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Community Health Systems, Inc. Previews Third Quarter 2016 Operating Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today announced preliminary financial and operating results for the three months ended September 30, 2016. These results are based on information available to management as of the date of this press release and are subject to revision upon finalization of the Company’s quarterly accounting and financial reporting procedures. Additionally, included in these results is the Company’s update to the previous estimate of impairment of goodwill and other long-lived assets recorded during the quarter ended June 30, 2016, as well as the determination of hospital reporting unit goodwill allocated to the four hospitals for which the Company has signed a definitive agreement to sell as previously announced on September 29, 2016. Financial and statistical data reported in this release include the operating results of Quorum Health Corporation (“QHC”) through April 29, 2016, the date on which the Company completed the spin-off of QHC. Same-store operating results and statistical data exclude information for the hospitals divested in the spin-off of QHC in both the three months ended September 30, 2016, and the comparable period in 2015.

The Company anticipates net operating revenues for the three months ended September 30, 2016, will be approximately $4.380 billion, compared with $4.846 billion for the same period in 2015. Income from continuing operations before income taxes as reported for the three months ended September 30, 2016, is expected to be a loss of approximately $(83) million, compared with income from continuing operations before income taxes of $121 million for the three months ended September 30, 2015.

Net cash provided by operating activities for the three months ended September 30, 2016, is expected to be approximately $178 million, with total net cash provided by operating activities for the nine months ended September 30, 2016, expected to be approximately $810 million. This compares with $111 million for the three months ended September 30, 2015, and $615 million for the nine months ended September 30, 2015. Adjusted EBITDA for the three months ended September 30, 2016, is expected to be approximately $465 million, compared with $661 million for the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders for the three months ended September 30, 2016, is expected to be a loss of $(0.69) per share (diluted), compared with income from continuing operations of $0.51 per share (diluted) for the three months ended September 30, 2015. The results for the three months ended September 30, 2016, included a loss of $(0.28) per share (diluted) for the impairment of goodwill and long-lived assets, primarily related to the allocation of reporting unit goodwill to four hospitals classified as held for sale in September 2016 upon the execution of a definitive sale agreement as noted above, as well as the updated measurement of the estimated impairment charge recorded during the three months ended June 30, 2016, and a loss of $(0.06) per share (diluted) related to the settlement of certain outstanding legal matters. Excluding these items, the Company anticipates income from continuing operations attributable to Community Health Systems, Inc. common stockholders to be a loss of $(0.35) per share (diluted) for the three months ended September 30, 2016.

The consolidated operating results for the three months ended September 30, 2016, reflect a 12.4 percent decrease in total admissions and a 13.0 percent decrease in adjusted admissions, compared with the same period in 2015. On a same-store basis, admissions decreased 2.1 percent and adjusted admissions decreased 1.5 percent during the three months ended September 30, 2016, compared with the same period in 2015.

On a same-store basis, consolidated net operating revenues for the three months ended September 30, 2016 are expected to increase over the prior year period by approximately 1.2 percent. Same-store consolidated salaries and benefits expense is expected to increase as a percentage of consolidated net operating revenues from 46.0 percent for the three months ended September 30, 2015, to approximately 47.1 percent for the three months ended September 30, 2016. Same-store consolidated supplies expense is expected to increase as a percentage of consolidated net operating revenues from 16.3 percent for the three months ended September 30, 2015, to approximately 16.5 percent for the three months ended September 30, 2016. Same-store consolidated other operating expenses are expected to increase as a percentage of consolidated net operating revenues from 22.4 percent for the three months ended September 30, 2015, to approximately 23.2 percent for the three months ended September 30, 2016. Electronic health records incentives were lower than the same period in the prior year by $42 million due to changes in how incentive payments are structured under the applicable legal requirements governing this program.

The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues, as well as larger than anticipated reductions to reimbursement from state supplemental programs. These results were also affected by a failure to achieve anticipated expense reductions as the Company experienced increases in health insurance costs, costs of state supplemental programs, medical specialist fees, and implant supply costs, among other expenses.

The Company is also providing a preliminary update to its 2016 annual guidance for Adjusted EBITDA to reflect changes to projected consolidated operating results for the year ending December 31, 2016, as such guidance was previously reflected in the Company’s earnings...


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