FRANKLIN -- Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today announced financial and operating results for the three and nine months ended September 30, 2022.

The following highlights the financial and operating results for the three months ended September 30, 2022.

• Net operating revenues totaled $3.025 billion.
• Net loss attributable to Community Health Systems, Inc. stockholders was $(42) million, or $(0.32) per share (diluted), compared to net income of $111 million, or $0.85 per share (diluted), for the same period in 2021. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to Community Health Systems, Inc. stockholders was $(0.52) per share (diluted), compared to net income of $0.69 per share (diluted) for the same period in 2021.
• Adjusted EBITDA was $400 million, including $115 million of pandemic relief funds.
• Net cash provided by operating activities was $137 million for the three months ended September 30, 2022, compared to $121 million for the same period in 2021.
• Approximately $267 million principal amount of notes outstanding were extinguished through open market repurchases during the three months ended September 30, 2022.
• On a same-store basis, admissions decreased 2.2 percent and adjusted admissions increased 5.2 percent, compared to the same period in 2021.
• Hurricane Ian in Florida impacted the results of operations for the three months ended September 30, 2022, resulting in a loss of net operating revenues together with incremental expenses currently estimated at approximately $10 million in the aggregate on a pre-tax basis. This amount does not include any insurance recoveries that the Company may receive.

Commenting on the results, Tim L. Hingtgen, chief executive officer of Community Health Systems, Inc., said, “First, I am proud of our healthcare teams in Florida who continuously maintained their operations during Hurricane Ian and in the aftermath of the storm. They provided uninterrupted and essential healthcare services, under the most difficult circumstances, and we appreciate their commitment to the people and communities they serve.”

Hingtgen went on to say, “Against a continued backdrop of challenging industry and environmental factors in the third quarter, we focused our efforts on making important sequential progress in key areas. We were successful at driving stronger surgical volumes and also saw other volume indicators rebound midway through the quarter. Likewise, strong expense management programs, a significant reduction in contract labor, and other operational adjustments helped mitigate inflationary costs pressures. As these trends continue and we aggressively pursue our best strategic opportunities, we expect to drive incremental growth moving forward.”

Three Months Ended September 30, 2022

Net operating revenues for the three months ended September 30, 2022, totaled $3.025 billion, a 2.9 percent decrease compared to $3.115 billion for the same period in 2021. On a same-store basis, net operating revenues decreased 2.3 percent for the three months ended September 30, 2022, compared to the same period in 2021. Net operating revenues for the three months ended September 30, 2022, reflect a 3.7 percent decrease in admissions and a 3.8 percent increase in adjusted admissions, compared to the same period in 2021. On a same-store basis, admissions decreased 2.2 percent and adjusted admissions increased 5.2 percent for the three months ended September 30, 2022, compared to the same period in 2021.

Net loss attributable to Community Health Systems, Inc. stockholders was $(42) million, or $(0.32) per share (diluted), for the three months ended September 30, 2022, compared to net income of $111 million, or $0.85 per share (diluted), for the same period in 2021. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to Community Health Systems, Inc. stockholders was $(0.52) per share (diluted) for the three months ended September 30, 2022, compared to net income of $0.69 per share (diluted) for the same period in 2021. Pandemic relief funds, as more specifically described below, had a positive impact on net (loss) income attributable to Community Health Systems, Inc. stockholders (both on a consolidated and adjusted basis) of approximately $84 million, or $0.65 on a per share (diluted) basis, for the three months ended September 30, 2022, and $14 million, or $0.11 on a per share (diluted) basis, for the same period in 2021.

Adjusted EBITDA for the three months ended September 30, 2022, was $400 million compared to $482 million for the same period in 2021. Pandemic relief funds had a positive impact on Adjusted EBITDA of approximately $115 million and $19 million for the three months ended September 30, 2022 and 2021, respectively.

The net loss attributable to Community Health Systems, Inc. stockholders for the three months ended September 30, 2022, compared to net income for the same period in 2021 and the decrease in Adjusted EBITDA for the three months ended September 30, 2022, compared to the same period in 2021, is primarily due to lower net operating revenues as a result of fewer inpatient admissions, due in part to Hurricane Ian, lower acuity of inpatient admissions and surgeries and unfavorable changes in payor mix, as well as continued expense pressures including contract labor expense. While contract labor continues to decline sequentially, it remains elevated compared to the prior year period.

Nine Months Ended September 30, 2022

Net operating revenues for the nine months ended September 30, 2022, totaled $9.069 billion, a 0.7 percent decrease compared to $9.135 billion for the same period in 2021. On a same-store basis, net operating revenues increased 0.1 percent for the nine months ended September 30, 2022, compared to the same period in 2021. Net operating revenues for the nine months ended September 30, 2022, reflect a 2.9 percent decrease in admissions and a 1.8 percent increase in adjusted admissions, compared to the same period in 2021. On a same-store basis, admissions decreased 1.3 percent and adjusted admissions increased 3.1 percent for the nine months ended September 30, 2022, compared to the same period in 2021.

Net loss attributable to Community Health Systems, Inc. stockholders was $(369) million, or $(2.86) per share (diluted), for the nine months ended September 30, 2022, compared to net income of $52 million, or $0.40 per share (diluted), for the same period in 2021. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to Community Health Systems, Inc. stockholders was $(2.92) per share (diluted) for the nine months ended September 30, 2022, compared to net income of $1.29 per share (diluted) for the same period in 2021. Pandemic relief funds, as more specifically described below, had a positive impact on net (loss) income attributable to Community Health Systems, Inc. stockholders (both on a consolidated and adjusted basis) of approximately $125 million, or $0.97 on a per share (diluted) basis, for the nine months ended September 30, 2022, and approximately $77 million, or $0.59 on a per share (diluted) basis, for the same period in 2021.

Adjusted EBITDA for the nine months ended September 30, 2022, was $1.062 billion compared to $1.429 billion for the same period in 2021. Pandemic relief funds had a positive impact on Adjusted EBITDA of approximately $171 million and $102 million for the nine months ended September 30, 2022 and 2021, respectively.

The net loss attributable to Community Health Systems, Inc. stockholders for the nine months ended September 30, 2022, compared to net income for the same period in 2021 and the decrease in Adjusted EBITDA for the nine months ended September 30, 2022, compared to the same period in 2021, is primarily due to a decline in net operating revenues from fewer inpatient admissions, which was not fully offset by the increase in outpatient visits and surgeries. Also, a lower acuity of services was partially offset by improved reimbursement rates. Wage inflation and higher costs for contract labor resulted in increased operating expenses compared to the prior year period.

Open Market Note Repurchases

During August and September of 2022, the Company extinguished approximately $267 million principal amount of notes through open market repurchases, resulting in the recognition of a pre-tax gain from early extinguishment of debt of approximately $78 million during the three months ended September 30, 2022.

Pandemic Relief Funds

The Company received (returned) pandemic relief fund payments through various federal, state and local programs of approximately $108 million and $(4) million during the three months ended September 30, 2022 and 2021, respectively, and approximately $160 million and $4 million for the nine months ended September 30, 2022 and 2021, respectively. The Company recognized pandemic relief funds eligible to be claimed as a reduction in operating costs and expenses of approximately $115 million and $19 million during the three months ended September 30, 2022 and 2021, respectively, and approximately $171 million and $102 million for the nine months ended September 30, 2022 and 2021, respectively. Amounts recognized are denoted by the caption “pandemic relief funds” in the condensed consolidated statements of (loss) income. Pandemic relief funds that have not yet been recognized as a reduction in operating costs and expenses or otherwise refunded to the U.S. Department of Health and Human Services or the various state and local agencies as of September 30, 2022, totaled approximately $4 million and are reflected within accrued liabilities-other in the condensed consolidated balance sheet.

Other

Certain of the Company’s facilities in Florida experienced interruption in business and incurred additional costs as a direct result of Hurricane Ian which made landfall in late September 2022. The Company currently estimates that this hurricane resulted in an estimated loss of net operating revenues together with incremental expenses directly related to hurricane response efforts of approximately $10 million in the aggregate on a pre-tax basis during the three months ended September 30, 2022. The impact on net operating revenues is the direct result of the evacuations and population disruption prior to the hurricane, as well as during the aftermath and recovery efforts in the affected communities. This estimated impact is prior to any insurance recoveries which the Company may receive and which, due to the requirement to account for such amounts as gain contingencies, will not be recognized until future periods. Due to the timing of this event, it is expected that the above estimate would be updated in the fourth quarter to account for the impact of additional lost revenues and incremental expenses for continued clean-up and remediation efforts.

The Company completed the divestiture of one hospital on July 1, 2022 (in respect of which the Company received proceeds at a preliminary closing on June 30, 2022), the closure of one hospital and the near-complete closure (through the cessation of the provision of inpatient services and substantially all outpatient services) of one hospital during the three months ended September 30, 2022. Financial and statistical data for 2022 and 2021 presented in this press release includes the operating results of divested or closed businesses for the periods prior to the consummation of the respective divestiture or closure. Same-store operating results exclude businesses divested in 2021 and 2022, businesses closed or substantially closed in 2022 and one hospital opened in 2022.

Effective October 1, 2022, Healthtrust Purchasing Group, L.P. (“HPG”), a group purchasing organization in which the Company is a noncontrolling partner, completed the sale of a majority interest in CoreTrust Holdings, LLC (“CoreTrust”) to a third party. Proceeds for the sale of interest in CoreTrust were distributed to members of HPG at a preliminary closing on September 30, 2022, and the Company received approximately $121 million in connection with such distribution. Completion of the transaction represents a nonrecognized subsequent event and therefore, proceeds received by the Company are recorded in accrued liabilities – other in the condensed consolidated balance sheets as of September 30, 2022. The Company expects to recognize the majority of the proceeds into income during the three months ended December 31, 2022.

Information About Non-GAAP Financial Measures

This press release presents Adjusted EBITDA, a non-GAAP financial measure, which is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude loss (gain) from early extinguishment of debt, impairment and (gain) loss on sale of businesses, gain on sale of equity interests in Macon Healthcare, LLC, expense related to government and other legal matters and related costs, expense incurred in the fourth quarter of 2020 related to the settlement of certain professional liability claims for which the third-party insurers’ obligation to insure the Company against the underlying loss was being litigated along with income during the fourth quarter of 2021 associated with the settlement of such litigation for the recovery of amounts covered by such third-party insurance policies, expense related to employee termination benefits and other restructuring charges, and expense from settlement and fair value adjustments on the contingent value right agreement liability related to the Health Management Associates, Inc. (“HMA”) legal proceedings and related legal expenses. For information regarding why the Company believes Adjusted EBITDA provides useful information to investors, and for a reconciliation of Adjusted EBITDA to net (loss) income attributable to Community Health Systems, Inc. stockholders, see footnote (c) to the Financial Highlights, Financial Statements and Selected Operating Data below. Additionally, this press release presents adjusted net (loss) income attributable to Community Health Systems, Inc. stockholders per share (diluted), a non-GAAP financial measure, to reflect the impact on net (loss) income attributable to Community Health Systems, Inc. stockholders per share (diluted) from the selected items used in the calculation of Adjusted EBITDA. For information regarding why the Company believes this non-GAAP financial measure provides useful information to investors, and for a reconciliation of this non-GAAP financial measure to net (loss) income attributable to Community Health Systems, Inc. stockholders per share (diluted), see footnote (e) to the Financial Highlights, Financial Statements and Selected Operating Data below.

The non-GAAP financial measures set forth above are not measurements of financial performance under U.S. GAAP, and should not be considered in isolation or as a substitute for any financial measure calculated in accordance with U.S. GAAP. Additionally, the calculation of these non-GAAP financial measures may not be comparable to similarly titled measures disclosed by other companies.

The Company’s annual earnings guidance for 2022, as provided on July 27, 2022, is reaffirmed. The 2022 guidance is based on the Company’s historical operating performance, current trends, and other assumptions the Company believes are reasonable at this time. Assumptions underlying the annual earnings guidance provided on July 27, 2022 are unchanged.

Community Health Systems, Inc. is one of the nation’s largest healthcare companies. The Company’s affiliates are leading providers of healthcare services, developing and operating healthcare delivery systems in 47 distinct markets across 16 states. As of October 26, 2022, the Company’s subsidiaries own or lease 81 affiliated hospitals with approximately 13,000 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.

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 Thursday, October 27, 2022, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review financial and operating results for the third quarter ended September 30, 2022. 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. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately 30 days. 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.