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Community Health Systems, Inc. Announces Second Quarter 2021 Results


 

Community Health Systems, Inc. (NYSE: CYH) (the "Company") announced financial and operating results for the three and six months ended June 30, 2021.

The following highlights the financial and operating results for the three months ended June 30, 2021.

  • Net operating revenues totaled $3.007 billion.
  • Net income attributable to Community Health Systems, Inc. common stockholders was $6 million, or $0.04 per share (diluted), compared with net income of $70 million, or $0.61 per share (diluted), for the same period in 2020. Excluding the adjusting items as presented in the table in footnote (e) on page 17, net income attributable to Community Health Systems, Inc. common stockholders was $0.23 per share (diluted), compared to net income of $0.85 per share (diluted) for the same period in 2020.
  • Adjusted EBITDA was $453 million.
  • Net cash provided by operating activities was $179 million, which included repayments of Medicare accelerated payments in the amount of approximately $116 million. Net cash provided by operating activities was $1.652 billion for the same period in 2020, which included receipts of Medicare accelerated payments in the amount of approximately $1.158 billion.
  • On a same-store basis, admissions increased 17.0 percent and adjusted admissions increased 28.5 percent, compared with the same period in 2020.

Net operating revenues for the three months ended June 30, 2021, totaled $3.007 billion, a 19.4 percent increase compared with $2.519 billion for the same period in 2020.

Net income attributable to Community Health Systems, Inc. common stockholders was $6 million, or $0.04 per share (diluted), for the three months ended June 30, 2021, compared with $70 million, or $0.61 per share (diluted), for the same period in 2020. Excluding the adjusting items as presented in the table in footnote (e) on page 17, net income attributable to Community Health Systems, Inc. common stockholders was $0.23 per share (diluted) for the three months ended June 30, 2021, compared to $0.85 per share (diluted) for the same period in 2020. Payments received by the Company through the Public Health and Social Services Emergency Fund (the "PHSSEF") and state and local pandemic relief programs had a positive impact on net income attributable to Community Health Systems, Inc. common stockholders (both on a consolidated and adjusted basis) of approximately $333 million, or $2.89 on a per share (diluted) basis, for the three months ended June 30, 2020. Weighted-average shares outstanding (diluted) were 131 million and 115 million for the three months ended June 30, 2021 and 2020, respectively.

Adjusted EBITDA for the three months ended June 30, 2021, was $453 million compared with $454 million for the same period in 2020. Payments received by the Company through the PHSSEF and state and local pandemic relief programs had a positive impact on Adjusted EBITDA of approximately $1 million and $448 million for the three months ended June 30, 2021 and 2020, respectively.

The consolidated operating results for the three months ended June 30, 2021, reflect a 4.8 percent increase in admissions and a 15.7 percent increase in adjusted admissions, compared with the same period in 2020. On a same-store basis, admissions increased 17.0 percent and adjusted admissions increased 28.5 percent for the three months ended June 30, 2021, compared with the same period in 2020. On a same-store basis, net operating revenues increased 30.2 percent for the three months ended June 30, 2021, compared with the same period in 2020, primarily reflecting recovery from COVID-19 pandemic-induced reductions in volume in 2020.

Net operating revenues for the six months ended June 30, 2021, totaled $6.020 billion, an 8.6 percent increase compared with $5.544 billion for the same period in 2020.

Net loss attributable to Community Health Systems, Inc. common stockholders was $(58) million, or $(0.46) per share (diluted), for the six months ended June 30, 2021, compared with net income of $87 million, or $0.76 per share (diluted), for the same period in 2020. Excluding the adjusting items as presented in the table in footnote (e) on page 17, net income attributable to Community Health Systems, Inc. common stockholders was $0.60 per share (diluted) for the six months ended June 30, 2021, compared to net loss of $(0.73) per share (diluted) for the same period in 2020. Payments received by the Company through the PHSSEF and state and local pandemic relief programs, as more specifically described below, had a positive impact on net income attributable to Community Health Systems, Inc. common stockholders (both on a consolidated and adjusted basis) of approximately $63 million, or $0.50 on a per share (diluted) basis, and approximately $333 million, or $2.90 on a per share (diluted) basis, for the six months ended June 30, 2021 and 2020, respectively. Weighted-average shares outstanding (diluted) were 126 million and 115 million for the six months ended June 30, 2021 and 2020, respectively.

Adjusted EBITDA for the six months ended June 30, 2021, was $948 million compared with $763 million for the same period in 2020. Payments received by the Company through the PHSSEF and state and local pandemic relief programs had a positive impact on Adjusted EBITDA of approximately $83 million and $448 million for the six months ended June 30, 2021 and 2020, respectively.

The consolidated operating results for the six months ended June 30, 2021, reflect a 5.5 percent decrease in admissions and a 2.0 percent decrease in adjusted admissions, compared with the same period in 2020. On a same-store basis, admissions increased 5.1 percent and adjusted admissions increased 8.7 percent for the six months ended June 30, 2021, compared with the same period in 2020. On a same-store basis, net operating revenues increased 19.2 percent for the six months ended June 30, 2021, compared with the same period in 2020, reflecting recovery from COVID-19 pandemic-induced reductions in volume in 2020.

Commenting on the results, Tim L. Hingtgen, chief executive officer of Community Health Systems, Inc., said, "As COVID-19 cases declined during the second quarter, we experienced a solid rebound of non-COVID-19 patient volume. Our strong results in the period were driven by ongoing initiatives to attract new patients, along with efforts to re-engage and retain patients who have previously utilized our healthcare systems. As we continue to position the Company for long-term success, we believe our recent capital investments and other strategic programs are supporting growth, while cost management and margin improvement programs are also adding value. Looking forward to the second half of the year, we remain focused on supporting our clinicians and caregivers and providing high-quality health services for the patients and communities we serve."


Financing Transaction:

The Company recognized a net, pre-tax loss from early extinguishment of debt of approximately $8 million for the three months ended June 30, 2021, primarily as a result of completing a private offering on May 19, 2021 of $1.440 billion aggregate principal amount of 6⅛% Junior-Priority Secured Notes due 2030. The proceeds of this offering, together with cash on hand, were used to redeem the remaining principal amount of the 8⅛% Junior-Priority Secured Notes due 2024 of approximately $1.348 billion and to pay related fees and expenses.


COVID - 19 Pandemic:

COVID-19, a disease caused by a novel strain of coronavirus, materially affected the Company's results of operations during 2020, and continued to affect the Company's results of operations during the three and six months ended June 30, 2021. Federal and state governments have passed legislation, promulgated regulations and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency. Sources of relief include the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"), which was enacted on March 27, 2020, the Paycheck Protection Program and Health Care Enhancement Act (the "PPPHCE Act"), which was enacted on April 24, 2020, the Consolidated Appropriations Act, 2021 (the "CAA"), which was enacted on December 27, 2020, and the American Rescue Plan Act of 2021 (the "ARPA"), which was enacted on March 11, 2021. Together, these stimulus laws authorize over $178 billion in funding to be distributed to hospitals and other healthcare providers through the PHSSEF. In addition to the relief funding, the CARES Act provided for an expansion of the Medicare Accelerated and Advance Payment Program. Various state and local programs also exist to provide relief, either independently or through distribution of monies received via the CARES Act and other enacted federal legislation. The Company has been a beneficiary of these stimulus monies.

Through June 30, 2021, the Company received approximately $712 million in payments through the PHSSEF and various state and local programs on a cumulative basis since their enactment of which approximately $705 million was received during the year ended December 31, 2020, and the balance of which was received during the six months ended June 30, 2021. PHSSEF payments are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic and are not required to be repaid provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing, not using funds received from the PHSSEF to reimburse eligible expenses or lost revenues that other sources have or may be obligated to reimburse, and audit and reporting requirements.

The Company recognized approximately $1 million and $83 million of the PHSSEF and various state and local program payments eligible to be claimed as a reduction in operating costs and expenses during the three and six months ended June 30, 2021, respectively. During the six months ended June 30, 2021, the Company's estimate of the amount of payments received through the PHSSEF or state and local programs for which the Company is reasonably assured of meeting the underlying terms and conditions was updated based on, among other things, expenses incurred in the period that are attributable to the coronavirus, the Company's results of operations during such period as compared to the Company's 2020 budget for the same period in the prior year and the allocation of targeted distribution payments to various subsidiaries. Amounts received through the PHSSEF or state and local programs that have not been recognized as a reduction to operating costs and expenses and otherwise have not been refunded to the U.S. Department of Health and Human Services ("HHS") or state and local agencies as of June 30, 2021, are reflected within accrued liabilities-other in the condensed consolidated balance sheet. Such unrecognized amounts may either be returned to HHS or may be recognized as a reduction in operating costs and expenses in future periods if the underlying conditions for recognition are reasonably assured of having been met.

HHS' interpretation of the underlying terms and conditions of such PHSSEF payments, including auditing and reporting requirements, continues to evolve. In June 2021, HHS issued guidance that set forth deadlines for using and reporting on the use of PHSSEF funds, depending on the dates on which the funds were received. Additional guidance or new and amended interpretations of existing guidance on the terms and conditions of such PHSSEF payments may result in the Company's inability to recognize certain PHSSEF payments, changes in the estimate of amounts recognized, or the derecognition of amounts previously recognized, which (in any such case) may be material.

Medicare accelerated payments of approximately $1.2 billion were received during April 2020. No additional Medicare accelerated payments have been received by the Company since such time, including during the three and six months ended June 30, 2021. Payments under the Medicare Accelerated and Advance Payment Program are advances that must be repaid. Providers are required to repay accelerated payments beginning one year after the payment was issued. After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms. The repayment terms specify that for the first 11 months after repayment begins, repayment will occur through an automatic recoupment of 25% of Medicare payments otherwise owed to the provider during such time. At the end of the eleven-month period, recoupment will increase to 50% for six months. At the end of the six months (or 29 months from the receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, as applicable. In such event, if payment is not received within 30 days, interest will accrue at the rate of 4% per annum from the date the letter was issued and will be assessed for each full 30-day period that the balance remains unpaid.

In April 2021, Centers for Medicare & Medicaid Services ("CMS") began recouping Medicare accelerated payments previously received by the Company. As of June 30, 2021, approximately $116 million has been recouped from the Company by CMS subject to the aforementioned payment terms. Additionally, approximately $18 million and $77 million of amounts previously received were repaid by the Company to CMS or assumed by buyers related to hospitals the Company divested during the six months ended June 30, 2021, and year ended December 31, 2020, respectively. As of June 30, 2021, approximately $680 million of Medicare accelerated payments are reflected within accrued liabilities-other in the condensed consolidated balance sheet while the remaining approximately $267 million are included within other long-term liabilities.

The PHSSEF payments received to date as noted above and payments which the Company may receive in the future under the CARES Act and other stimulus legislation have been and may continue to be beneficial in partially mitigating the impact of the COVID-19 pandemic on the Company's results of operations and financial position. Additionally, the federal government may consider additional stimulus and relief efforts, but the Company is unable to predict whether additional stimulus measures will be enacted or their impact, if any. The Company is unable to assess the extent to which potential ongoing negative impacts on the Company arising from the COVID-19 pandemic will be offset by benefits which the Company may recognize or receive in the future under the CARES Act and other enacted stimulus legislation or any future stimulus measures.


Divestitures and hospital closures
:

The Company completed the divestiture of three hospitals on January 1, 2021, (in respect of which the Company received proceeds at a preliminary closing on December 31, 2020), one hospital on February 1, 2021, and one hospital on April 1, 2021. While the Company's formal portfolio rationalization program concluded as of December 31, 2020 (inclusive of definitive agreements entered into in 2020 for the sales of hospitals which have been completed in 2021), the Company continues to receive interest from potential acquirers for certain of its hospitals, and may, from time to time, consider selling additional hospitals or, if applicable, its unconsolidated equity interests in hospitals if the Company considers any such dispositions to be in its best interests.

Financial and statistical data for 2020 and 2021 presented in this press release includes the operating results of divested or closed hospitals for the periods prior to the consummation of the respective divestiture or hospital closing. Same-store operating results exclude the results of a hospital opened in 2020 and the hospitals divested or closed in 2020 and 2021.

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