Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and six
months ended June 30, 2017.
The following highlights the financial and operating results for
the three months ended June 30, 2017, that are further discussed
below:
- Net operating revenues totaled
$4.144 billion.
- Net loss attributable to Community
Health Systems, Inc. common stockholders was $(137) million, or
$(1.22) per share (diluted), compared with net loss of $(1.432)
billion, or $(12.91) per share (diluted) for the same period in
2016.
- Adjusted EBITDA was $435
million.
- Loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
was $(1.17) per share (diluted).
- Adjusted for certain items discussed
below, loss from continuing operations attributable to Community
Health Systems, Inc. common stockholders was $(0.25) per share
(diluted).
- Cash flow from operations was $261
million, compared with $338 million for the same period in 2016,
representing a 22.8 percent decrease.
- On a same-store basis, both
admissions and adjusted admissions decreased 2.5 percent, compared
with the same period in 2016.
Financial and statistical data for 2016 include the following in
operating results through the effective date of each respective
transaction:
- On April 29, 2016, the Company
completed the spin-off of Quorum Health Corporation (“QHC”),
comprised of 38 affiliated hospitals and related outpatient
services in 16 states, together with Quorum Health Resources, LLC,
a subsidiary providing management advisory and consulting services
to non-affiliated hospitals. Same-store operating results and
statistical data exclude information for the hospitals divested in
the spin-off of QHC in the comparable period in 2016.
- On April 29, 2016, the Company sold its
unconsolidated minority equity interests in Valley Health System,
LLC and Summerlin Hospital Medical Center, LLC, both joint ventures
with Universal Health Systems, Inc. comprising a total of five
hospitals in Las Vegas, Nevada.
- On December 31, 2016, the Company sold
an 80 percent majority ownership interest in its home care division
to a subsidiary of Almost Family, Inc. Same-store operating results
exclude the home care division in the comparable period in
2016.
- On May 1, 2017, the Company sold 11
hospitals as part of its ongoing portfolio rationalization efforts.
Same-store operating results exclude the results of these hospitals
divested in 2017 and the comparable period in 2016. An additional
nine hospitals were sold effective June 30, 2017, and July 1, 2017.
Actual and same-store operating results include the results of
these hospitals in 2017 and the comparable periods in 2016.
Net operating revenues for the three months ended June 30, 2017,
totaled $4.144 billion, a 9.7 percent decrease, compared with
$4.590 billion for the same period in 2016. Loss from continuing
operations attributable to Community Health Systems, Inc. common
stockholders was $(131) million, or $(1.17) per share (diluted),
for the three months ended June 30, 2017, compared with $(1.431)
billion, or $(12.90) per share (diluted), for the same period in
2016. During the three months ended June 30, 2017, the Company
recorded a non-cash expense totaling $80 million related to
impairment charges to reduce the value of long-lived assets,
primarily allocated goodwill, at hospitals that the Company has
identified for sale. The impairment charges do not have an impact
on the calculation of the Company’s financial covenants under the
Company’s Credit Facility.
The results for the three months ended June 30, 2017, included a
loss of $(0.77) per share (diluted) related to impairment and
(gain) loss on sale of businesses, loss of $(0.06) per share
(diluted) from early extinguishment of debt, loss of $(0.04) per
share (diluted) related to government and other legal settlements,
loss of $(0.01) per share (diluted) related to employee termination
benefits and other restructuring charges, and loss of $(0.04) per
share (diluted) related to expense from fair value adjustments on
the CVR agreement liability accounted for at fair value related to
the HMA legal proceedings, and related legal expenses. Excluding
these items, loss from continuing operations was $(0.25) per share
(diluted).
Net loss attributable to Community Health Systems, Inc. common
stockholders was $(137) million, or $(1.22) per share (diluted) for
the three months ended June 30, 2017, compared with $(1.432)
billion, or $(12.91) per share (diluted) for the same period in
2016. Discontinued operations for the three months ended June 30,
2017, consisted of $(0.01) per share (diluted) of losses from
operations of entities sold or held for sale and $(0.04) per share
(diluted) for impairment of hospitals sold or held for sale for a
total after-tax loss of approximately $(6) million.
Weighted-average shares outstanding (diluted) were 112 million for
the three months ended June 30, 2017, and 111 million for the three
months ended June 30, 2016. Adjusted EBITDA for the three months
ended June 30, 2017, was $435 million compared with $563 million
for the same period in 2016, representing a 22.7 percent
decrease.
The consolidated operating results for the three months ended
June 30, 2017, reflect a 10.8 percent decrease in total admissions,
and an 11.2 percent decrease in total adjusted admissions, compared
with the same period in 2016. On a same-store basis, both
admissions and adjusted admissions decreased 2.5 percent during the
three months ended June 30, 2017, compared with the same period in
2016. On a same-store basis, net operating revenues decreased 0.7
percent during the three months ended June 30, 2017, compared with
the same period in 2016.
Net operating revenues for the six months ended June 30, 2017,
totaled $8.629 billion, a 10.0 percent decrease, compared with
$9.589 billion for the same period in 2016. Loss from continuing
operations attributable to Community Health Systems, Inc. common
stockholders was $(328) million, or $(2.94) per share (diluted),
for the six months ended June 30, 2017, compared with $(1.418)
billion, or $(12.82) per share (diluted), for the same period in
2016. During the six months ended June 30, 2017, the Company
recorded a non-cash expense totaling $330 million related to
impairment charges to reduce the value of long-lived assets,
primarily allocated goodwill, at hospitals that the Company has
identified for sale. The impairment charges do not have an impact
on the calculation of the Company’s financial covenants under the
Company’s Credit Facility.
The results for the six months ended June 30, 2017, included the
loss of $(2.68) per share (diluted) related to impairment and
(gain) loss on sale of businesses, loss of $(0.18) per share
(diluted) from early extinguishment of debt, loss of $(0.01) per
share (diluted) related to employee termination benefits and other
restructuring charges, and loss of $(0.08) per share (diluted)
related to expense from fair value adjustments on the CVR agreement
liability accounted for at fair value related to the HMA legal
proceedings, and related legal expenses. These expenses were
partially offset by income of $0.19 per share (diluted) related to
government and other legal settlements, net of related legal
expenses, primarily as a result of the previously announced
settlement of the shareholder derivative action in January 2017.
Excluding these items, loss from continuing operations was $(0.17)
per share (diluted).
Net loss attributable to Community Health Systems, Inc. common
stockholders was $(335) million, or $(3.01) per share (diluted) for
the six months ended June 30, 2017, compared with $(1.421) billion,
or $(12.85) per share (diluted) for the same period in 2016.
Discontinued operations for the six months ended June 30, 2017,
consisted of $(0.02) per share (diluted) of losses from operations
of entities sold or held for sale and $(0.04) per share (diluted)
for impairment of hospitals sold or held for sale for a total
after-tax loss of approximately $(7) million. Weighted-average
shares outstanding (diluted) were 112 million for the six months
ended June 30, 2017, and 111 million for the six months ended June
30, 2016. Adjusted EBITDA for the six months ended June 30, 2017,
was $963 million compared with $1.196 billion for the same period
in 2016, representing a 19.5 percent decrease.
The consolidated operating results for the six months ended June
30, 2017, reflect an 11.1 percent decrease in total admissions, and
an 11.9 percent decrease in total adjusted admissions, compared
with the same period in 2016. On a same-store basis, both
admissions and adjusted admissions decreased 1.8 percent during the
six months ended June 30, 2017, compared with the same period in
2016. On a same-store basis, net operating revenues increased 0.1
percent during the six months ended June 30, 2017, compared with
the same period in 2016.
The Company completed its divestitures of one hospital on June
30, 2017, and eight hospitals on July 1, 2017, bringing its total
completed divestitures to 20 hospitals, out of the previously
announced 30 hospitals subject to definitive agreements. The
Company expects to complete the sale of the remaining 10 hospitals
subject to definitive agreements by September 30, 2017.
In addition to the previously announced divestiture of 30
hospitals, the Company continues to receive interest from acquirers
for certain of its hospitals. The Company is pursuing these
interests for sale transactions involving hospitals with a combined
total of at least $1.5 billion in annual net operating revenues and
combined mid-single digit Adjusted EBITDA margins.
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA
adjusted to add back net income attributable to noncontrolling
interests and to exclude the effect of discontinued operations,
loss from early extinguishment of debt, impairment and (gain) loss
on sale of businesses, gain on sale of investments in
unconsolidated affiliates, expense incurred related to the spin-off
of QHC, expense incurred related to the sale of a majority
ownership interest in the Company’s home care division, (income)
expense related to government and other legal settlements and
related costs, expenses related to employee termination benefits
and other restructuring charges, and expense (income) from fair
value adjustments on the CVR agreement liability accounted for at
fair value related to the HMA legal proceedings, and related legal
expenses. For information regarding why the Company believes
Adjusted EBITDA presents useful information to investors, and for a
reconciliation of Adjusted EBITDA to net income attributable to
Community Health Systems, Inc. stockholders, see footnote (e) to
the Financial Highlights, Financial Statements and Selected
Operating Data below.
Commenting on the results, Wayne T. Smith, chairman and chief
executive officer of Community Health Systems, Inc., said,
“Obviously, we are disappointed with our performance during the
second quarter. Our financial results reflect weaker than expected
volumes, which negatively affected our net revenue and Adjusted
EBITDA performance. We are seeing better results in certain areas,
and we continue to work on a number of initiatives to drive
operational and financial improvements. In terms of our divestiture
program, we completed several transactions during the second
quarter and remain on track to complete other announced
divestitures in the third quarter of 2017. We also announced that
we are pursuing the disposition of additional hospitals, as we
shift to a smaller, stronger portfolio of assets.”
Included on pages 18, 19, 20 and 21 of this press release are
tables setting forth the Company’s 2017 annual earnings guidance.
The updated 2017 guidance is based on the Company’s historical
operating performance, current trends and other assumptions that
the Company believes are reasonable at this time, and reflects the
impact of planned divestitures that the Company expects to occur in
2017.
Community Health Systems, Inc. is one of the largest publicly
traded hospital companies in the United States and a leading
operator of general acute care hospitals in communities across the
country. The Company, through its subsidiaries, owns, leases or
operates 137 affiliated hospitals in 21 states with an aggregate of
approximately 22,000 licensed beds.
The Company’s headquarters are located in Franklin, Tennessee, a
suburb south of Nashville. Shares in Community Health Systems, Inc.
are traded on the New York Stock Exchange under the symbol “CYH.”
More information about the Company can be found on its website at
www.chs.net.
Community Health Systems, Inc. will hold a conference call on
Wednesday, August 2, 2017, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the second
quarter ended June 30, 2017. Investors will have the opportunity to
listen to a live Internet broadcast of the conference call by
clicking on the Investor Relations link of the Company’s website at
www.chs.net. To listen to the live call, please go to the website
at least fifteen minutes early to register, download and install
any necessary audio software. For those who cannot listen to the
live broadcast, a replay will be available shortly after the call
and will continue to be available through September 2, 2017. Copies
of this press release and conference call slide show, as well as
the Company’s Current Report on Form 8-K (including this press
release), will be available on the Company’s website at
www.chs.net.
COMMUNITY HEALTH SYSTEMS,
INC. AND SUBSIDIARIES Financial Highlights (a)(b)(c)(d)
(In millions, except per share amounts) (Unaudited)
Three
Months Ended Six Months Ended June 30, June
30, 2017 2016 2017 2016 Net
operating revenues $ 4,144 $ 4,590 $ 8,629 $ 9,589 Loss from
continuing operations (f), (i), (j), (k) (116 ) (1,405 ) (292 )
(1,368 )
Net loss attributable to Community Health
Systems, Inc. stockholders
(137 ) (1,432 ) (335 ) (1,421 ) Adjusted EBITDA (e) 435 563 963
1,196 Net cash provided by operating activities 261 338 503 632
Basic loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (i), (j), (k) $ (1.17 ) $ (12.90 ) $
(2.94 ) $ (12.82 ) Discontinued operations (0.06 )
(0.01 ) (0.06 ) (0.03 ) Net loss $ (1.22 ) $ (12.91 )
$ (3.01 ) $ (12.85 )
Diluted loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (j), (k) $ (1.17 ) $ (12.90 )
$ (2.94 ) $ (12.82 ) Discontinued operations (0.06 )
(0.01 ) (0.06 ) (0.03 ) Net loss (h) $ (1.22 ) $
(12.91 ) $ (3.01 ) $ (12.85 )
Weighted-average number of shares outstanding (g): Basic 112 111
112 111 Diluted 112 111 112 111
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY HEALTH SYSTEMS,
INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Loss (a)(b)(c)(d) (In millions, except per share amounts)
(Unaudited)
Three Months Ended June 30, 2017
2016 Amount
% of Net
OperatingRevenues
Amount
% of Net Operating
Revenues
Operating revenues (net of contractual allowances and discounts) $
4,823 $ 5,290 Provision for bad debts 679
700 Net operating revenues
4,144 100.0 % 4,590 100.0
% Operating costs and expenses: Salaries and benefits 1,920
46.3 % 2,154 46.9 % Supplies 697 16.8 % 759 16.6 % Other operating
expenses 1,017 24.6 % 1,056 23.1 % Government and other legal
settlements and related costs (j) 7 0.2 % - - % Electronic health
records incentive reimbursement (17 ) (0.4 ) % (31 ) (0.7 ) % Rent
104 2.5 % 112 2.4 % Depreciation and amortization 223 5.4 % 276 6.0
% Impairment and (gain) loss on sale of businesses, net (i)
80 1.9 % 1,639 35.7 % Total
operating costs and expenses 4,031 97.3 %
5,965 130.0 % Income (loss) from
operations (f), (i), (j) 113 2.7 % (1,375 ) (30.0 ) % Interest
expense, net 239 5.8 % 246 5.4 % Loss from early extinguishment of
debt 10 0.2 % 30 0.7 % Gain on sale of investments in
unconsolidated affiliates (k) - - % (94 ) (2.1 ) % Equity in
earnings of unconsolidated affiliates (5 ) (0.1 ) %
(14 ) (0.4 ) % Loss from continuing operations before income
taxes (131 ) (3.2 ) % (1,543 ) (33.6 ) % Benefit from income taxes
(15 ) (0.4 ) % (138 ) (3.0 ) % Loss from continuing
operations (f), (i), (j), (k) (116 ) (2.8 ) % (1,405
) (30.6 ) % Discontinued operations, net of taxes: Loss from
operations of entities sold or held for sale (1 ) (0.0 ) % (1 ) - %
Impairment of hospitals sold or held for sale (5 ) (0.1 ) %
- - % Loss from discontinued operations, net
of taxes (6 ) (0.1 ) % (1 ) - % Net loss (122
) (2.9 ) % (1,406 ) (30.6 ) % Less: Net income attributable to
noncontrolling interests 15 0.4 % 26
0.6 % Net loss attributable to Community Health
Systems, Inc. stockholders $ (137 ) (3.3 ) % $ (1,432 ) (31.2 ) %
Basic loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (i), (j), (k) $ (1.17 ) $ (12.90 )
Discontinued operations (0.06 ) (0.01 ) Net loss $
(1.22 ) $ (12.91 )
Diluted loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (j), (k) $ (1.17 ) $ (12.90 )
Discontinued operations (0.06 ) (0.01 ) Net loss (h)
$ (1.22 ) $ (12.91 ) Weighted-average number of shares
outstanding (g): Basic 112 111 Diluted
112 111
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY HEALTH SYSTEMS,
INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Loss (a)(b)(c)(d) (In millions, except per share amounts)
(Unaudited)
Six Months Ended June 30, 2017
2016 Amount
% of Net
OperatingRevenues
Amount
% of Net Operating
Revenues
Operating revenues (net of contractual allowances and discounts) $
9,991 $ 11,044 Provision for bad debts 1,362
1,455 Net operating revenues
8,629 100.0 % 9,589 100.0
% Operating costs and expenses: Salaries and benefits 3,981
46.1 % 4,470 46.6 % Supplies 1,446 16.8 % 1,559 16.3 % Other
operating expenses 2,074 24.1 % 2,229 23.2 % Government and other
legal settlements and related costs (j) (34 ) (0.4 ) % 1 - %
Electronic health records incentive reimbursement (23 ) (0.3 ) %
(49 ) (0.5 ) % Rent 214 2.5 % 231 2.4 % Depreciation and
amortization 458 5.3 % 574 6.0 % Impairment and (gain) loss on sale
of businesses, net (i) 330 3.8 % 1,656
17.3 % Total operating costs and expenses
8,446 97.9 % 10,671 111.3 %
Income (loss) from operations (f), (i), (j) 183 2.1 % (1,082
) (11.3 ) % Interest expense, net 468 5.4 % 496 5.2 % Loss from
early extinguishment of debt 31 0.4 % 30 0.3 % Gain on sale of
investments in unconsolidated affiliates (k) - - % (94 ) (1.0 ) %
Equity in earnings of unconsolidated affiliates (9 ) (0.1 )
% (34 ) (0.4 ) % Loss from continuing operations before
income taxes (307 ) (3.6 ) % (1,480 ) (15.4 ) % Benefit from income
taxes (15 ) (0.2 ) % (112 ) (1.1 ) % Loss from
continuing operations (f), (i), (j), (k) (292 ) (3.4 ) %
(1,368 ) (14.3 ) % Discontinued operations, net of
taxes: Loss from operations of entities sold or held for sale (2 )
- % (2 ) - % Impairment of hospitals sold or held for sale
(5 ) (0.1 ) % (1 ) - % Loss from discontinued
operations, net of taxes (7 ) (0.1 ) % (3 ) -
% Net loss (299 ) (3.5 ) % (1,371 ) (14.3 ) % Less: Net income
attributable to noncontrolling interests 36 0.4
% 50 0.5 % Net loss attributable to
Community Health Systems, Inc. stockholders $ (335 ) (3.9 ) % $
(1,421 ) (14.8 ) %
Basic loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (i), (j), (k) $ (2.94 ) $ (12.82 )
Discontinued operations (0.06 ) (0.03 ) Net loss $
(3.01 ) $ (12.85 )
Diluted loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (j), (k) $ (2.94 ) $ (12.82 )
Discontinued operations (0.06 ) (0.03 ) Net loss (h)
$ (3.01 ) $ (12.85 ) Weighted-average number of shares
outstanding (g): Basic 112 111 Diluted
112 111
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY HEALTH
SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Comprehensive Loss (In millions) (Unaudited)
Three Months Ended Six Months Ended June
30, June 30, 2017 2016 2017
2016 Net loss $ (122 ) $ (1,406 ) $ (299 ) $ (1,371 )
Other comprehensive income (loss), net of income taxes: Net change
in fair value of interest rate swaps, net of tax (2 ) (2 ) 3 (21 )
Net change in fair value of available-for-sale securities, net of
tax 2 (3 ) 5 (1 )
Amortization and recognition of
unrecognized pension cost components, net of tax
1 2 1 3
Other comprehensive income (loss) 1 (3 )
9 (19 ) Comprehensive loss (121 ) (1,409 )
(290 ) (1,390 ) Less: Comprehensive income attributable to
noncontrolling interests 15 26
36 50
Comprehensive loss attributable to
Community Health Systems, Inc. stockholders
$ (136 ) $ (1,435 ) $ (326 ) $ (1,440 )
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Selected Operating
Data (a)(c) (Dollars in millions) (Unaudited)
Three
Months Ended June 30, Consolidated Same-Store
2017 2016 % Change 2017 2016
% Change Number of hospitals (at end of period) 143 156 143
143 Licensed beds (at end of period) 23,829 26,366 23,829 24,163
Beds in service (at end of period) 21,549 23,371 21,549 21,673
Admissions 189,435 212,259 -10.8 % 184,992 189,762 -2.5 % Adjusted
admissions 415,515 468,087 -11.2 % 405,584 415,778 -2.5 % Patient
days 840,516 947,492 818,249 842,493 Average length of stay (days)
4.4 4.5 4.4 4.4 Occupancy rate (average beds in service) 41.9 %
42.5 % 41.8 % 42.5 % Net operating revenues $ 4,144 $ 4,590 -9.7 %
$ 4,054 $ 4,083 -0.7 %
Net inpatient revenues as a % of net
patient revenues before provision for bad debts
43.3 % 42.8 % 43.2 % 43.1 %
Net outpatient revenues as a % of net
patient revenues before provision for bad debts
56.7 % 57.2 % 56.8 % 56.9 % Income (loss) from operations (f), (i),
(j) $ 113 $ (1,375 ) 108.2 %
Income (loss) from operations as a % of
net operating revenues
2.7 % -30.0 % Depreciation and amortization $ 223 $ 276 Equity in
earnings of unconsolidated affiliates $ (5 ) $ (14 )
Net loss attributable to Community Health
Systems, Inc. stockholders
$ (137 ) $ (1,432 ) 90.4 %
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-3.3 % -31.2 % Adjusted EBITDA (e) $ 435 $ 563 -22.7 %
Adjusted EBITDA as a % of net operating
revenues
10.5 % 12.3 % Net cash provided by operating activities $ 261 $ 338
-22.8 %
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Selected Operating
Data (a)(c) (Dollars in millions) (Unaudited)
Six
Months Ended June 30, Consolidated Same-Store
2017 2016 % Change 2017 2016
% Change Number of hospitals (at end of period) 143 156 143
143 Licensed beds (at end of period) 23,829 26,366 23,829 24,163
Beds in service (at end of period) 21,549 23,371 21,549 21,673
Admissions 401,677 451,959 -11.1 % 381,736 388,844 -1.8 % Adjusted
admissions 864,682 981,406 -11.9 % 820,764 835,744 -1.8 % Patient
days 1,813,401 2,023,718 1,715,740 1,740,032 Average length of stay
(days) 4.5 4.5 4.5 4.5 Occupancy rate (average beds in service)
44.2 % 43.8 % 44.1 % 44.1 % Net operating revenues $ 8,629 $ 9,589
-10.0 % $ 8,200 $ 8,193 0.1 %
Net inpatient revenues as a % of net
patient revenues before provision for bad debts
43.6 % 43.4 % 43.6 % 43.5 %
Net outpatient revenues as a % of net
patient revenues before provision for bad debts
56.4 % 56.6 % 56.4 % 56.5 % Income (loss) from operations (f), (i),
(j) $ 183 $ (1,082 ) 116.9 %
Income (loss) from operations as a % of
net operating revenues
2.1 % -11.3 % Depreciation and amortization $ 458 $ 574 Equity in
earnings of unconsolidated affiliates $ (9 ) $ (34 ) Net loss
attributable to Community Health Systems, Inc. stockholders $ (335
) $ (1,421 ) 76.4 %
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-3.9 % -14.8 % Adjusted EBITDA (e) $ 963 $ 1,196 -19.5 %
Adjusted EBITDA as a % of net operating
revenues
11.2 % 12.5 % Net cash provided by operating activities $ 503 $ 632
-20.4 %
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets (b)
(In millions, except share data) (Unaudited)
June 30,
2017 December 31, 2016 ASSETS Current assets Cash
and cash equivalents $ 768 $ 238
Patient accounts receivable, net of
allowance for doubtful accounts of $3,620 and $3,773 at June 30,
2017 and December 31, 2016, respectively
2,939 3,176 Supplies 438 480 Prepaid income taxes 22 17 Prepaid
expenses and taxes 210 187 Other current assets 678
568 Total current assets 5,055
4,666 Property and equipment, gross 11,397 12,422 Less
accumulated depreciation and amortization (4,085 )
(4,273 ) Property and equipment, net 7,312
8,149 Goodwill 6,165 6,521 Other
assets, net 2,341 2,608 Total assets $
20,873 $ 21,944
LIABILITIES AND EQUITY
Current liabilities Current maturities of long-term debt $ 46 $ 455
Accounts payable 917 995 Accrued interest 236 207 Accrued
liabilities 1,179 1,230 Total current
liabilities 2,378 2,887 Long-term debt
14,702 14,789 Deferred income taxes
396 411 Other long-term liabilities
1,456 1,575 Total liabilities
18,932 19,662 Redeemable noncontrolling
interests in equity of consolidated subsidiaries 548
554 EQUITY Community Health Systems, Inc.
stockholders’ equity: Preferred stock, $.01 par value per share,
100,000,000 shares authorized; none issued - -
Common stock, $.01 par value per share,
300,000,000 shares authorized; 114,758,677 shares issued and
outstanding at June 30, 2017, and 113,876,580 shares issued and
outstanding at December 31, 2016
1 1 Additional paid-in capital 1,984 1,975 Accumulated other
comprehensive loss (53 ) (62 ) Accumulated deficit (634 )
(299 ) Total Community Health Systems, Inc. stockholders’
equity 1,298 1,615 Noncontrolling interests in equity of
consolidated subsidiaries 95 113 Total
equity 1,393 1,728 Total liabilities
and equity $ 20,873 $ 21,944
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND
SUBSIDIARIES Condensed Consolidated Statements of Cash Flows
(b) (In millions) (Unaudited)
Six Months Ended June
30, 2017 2016 Cash flows from operating
activities Net loss $ (299 ) $ (1,371 ) Adjustments to reconcile
net loss to net cash provided by operating activities: Depreciation
and amortization 458 574 Government and other legal settlements and
related costs (j) 6 1 Stock-based compensation expense 15 26
Impairment of hospitals sold or held for sale 5 1 Impairment and
(gain) loss on sale of businesses, net (i) 330 1,656 Loss from
early extinguishment of debt 31 30 Gain on sale of investments in
unconsolidated affiliates (k) - (94 ) Other non-cash expenses, net
18 22 Changes in operating assets and liabilities, net of effects
of acquisitions and divestitures: Patient accounts receivable 186
(40 ) Supplies, prepaid expenses and other current assets (55 ) 31
Accounts payable, accrued liabilities and income taxes (126 ) (212
) Other (66 ) 8 Net cash provided by operating
activities 503 632 Cash flows
from investing activities Acquisitions of facilities and other
related equipment (4 ) (114 ) Purchases of property and equipment
(274 ) (407 ) Proceeds from disposition of hospitals and other
ancillary operations 921 12 Proceeds from sale of property and
equipment 3 7 Purchases of available-for-sale securities (37 ) (63
) Proceeds from sales of available-for-sale securities 47 233
Proceeds from sale of investments in unconsolidated affiliates -
403 Distribution from Quorum Health Corporation - 1,219 Increase in
other investments (60 ) (113 ) Net cash provided by
investing activities 596 1,177
Cash flows from financing activities Repurchase of restricted stock
shares for payroll tax withholding requirements (5 ) (5 ) Deferred
financing costs and other debt-related costs (62 ) (22 ) Proceeds
from noncontrolling investors in joint ventures 5 - Redemption of
noncontrolling investments in joint ventures (4 ) (16 )
Distributions to noncontrolling investors in joint ventures (53 )
(47 ) Borrowings under credit agreements 840 2,806 Issuance of
long-term debt 3,100 - Proceeds from receivables facility 26 31
Repayments of long-term indebtedness (4,416 ) (4,279
) Net cash used in financing activities (569 ) (1,532
) Net change in cash and cash equivalents 530 277 Cash and
cash equivalents at beginning of period 238
184 Cash and cash equivalents at end of period $ 768
$ 461
__________
For footnotes, see pages 13, 14, 15, 16
and 17.
Footnotes to Financial Highlights,
Financial Statements and Selected Operating Data
(a) Continuing operating results exclude discontinued
operations for the three and six months ended June 30, 2017 and
2016. Both financial and statistical results exclude entities in
discontinued operations and hospitals sold during the period for
all periods presented. Same-store operating results and statistical
data exclude information for the hospitals divested in the spin-off
of QHC in the comparable period in 2016. (b) The contingent
value right (“CVR”) entitles the holder to receive a cash payment
up to $1.00 per CVR (subject to downward adjustment but not below
zero), subject to the final resolution of certain legal matters
pertaining to Health Management Associates, Inc. (“HMA”), as
defined in the CVR agreement. If the aggregate amount of applicable
losses under the CVR agreement exceeds a deductible of $18 million,
then the amount payable in respect of each CVR shall be reduced
(but not below zero) by an amount equal to the quotient obtained by
dividing: (a) the product of (i) all losses in excess of the
deductible and (ii) 90%; by (b) the number of CVRs outstanding on
the date on which final resolution of the existing litigation
occurs. Since the HMA acquisition date of January 27, 2014,
approximately $33 million in costs have been incurred and
approximately $30 million of settlements have been paid related to
certain HMA legal matters, which collectively exceed the deductible
of $18 million under the CVR agreement. The Company previously
recorded an estimated fair value of the remaining underlying claims
that will be covered by the CVR of $284 million as part of the
acquisition accounting for HMA, which, after consideration of
amounts paid and current estimates of valuation inputs, has been
adjusted to its estimated fair value of $260 million at June 30,
2017. In addition, although future legal fees (which are expensed
as incurred) associated with the HMA legal matters have not been
accrued or included in the table below, such legal fees are taken
into account in determining the total amount of reductions applied
to the amounts owed to CVR holders. For the CVR valuation at June
30, 2017, the change in fair value from the previous quarter was
primarily the result of a decrease in the discount rate applied to
the estimated settlement amount. The following table
presents the impact of the recorded amounts as described above as
applied to the CVR and the $18 million deductible and 10%
co-insurance amounts (in millions):
As of
June 30, 2017 Legal and other related costs incurred
to date $ 33 Settlements 30 Estimated liability for probable
contingencies - Estimated liability for unresolved contingencies at
fair value 260
Costs incurred plus certain estimated
liabilities for CVR-related matters
323 Allocated to: CHS deductible of $18 million (18 ) CHS
co-insurance at 10% (29 )
Recorded amounts that reduce CVR value
after giving effect to deductible and co-insurance
$ 276 CVRs outstanding 265
(c)
Included in discontinued operations for the three and six months
ended June 30, 2017 and 2016, are three smaller hospitals that are
being actively marketed for sale, one of which was sold effective
May 1, 2017. The after-tax loss for the sold or held for sale
hospitals, was approximately $6 million and $1 million for the
three months ended June 30, 2017 and 2016, respectively, and
approximately $7 million and $3 million for the six months ended
June 30, 2017 and 2016, respectively. (d) The following
table provides information needed to calculate loss per share,
which is adjusted for income attributable to noncontrolling
interests (in millions):
Three Months Ended Six
Months Ended June 30, June 30, 2017
2016 2017 2016
Loss from continuing operations
attributable to Community Health Systems, Inc. common
stockholders:
Loss from continuing operations, net of taxes $ (116 ) $ (1,405 ) $
(292 ) $ (1,368 )
Less: Income from continuing operations
attributable to noncontrolling interests, net of taxes
15 26 36 50
Loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$
(131
)
$ (1,431 ) $ (328 ) $ (1,418 )
Loss from discontinued operations
attributable to Community Health Systems, Inc. common
stockholders:
Loss from discontinued operations, net of taxes $ (6 ) $ (1 ) $ (7
) $ (3 )
Less: Loss from discontinued operations
attributable to noncontrolling interests, net of taxes
- - - -
Loss from discontinued operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$ (6 ) $ (1 ) $ (7 ) $ (3 ) (e) EBITDA is a non-GAAP
financial measure which consists of net loss attributable to
Community Health Systems, Inc. before interest, income taxes, and
depreciation and amortization. Adjusted EBITDA, also a non-GAAP
financial measure, is EBITDA adjusted to add back net income
attributable to noncontrolling interests and to exclude the effect
of discontinued operations, loss from early extinguishment of debt,
impairment and (gain) loss on sale of businesses, gain on sale of
investments in unconsolidated affiliates, expense incurred related
to the spin-off of QHC, expense incurred related to the sale of a
majority ownership interest in the Company’s home care division,
(income) expense related to government and other legal settlements
and related costs, expense related to employee termination benefits
and other restructuring charges, and expense (income) from fair
value adjustments on the CVR agreement liability accounted for at
fair value related to the HMA legal proceedings, and related legal
expenses. This is the initial period in which the Company has
incurred a significant amount of and included an adjustment for
employee termination benefits and other restructuring charges in
Adjusted EBITDA. The Company has included this adjustment (and
intends to continue including this adjustment on a prospective
basis) based on its belief that such expense, which may differ
significantly between periods in a manner not correlated with the
Company’s ongoing operational performance, is consistent with
management’s intended use of Adjusted EBITDA to assess the
Company’s results of operations and compare operating results
between periods. The Company has from time to time sold
noncontrolling interests in certain of its subsidiaries or acquired
subsidiaries with existing noncontrolling interest ownership
positions. The Company believes that it is useful to present
Adjusted EBITDA because it adds back the portion of EBITDA
attributable to these third-party interests and clarifies for
investors the Company’s portion of EBITDA generated by continuing
operations. The Company reports Adjusted EBITDA as a measure of
financial performance. Adjusted EBITDA is a key measure used by
management to assess the operating performance of the Company’s
hospital operations and to make decisions on the allocation of
resources. Adjusted EBITDA is also used to evaluate the performance
of the Company’s executive management team and is one of the
primary targets used to determine short-term cash incentive
compensation. In addition, management utilizes Adjusted EBITDA in
assessing the Company’s consolidated results of operations and
operational performance and in comparing the Company’s results of
operations between periods. The Company believes it is useful to
provide investors and other users of the Company’s financial
statements this performance measure to align with how management
assesses the Company’s results of operations. Adjusted EBITDA also
is comparable to a similar metric called Consolidated EBITDA, as
defined in the Company’s senior secured credit facility, which is a
key component in the determination of the Company’s compliance with
some of the covenants under the Company’s senior secured credit
facility (including the Company’s ability to service debt and incur
capital expenditures), and is used to determine the interest rate
and commitment fee payable under the senior secured credit facility
(although Adjusted EBITDA does not include all of the adjustments
described in the senior secured credit facility). Adjusted
EBITDA is not a measurement of financial performance under U.S.
GAAP. It should not be considered in isolation or as a substitute
for net income, operating income, or any other performance measure
calculated in accordance with U.S. GAAP. The items excluded from
Adjusted EBITDA are significant components in understanding and
evaluating financial performance. The Company believes such
adjustments are appropriate as the magnitude and frequency of such
items can vary significantly and are not related to the assessment
of normal operating performance. Additionally, this calculation of
Adjusted EBITDA may not be comparable to similarly titled measures
reported by other companies. The following table reflects
the reconciliation of Adjusted EBITDA, as defined, to net loss
attributable to Community Health Systems, Inc. stockholders as
derived directly from the condensed consolidated financial
statements (in millions):
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016 2017
2016
Net loss attributable to Community Health
Systems, Inc. stockholders
$ (137 ) $ (1,432 ) $ (335 ) $ (1,421 ) Adjustments: Benefit from
income taxes (15 ) (138 ) (15 ) (112 ) Depreciation and
amortization 223 276 458 574 Net income attributable to
noncontrolling interests 15 26 36 50 Loss from discontinued
operations 6 1 7 3 Interest expense, net 239 246 468 496 Loss from
early extinguishment of debt 10 30 31 30 Impairment and (gain) loss
on sale of businesses, net 80 1,639 330 1,656 Gain on sale of
investments in unconsolidated affiliates - (94 ) - (94 )
Expense (income) from government and other
legal settlements and related costs
7 - (34 ) 1
Expense (income) from fair value
adjustments and legal expenses related to cases covered by the
CVR
5 (1 ) 12 - Expense related to the sale of a majority interest in
home care division - - 1 - Expense related to the spin-off of QHC -
10 - 13
Expense related to employee termination
benefits and other restructuring charges
2 - 4 -
Adjusted EBITDA $ 435 $ 563 $ 963 $ 1,196
(f) Included in non-same-store income (loss)
from operations and loss from continuing operations are pre-tax
charges related to acquisition costs of less than $1 million and $1
million for the three months ended June 30, 2017 and 2016, and $1
million and $3 million for the six months ended June 30, 2017 and
2016, respectively. (g) The following table sets forth
components reconciling the basic weighted-average number of shares
to the diluted weighted-average number of shares (in millions):
Three Months Ended
Six Months Ended June 30, June 30, 2017
2016 2017 2016
Weighted-average number of shares
outstanding - basic
112 111 112 111 Add effect of dilutive securities: Stock awards and
options - - - -
Weighted-average number of shares
outstanding - diluted
112 111 112 111 The Company generated a loss from
continuing operations attributable to Community Health Systems,
Inc. common stockholders for the three and six months ended June
30, 2017 and 2016, so the effect of dilutive securities is not
considered because their effect would be antidilutive. If the
Company had generated income from continuing operations during the
three months ended June 30, 2017 and 2016, the effect of restricted
stock awards on the diluted shares calculation would have been an
increase of 215,313 shares and 168,764 shares, respectively. If the
Company had generated income from continuing operations during the
six months ended June 30, 2017 and 2016, the effect of restricted
stock awards on the diluted shares calculation would have been an
increase of 147,043 shares and 115,135 shares, respectively.
(h) The following supplemental tables reconcile loss from
continuing operations and net loss attributable to Community Health
Systems, Inc. common stockholders, as reported, on a per share
(diluted) basis, with the adjustments described herein (total per
share amounts may not add due to rounding):
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016 2017
2016 Loss from continuing operations, as reported $
(1.17 ) $ (12.90 ) $ (2.94 ) $ (12.82 ) Adjustments: Loss from
early extinguishment of debt 0.06 0.18 0.18 0.18 Impairment and
(gain) loss on sale of businesses, net 0.77 13.29 2.68 13.45
Expense (income) from government and other
legal settlements and related costs
0.04 - (0.19 ) -
Expense from fair value adjustments and
legal expenses related to cases covered by the CVR
0.04 - 0.08 - Gain on sale of investments in unconsolidated
affiliates - (0.54 ) - (0.54 ) Expense related to the spin-off of
QHC - 0.07 - 0.09
Expense related to employee termination
benefits and other restructuring charges
0.01 - 0.01 -
(Loss) income from continuing operations,
excluding adjustments
$ (0.25 ) $ 0.09 $ (0.17 ) $ 0.36
Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017 2016
Net loss, as reported $ (1.22 ) $ (12.91 ) $ (3.01 ) $
(12.85 ) Adjustments: Loss from early extinguishment of debt 0.06
0.18 0.18 0.18 Impairment and (gain) loss on sale of businesses,
net 0.77 13.29 2.68 13.45
Expense (income) from government and other
legal settlements and related costs
0.04 - (0.19 ) -
Expense from fair value adjustments and
legal expenses related to cases covered by the CVR
0.04 - 0.08 - Gain on sale of investments in unconsolidated
affiliates - (0.54 ) - (0.54 ) Expense related to the spin-off of
QHC - 0.07 - 0.09
Expense related to employee termination
benefits and other restructuring charges
0.01 - 0.01 -
Net (loss) income, excluding adjustments $ (0.31 ) $ 0.08
$ (0.24 ) $ 0.33 (i) Both income from
operations and loss from continuing operations for the three and
six months ended June 30, 2017, included non-cash expense of
approximately $80 million and $330 million, respectively, related
to impairment charges to reduce the value of long-lived assets,
primarily allocated goodwill, at hospitals that the Company has
identified for sale or sold. Both loss from operations and loss
from continuing operations for the three and six months ended June
30, 2016, included an impairment charge of approximately $1.639
billion, of which $1.400 billion was a charge related to the
write-down of a portion of the goodwill for the Company’s hospital
operation reporting unit, and $239 million was a charge related to
the adjustment of the fair value of long-lived assets at certain of
the Company’s underperforming hospitals and some of the hospitals
that the Company was marketing for sale that had experienced
declining operating results or had a decline in their estimated
fair value since the Company’s previous impairment review. Of this
$239 million impairment charge, $169 million related to the
reduction in value of long-lived assets at such hospitals that the
Company was marketing for sale, and $70 million related to the
reduction in value of long-lived assets at such under-performing
hospitals. Also, included in loss from operations and loss from
continuing operations for the six months ended June 30, 2016, was
an impairment charge of approximately $17 million incurred during
the three months ended March 31, 2016, related to the write-down of
a portion of the goodwill allocated to the divestitures of Lehigh
Regional Medical Center and Bartow Regional Medical Center, as well
as the impairment of certain long-lived assets at one of the
Company’s smaller hospitals where the decision was made during the
quarter ended March 31, 2016, to permanently close the hospital.
These impairment charges do not have an impact on the calculation
of the Company’s financial covenants under the Company’s Credit
Facility. (j) The $(0.04) per share (diluted) of expense for
“Government and other legal settlements and related costs” for the
three months ended June 30, 2017, is the settlement in principle of
several lawsuits during the three months ended June 30, 2017, and
related legal expenses. The $0.19 per share (diluted) of income for
“Government and other legal settlements and related costs” for the
six months ended June 30, 2017, is primarily the impact of the
shareholder derivative action settled during the six months ended
June 30, 2017, net of related legal expenses. (k) On April
29, 2016, the Company sold its unconsolidated minority equity
interests in Valley Health System, LLC, a joint venture with
Universal Health Systems, Inc. (“UHS”) representing four hospitals
in Las Vegas, Nevada, in which the Company owned a 27.5% interest,
and in Summerlin Hospital Medical Center, LLC, a joint venture with
UHS representing one hospital in Las Vegas, Nevada, in which the
Company owned a 26.1% interest. The Company received $403 million
in cash in return for the sale of its equity interests and
recognized a $94 million gain on sale of investments in
unconsolidated affiliates during the six months ended June 30,
2016. (l) Total per share amounts may not add due to
rounding.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s
projected consolidated operating results for the year ending
December 31, 2017. These projections update selected guidance
issued on May 1, 2017, and are based on the Company’s historical
operating performance, current trends and other assumptions that
the Company believes are reasonable at this time. The 2017 guidance
should be considered in conjunction with the assumptions included
herein. See pages 20 and 21 for a list of factors that could affect
the future results of the Company or the healthcare industry
generally.
The following is provided as guidance to analysts and
investors:
2017 Projection Range Net operating
revenues less provision for bad debts (in millions) $ 15,850 to $
16,050 Adjusted EBITDA (in millions) $ 1,825 to $ 2,000 (Loss)
income from continuing operations per share - diluted $ (0.30 ) to
$ 0.40 Same-store hospital annual adjusted admissions decline (2.0
) % to (1.0 ) % Weighted-average diluted shares, in millions 112.0
to 113.0
The following assumptions were used in developing the 2017
guidance provided above:
- The divestiture of 30 hospitals
included in continuing operations, in respect of which the Company
has divested or entered into a definitive agreement, consisting of
ten separate contemplated transactions. These hospitals generated
approximately $3.4 billion of net operating revenues in 2016 with
mid-single digit Adjusted EBITDA margins. The Company assumes these
divestitures will generate approximately $1.95 billion in gross
proceeds, including working capital. The Company assumes all of
these divestitures will close at various dates during the first
nine months of 2017.
- The Company’s projections also exclude
the following:
- Gains associated with the settlement of
the shareholder derivative action in January 2017;
- Payments related to the CVRs issued in
connection with the HMA acquisition, and changes in the valuation
of liabilities underlying the CVR;
- Losses from the early extinguishment of
debt;
- Impairment of goodwill and long-lived
assets;
- Employee termination benefits and
restructuring costs;
- Resolution of government investigations
or other significant legal settlements;
- Costs incurred in connection with the
planned divestitures; and
- Other significant gains or losses that
neither relate to the ordinary course of business nor reflect the
Company’s underlying business performance.
- The Company has two small hospitals
which remain held for sale for which the operating results have
been classified in discontinued operations and have been excluded
from the Company’s guidance.
Other assumptions used in the above guidance:
- Health Information Technology (HITECH)
electronic health records incentive reimbursement of approximately
$25 million to $30 million for the year ending December 31,
2017.
- Same-store hospital annual adjusted
admissions decline of (2.0)% to (1.0)% for 2017, which does not
take into account service closures and weather-related or other
unusual events.
- Expressed as a percentage of net
operating revenues, depreciation and amortization of approximately
5.7% to 5.8% for 2017. Additionally, this is a fixed cost and the
percentages may change as revenue varies. Such amounts exclude the
possible impact of any future hospital fixed asset impairments and
additional hospitals which may be classified as held for sale.
- Interest expense, expressed as a
percentage of net operating revenues, of approximately 5.6% to
5.7%; however, interest expense may vary as revenue varies.
Interest expense has been adjusted to reflect the Company’s
refinancing transactions in March 2017 and May 2017 and the
repayment of debt with proceeds from the anticipated divestitures,
based on the expected timing of those divestitures. Projected
interest expense does not consider any future refinancing
transactions. Total fixed rate debt, including swaps, is expected
to average approximately 75% to 85% of total debt during 2017.
- Expressed as a percentage of net
operating revenues, net income attributable to noncontrolling
interests of approximately 0.5% to 0.6% for 2017.
- Expressed as a percentage of income
from continuing operations before income taxes, provision for
income taxes of approximately 30.0% to 31.0% for 2017, which
includes the impact of adopting ASU 2016-09 on the tax provision
for the vesting of equity-based compensation.
A reconciliation of the Company’s projected 2017 Adjusted
EBITDA, a forward-looking non-GAAP financial measure, to the
Company’s projected net (loss) income attributable to Community
Health Systems, Inc. stockholders, the most directly comparable
GAAP financial measure, is shown below:
Year Ending December 31, 2017
Low High
Net (loss) income attributable to
Community Health Systems, Inc. stockholders (1)
$ (51 ) $ 28 Adjustments: Depreciation and amortization 925 950
Interest expense, net 900 911 (Benefit from) provision for income
taxes (30 ) 21 Net income attributable to noncontrolling interests
81 90 Adjusted EBITDA (1) $ 1,825 $
2,000
(1)
The Company does not include in this
reconciliation the impact of certain items not included in the
Company’s forecast set forth above that would be included in a
reconciliation of historical net (loss) income attributable to
Community Health Systems, Inc. stockholders to Adjusted EBITDA such
as, but not limited to, losses from early extinguishment of debt,
impairment and (gain) loss on sale of businesses, and expense
(income) related to government and other legal settlements and
related costs, in light of the fact that such items are not
determinable and/or the inherent difficulty in quantifying such
projected amounts on a forward-looking basis.
- Capital expenditures are projected as
follows (in millions):
2017 Guidance
Total $575 to $725
- Net cash provided by operating
activities, excluding cash flows related to the CVR and settlement
of legal contingencies, is projected as follows (in millions):
2017
Guidance Total $975 to $1,125
- Weighted-average shares outstanding are
projected to be between approximately 112 million to 113 million
for 2017.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995
that involve risk and uncertainties. All statements in this press
release other than statements of historical fact, including
statements regarding projections, expected operating results, and
other events that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “thinks,” and similar
expressions, are forward-looking statements. Although the Company
believes that these forward-looking statements are based on
reasonable assumptions, these assumptions are inherently subject to
significant economic and competitive uncertainties and
contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company.
Accordingly, the Company cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking statements.
A number of factors could affect the future results of the Company
or the healthcare industry generally and could cause the Company’s
expected results to differ materially from those expressed in this
press release.
These factors include, among other things:
- general economic and business
conditions, both nationally and in the regions in which we
operate;
- the impact of the potential repeal of
or significant changes to the Affordable Care Act, its
implementation or its interpretation, as well as changes in other
federal, state or local laws or regulations affecting our
business;
- the extent to which states support
increases, decreases or changes in Medicaid programs, implement
health insurance exchanges or alter the provision of healthcare to
state residents through regulation or otherwise;
- the future and long-term viability of
health insurance exchanges, which may be affected by whether a
sufficient number of payors participate as well as the impact of
the 2016 federal elections on the Affordable Care Act;
- risks associated with our substantial
indebtedness, leverage and debt service obligations, including our
ability to refinance such indebtedness on acceptable terms or to
incur additional indebtedness;
- demographic changes;
- changes in, or the failure to comply
with, governmental regulations;
- potential adverse impact of known and
unknown government investigations, audits, and federal and state
false claims act litigation and other legal proceedings;
- our ability, where appropriate, to
enter into and maintain provider arrangements with payors and the
terms of these arrangements, which may be further affected by the
increasing consolidation of health insurers and managed care
companies;
- changes in, or the failure to comply
with, contract terms with payors and changes in reimbursement rates
paid by federal or state healthcare programs or commercial
payors;
- any potential additional impairments in
the carrying value of goodwill, other intangible assets, or other
long-lived assets, or changes in the useful lives of other
intangible assets;
- changes in inpatient or outpatient
Medicare and Medicaid payment levels;
- the effects related to the continued
implementation of the sequestration spending reductions and the
potential for future deficit reduction legislation;
- increases in the amount and risk of
collectability of patient accounts receivable, including decreases
in collectability which may result from, among other things,
self-pay growth in states that have not expanded Medicaid and
difficulties in recovering payments for which patients are
responsible, including co-pays and deductibles;
- the efforts of insurers, healthcare
providers and others to contain healthcare costs, including the
trend toward value-based purchasing;
- our ongoing ability to demonstrate
meaningful use of certified electronic health record technology and
recognize income for the related Medicare or Medicaid incentive
payments to the extent such payments have not expired;
- increases in wages as a result of
inflation or competition for highly technical positions and rising
supply and drug costs due to market pressure from pharmaceutical
companies and new product releases;
- liabilities and other claims asserted
against us, including self-insured malpractice claims;
- competition;
- our ability to attract and retain, at
reasonable employment costs, qualified personnel, key management,
physicians, nurses and other healthcare workers;
- trends toward treatment of patients in
less acute or specialty healthcare settings, including ambulatory
surgery centers or specialty hospitals;
- changes in medical or other
technology;
- changes in U.S. generally accepted
accounting principles;
- the availability and terms of capital
to fund any additional acquisitions or replacement facilities or
other capital expenditures;
- our ability to successfully make
acquisitions or complete divestitures, including the disposition of
hospitals and non-hospital businesses pursuant to our portfolio
rationalization and deleveraging strategy, our ability to complete
any such acquisitions or divestitures on desired terms or at all
(including to realize the anticipated amount of proceeds from
contemplated dispositions), the timing of the completion of any
such acquisitions or divestitures, and our ability to realize the
intended benefits from any such acquisitions or divestitures;
- the impact that changes in our
relationships with joint venture or syndication partners could have
on effectively operating our hospitals or ancillary services or in
advancing strategic opportunities;
- our ability to successfully integrate
any acquired hospitals, including those of HMA, or to recognize
expected synergies from acquisitions;
- the impact of seasonal severe weather
conditions;
- our ability to obtain adequate levels
of general and professional liability insurance;
- timeliness of reimbursement payments
received under government programs;
- effects related to outbreaks of
infectious diseases;
- the impact of the external, criminal
cyber-attack suffered by us in the second quarter of 2014,
including potential reputational damage, the outcome of our
investigation and any potential governmental inquiries, the outcome
of litigation filed against us in connection with this
cyber-attack, the extent of remediation costs and additional
operating or other expenses that we may continue to incur, and the
impact of potential future cyber-attacks or security breaches;
- any failure to comply with the terms of
the Corporate Integrity Agreement;
- the concentration of our revenue in a
small number of states;
- our ability to realize anticipated cost
savings and other benefits from our current strategic and
operational cost savings initiatives; and
- the other risk factors set forth in our
other public filings with the Securities and Exchange
Commission.
The consolidated operating results for the three and six months
ended June 30, 2017, are not necessarily indicative of the results
that may be experienced for any future periods. The Company
cautions that the projections for calendar year 2017 set forth in
this press release are given as of the date hereof based on
currently available information. The Company undertakes no
obligation to revise or update any forward-looking statements, or
to make any other forward-looking statements, whether as a result
of new information, future events or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170801006609/en/
Community Health Systems, Inc.Thomas J. Aaron,
615-465-7000Executive Vice President and Chief Financial
Officer
Community Health Systems (NYSE:CYH)
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