same period in 2023.

Current wording

Our provision for income taxes for the three months ended March 31, 2025 and 2024 was $42 million and $28 million, respectively, and the effective tax rates were 62.7% and 127.3% for the three months ended March 31, 2025 and 2024, respectively. The increase in the provision for income taxes for the three months ended March 31, 2025, compared to the same period in 2024 was due to an increase in non-deductible goodwill related to divested hospitals. The difference in our effective tax rate for the three months ended March 31, 2025, compared to the same period in 2024 is due to an increase in income before taxes and the aforementioned increase in the provision for income taxes.

Previous wording

Net income attributable to noncontrolling interests as a percentage of net operating revenues was 1.2% for the nine months ended September 30, 2024, compared to 1.1% for the same period in 2023.

Current wording

Net income attributable to noncontrolling interests as a percentage of net operating revenues was 1.2% for the three months ended March 31, 2025, compared to 1.1% for the same period in 2024.

Previous wording

Net loss attributable to Community Health Systems, Inc. stockholders was $(391) million for the three months ended September 30, 2024, compared to $(91) million for the same period in 2023.

Current wording

Net loss attributable to Community Health Systems, Inc. stockholders was $(13) million for the three months ended March 31, 2025, compared to $(41) million for the same period in 2024.

Previous wording

Net cash provided by operating activities increased $144 million, from approximately $120 million for the nine months ended September 30, 2023, to approximately $264 million for the nine months ended September 30, 2024. The increase in cash provided by operating activities is primarily due to increased collections of patient accounts receivable and lower cash paid for interest, partially offset by increased income tax payments. Cash paid for interest was $562 million during the nine months ended September 30, 2024, compared to $583 million for the same period in 2023. Cash paid for income taxes, net of refunds received, resulted in a net payment of $132 million and $61 million during the nine months ended September 30, 2024 and 2023.

Current wording

Net cash provided by operating activities increased $24 million, from approximately $96 million for the three months ended March 31, 2024, to approximately $120 million for the three months ended March 31, 2025. The increase in cash provided by operating activities is primarily due to an increase in accounts payable, partially offset by an increase in accounts receivable. Cash paid for interest was $229 million during the three months ended March 31, 2025, compared to $149 million for the same period in 2024. Cash paid for income taxes, net of refunds received, resulted in a net refund of $80 million and a payment of less than $1 million during the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Net cash used in investing activities was approximately $132 million for the nine months ended September 30, 2024, compared to approximately $206 million for the same period in 2023. Net cash used in investing activities during the nine months ended September 30, 2024 was impacted by a decrease of $106 million in cash used for the purchase of property and equipment and an increase of $51 million in cash proceeds from dispositions of hospitals and other ancillary operations, partially offset by a decrease of $95 million in cash from the net impact of the purchases and sales of available-for-sale debt and equity securities.

Current wording

Net cash provided by investing activities was approximately $444 million for the three months ended March 31, 2025, compared to net cash used in investing activities of approximately $99 million for the same period in 2024. Net cash used in investing activities during the three months ended March 31, 2025 was impacted by a decrease of $8 million in cash used for the purchase of property and equipment and an increase of $563 million in cash proceeds from dispositions of hospitals and other ancillary operations, partially offset by a decrease of $7 million in cash from the net impact of the purchases and sales of available-for-sale debt and equity securities and an increase of $25 million in cash used for other investments, which includes capitalized software costs and physician recruitment costs.

Previous wording

Our net cash used in financing activities was approximately $137 million for the nine months ended September 30, 2024, compared to net cash provided by financing activities of approximately $59 million for the same period in 2023, a change of $196 million. This was primarily due to the net impact of our debt borrowings and repayments during the nine months ended September 30, 2024, compared to the same period in 2023.

Current wording

Our net cash used in financing activities was approximately $170 million for the three months ended March 31, 2025, compared to net cash provided by financing activities of approximately $13 million for the same period in 2024, a change of $183 million. This was primarily due to the net impact of our debt borrowings and repayments during the three months ended March 31, 2025, compared to the same period in 2024.

Previous wording

Net working capital was approximately $1.0 billion at September 30, 2024 and $1.1 billion at December 31, 2023. Net working capital decreased by approximately $84 million between December 31, 2023 and September 30, 2024. The decrease is primarily due to decreases in patient accounts receivable, supplies and prepaid expenses and taxes and increases in accrued interest and other current liabilities during the nine months ended September 30, 2024, partially offset by increases in prepaid income taxes and other current assets and decreases in accounts payable, current operating lease liabilities and accrued liabilities for employee compensation.

Current wording

Net working capital was approximately $1.0 billion at March 31, 2025 and approximately $956 million at December 31, 2024. Net working capital increased by approximately $81 million between December 31, 2024 and March 31, 2025. The increase is primarily due to increases in cash, patient accounts receivable and prepaid expenses and taxes and decreases in accrued interest and accrued liabilities for employee compensation during the three months ended March 31, 2025, partially offset by decreases in prepaid income taxes and other current assets and increases in current maturities of long-term debt, accounts payable and income tax payable.

Previous wording

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc., or CHS, a revolving asset-based loan facility, or ABL Facility. The maximum aggregate amount under the ABL Facility is $1.0 billion, subject to borrowing base capacity. At September 30, 2024, we had outstanding borrowings of $372 million and approximately $438 million of additional borrowing capacity (after taking into consideration $66 million of outstanding letters of credit) under the ABL Facility. The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds. Letters of credit were reduced during the nine months ended September 30, 2024 by $15 million, primarily in relation to a professional liability claim that was settled and funded during the nine months ended September 30, 2024. Principal amounts outstanding under the ABL Facility, if any, will be due and payable in full on June 5, 2029.

Current wording

Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc., or CHS, a revolving asset-based loan facility, or ABL Facility. The maximum aggregate amount under the ABL Facility is $1.0 billion, subject to borrowing base capacity. At March 31, 2025, we had outstanding borrowings of $200 million and approximately $651 million of additional borrowing capacity (after taking into consideration $67 million of outstanding letters of credit) under the ABL Facility. The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds. Principal amounts outstanding under the ABL Facility, if any, will be due and payable in full on June 5, 2029.

Previous wording

As of September 30, 2024, approximately $20 million of our outstanding debt of approximately $11.5 billion is due within the next 12 months.

Current wording

As of March 31, 2025, approximately $29 million of our outstanding debt of approximately $11.3 billion is due within the next 12 months.

Previous wording

We believe that our current levels of cash, internally generated cash flows and current levels of availability for additional borrowing under the ABL Facility, our anticipated continued access to the capital markets, and the use of proceeds from any potential future dispositions as noted above, will be sufficient to finance acquisitions, capital expenditures, working capital requirements, and any debt repurchases or other debt repayments we may elect to make or be required to make through the next 12 months and the foreseeable future thereafter. However, ongoing negative economic conditions (including inflationary conditions and elevated interest rate levels) have resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

Current wording

We believe that our current levels of cash, internally generated cash flows and current levels of availability for additional borrowing under the ABL Facility, our anticipated continued access to the capital markets, and the use of proceeds from any potential future dispositions as noted above, will be sufficient to finance acquisitions, capital expenditures, working capital requirements, and any debt repurchases or other debt repayments we may elect to make or be required to make through the next 12 months and the foreseeable future thereafter. However, ongoing negative economic conditions (including in relation to inflationary pressures, elevated interest rate levels and impacts from the imposition of, or changes in, tariffs) have resulted in, and may continue to result in, significant disruptions of financial and capital markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

Previous wording

As noted above, during the three months ended September 30, 2024, we extinguished a portion of a series of our outstanding notes through open market purchases, and we may elect from time to time to continue to purchase our outstanding debt, including through open market purchases, privately negotiated transactions or otherwise. Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law requirements and other factors.

Current wording

We may elect from time to time to continue to purchase our outstanding debt, including through open market purchases, privately negotiated transactions or otherwise. Any such debt repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law requirements and other factors.

Previous wording

Cash expenditures for purchases of facilities and other related businesses were approximately $1 million for the nine months ended September 30, 2024, compared to $35 million for the same period in 2023. Our expenditures for the nine months ended September 30, 2024 and 2023 were primarily related to physician practices and clinics.

Current wording

Cash expenditures for purchases of facilities and other related businesses were less than $1 million for the three months ended March 31, 2025, compared to approximately $1 million for the same period in 2024. Our expenditures for the three months ended March 31, 2025 and 2024 were primarily related to physician practices and clinics.

Previous wording

Capital expenditures relate primarily to expansion and renovation of existing facilities, construction of additional access points such as free-standing emergency departments and ambulatory surgery centers, investments in higher acuity service lines and information technology infrastructure, as well as routine expenditures for equipment, minor renovations and other upgrades. In addition, we have incurred costs for hurricane-related repairs and expect to incur costs for capital expenditures needed to remediate damage sustained during hurricanes Helene and Milton. An estimate of total capital expenditures for such remedial efforts, the majority of which is expected to be covered by insurance, is not currently known. Capital expenditures totaled $251 million and $357 million for the nine months ended September 30, 2024 and 2023, respectively. We expect total capital expenditures of approximately $350 million to $400 million in 2024.

Current wording

Capital expenditures relate primarily to expansion and renovation of existing facilities, construction of additional access points such as free-standing emergency departments and ambulatory surgery centers, investments in higher acuity service lines and information technology infrastructure, as well as routine expenditures for equipment, minor renovations and other upgrades. Capital expenditures totaled $85 million and $93 million for the three months ended March 31, 2025 and 2024, respectively. We expect total capital expenditures of approximately $350 million to $400 million in 2025.