CYH - Community Health Systems, Inc.

Operator: Good day, and welcome to the Community Health Systems Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Anton Hie, Vice President of Investor Relations. Please go ahead. Anton Hie: Thank you, Betsy. Good morning, everyone, and welcome to Community Health Systems' Third Quarter 2025 Conference Call. Joining me today on the call are Kevin Hammons, President and Interim Chief Executive Officer; and Jason Johnson, Senior Vice President, Chief Accounting Officer and Interim Chief Financial Officer. Before we begin, I'll remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks as described in headings such as Risk Factors in our annual report on Form 10-K, and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss today exclude gains or losses from early extinguishment of debt, and impairment gains or losses on the sale of businesses. With that said, I'll turn the call over to Kevin Hammons, President and Interim Chief Executive Officer. Kevin? Kevin Hammons: Thank you, Anton. Good morning, everyone, and thank you for joining our third quarter 2025 conference call. Before we jump into discussing the quarter, I want to take a moment to thank the team here at CHS for the support they've shown me and others through the recent transition of senior leadership. It is gratifying to see our team's confidence in the work we are doing here at CHS and their commitment to our future success. Over the past 90 days or so, since stepping into my new role as interim CEO, I've had the opportunity to visit several of our markets and speak with many of our hospital leadership teams, including operational, financial, clinical and service line leaders. It is always inspiring to see the folks who are providing high-quality care for our patients, and helps put into perspective how important our hospitals are to the people and communities they serve. At CHS, we will remain focused on supporting our caregivers, physician partners and support teams to help ensure an exceptional health care experience for our patients. Next month, approximately 150 CEOs and CFOs from across the CHS network will gather for a leadership conference where we will discuss our vision for the future of the company and our ongoing commitment to investments in quality, improving both physician and patient experience, improving employee satisfaction, and achieving sustainable positive free cash flow. As I've shared with many on our team already, I'm very optimistic about the future of CHS and our opportunities to continuously improve the health care experience. To continue to improve our operational and financial performance and to create value for our investors through disciplined and proactive management of our business. Now turning to the third quarter operating results. Our operating performance was in line with our updated expectations. And our reported results were further enhanced by the recognition of a $28 million gain from the settlement with some prior litigation, which reimbursed us for previously incurred expenses. Same-store net revenue for the third quarter improved 6% year-over-year. We were encouraged to see some improvement in payer mix on both a sequential and year-over-year basis as well, as realizing the incremental state directed payments from New Mexico and Tennessee when compared to the prior year. As we have done all year, we continue to grow our inpatient volume. However, similar to last quarter, the overall business mix remains more heavily skewed towards medical versus surgical cases. And inpatient admissions were flat ahead of outpatient elective procedures. However, solid expense management across most categories helped drive slight margin expansion year-over-year, even when excluding the benefit from the legal cell. We continue to make targeted investments in advance our competitive position in many key markets during the quarter, including capacity and service line expansions, such as the acquisition of a vascular surgery practice and the relocation of a large OB/GYN practice onto our campus, both in Birmingham, Alabama. The addition of a new urology service line in Las Cruces, New Mexico, the addition of a new neurosurgery and spine program in Laredo, Texas and new robotic surgery programs in two of our New Mexico markets. We are successfully recruiting physicians and advanced practice providers to our markets. At September 30, 2025, we had approximately 160 more employee physicians and APPs in our clinics than in the prior year. With the recent recruits and plan commencements in the fourth quarter and early next year, we should be favorably positioned as we enter 2026. In addition, we continue to improve our capital structure, further reducing our leverage to 6.7x, down from 7.4x at year-end '24. Also as a reminder, during the quarter, we refinanced $1.74 (sic) [$1.743 billion ] of our Senior Secured Notes due 2027, through the offering of $1.79 billion of 2034 notes, thereby pushing out our nearest significant maturity to 2029. At this point, I want to introduce Jason Johnson, our Interim Chief Financial Officer. And I'll turn the call over to Jason to review the financial results in greater detail and discuss our updated guidance. Jason? Jason Johnson: Thank you, Kevin, and good morning, everyone. For the third quarter, CHS delivered results generally consistent with expectations. The overall volume growth was in line with our updated guidance and with continued solid execution on controllable aspects of our business, the company achieved expansion in adjusted EBITDA margins, and remains on track for the full year. Adjusted EBITDA for the third quarter was $376 million, compared with $347 million in the prior year period, with a margin of 12.2%, increasing 100 basis points year-over-year. Results included $28 million from the receipt of a settlement of a legal matter recognized as nonpatient revenue. When excluding this amount, adjusted EBITDA was $348 million (sic) [ $376 million ] and margin was approximately 11.4%, up 20 basis points from the prior year period. Please note that the nonpatient revenue related to legal settlement is excluded from the same-store metrics provided in our earnings release and supplemental materials. Same-store net revenue for the third quarter increased 6.0% year-over-year, again, driven primarily by rate growth as net revenue per adjusted admission was up 5.6% year-over-year. Same-store inpatient admissions increased 1.3% year-over-year, and adjusted admissions were up 0.3%. Same-store surgeries declined 2.2% and ED visits were down 1.3%. We were encouraged by the sequential volume performance coming out of the second quarter, which was better than our typical seasonal experience in the third quarter. However, as Kevin previously noted, we again experienced a divergence in inpatient surgeries, which were flat year-over-year. And outpatient surgeries, which were down, reflecting continued pressure on consumer demand for elective procedure in our markets. Despite this environment, the company continued to perform well on cost controls, including labor costs. The year-over-year increase in average hourly rate was in line with our expectations and contract labor expense was down slightly on a year-over-year basis. We also performed well again on supplies expense, which were down year-over-year, and as a percentage of net revenue fell 20 basis points to 15.0% when excluding the $28 million legal settlement. While we acknowledge ongoing inflationary pressures and potential incremental upward pressure from tariffs on imported products and raw materials in future periods, we believe that opportunities remain as we stabilize and mature workflows under our ERP. Medical specialist fees were $165 million in the third quarter up approximately 4% year-over-year on a same-store basis, and representing 5.4% of net revenue when excluding the legal settlement, which is generally consistent with recent quarters. We expect continued upward pressure on medical specialist fees in the fourth quarter and into next year, especially in radiology, while increased use of emerging or developing technology, including AI tools should eventually help on this front. Cash flows from operations were $70 million for the third quarter, and $277 million for the year-to-date. Cash flows from operations for the year-to-date as reported includes $126 million in outflows for taxes on gains on sales of hospitals, which are paid out of divestiture proceeds that are reported as investing cash flows. When excluding these cash taxes on divestiture gains, our adjusted cash flows from operations were $403 million for the year-to-date, and adjusted free cash flows were slightly negative for the year-to-date. Based on our historical performance, in which the fourth quarter operating cash flows are typically the strongest of the year, we remain confident in our ability to achieve positive free cash flow for the full year of 2025 after adjusting for cash taxes paid on divestiture gain. In August, we refinanced substantially all of our 2027 maturities, using proceeds from an offering of $1.79 billion and 9.75% Senior Secured Notes due 2034, to redeem via a tender offer $1.743 billion, or 99%, of our outstanding 2027 Senior Secured Notes. As Kevin previously noted, leverage at quarter end was 6.7x, down from 7.4x at year-end 2024, and our next significant maturity is in 2029, providing ample runway to continue executing our strategic initiatives. As expected, in October, we received $91 million in contingent cash consideration related to last year's divestiture Tennova Cleveland. We also continue to expect the divestiture of our outreach lab asset to close later this quarter with proceeds of approximately $195 million, which will provide additional liquidity to fund growth investments or further reduce our leverage. Now moving on to our updated 2025 financial guidance. Based on our operating results through the first 9 months, along with the benefit from the legal settlement that was not contemplated in the previous guidance, we are tightening our adjusted EBITDA range for the full year 2025 to $1.50 billion to $1.55 billion. Consistent with our prior approach, this guidance does not contemplate any further divestitures beyond those announced, nor does it assume contribution from any new or pending supplemental payment programs. This concludes our prepared remarks. So at this time, we will turn the call back over to the operator for Q&A. Operator: [Operator Instructions] The first question today comes from Brian Tanquilut with Jefferies. Brian Tanquilut: Congrats on the quarter. Maybe, Kevin, as I think about volume performance, obviously, nice to see the positive trend in inpatient. But on the outpatient side, you still saw some weakness in surgeries and ER. Just any thoughts you can share with us in terms of what you're seeing in terms of the recovery of volumes there? Or how are you guys thinking internally in terms of what that trajectory looks like? And maybe also the components of what outpatient is, and what you're seeing in those buckets? Kevin Hammons: Thanks, Brian. Absolutely. So as we called out in the second quarter, and as I believe we still saw in the third quarter, some of the economic headwinds, more the macroeconomics, the climate and consumer confidence seems to be the big headwind. And I think that continued on into the third quarter, particularly in some of our markets are experiencing some heavier or more softness economically than other markets. . And so we still believe that has been the primary driver of some of the softness now. As consumer confidence seems to be stabilizing, it's bounced off its lows in the second quarter a little bit and seems to be improving. We are seeing some recovery, and I think that we experienced that where we saw some improvement in payer mix into the third quarter, and we're certainly experiencing that in some of our markets. So that gives us a little more confidence as the payer mix improves and people are feeling better. They're starting to come back in for more procedures. Our -- although we were still down on an outpatient elective surgery volume year-over-year, it was improved over second quarter. So we did see some improvement there. I'd also point out maybe that the immigration climate probably is affecting some of our markets still if you think about markets in Arizona, across Texas, primarily, there's still probably a little bit of an overhang there where patient behavior, people are staying away from hospitals, at least on an elective basis more than we've seen in the past. Now we're also experiencing, or noticing that, in our ER business. And many of those are uncompensated. So where you're seeing some lower volume and maybe why that hasn't completely been noticed in our EBITDA generation is because some of that volume that we're seeing lots of volume, particularly in the ERs and uncompensated care. And so that has not had an EBITDA -- negative EBITDA impact on it. Brian Tanquilut: That's very helpful, Kevin. And then maybe just a follow-up question for me. How should we be thinking about your divestiture kind of plans or outlook for 2026? Kevin Hammons: Yes, we're still pursuing. Some divestitures were in some early conversations that -- it's too early at this point. We don't know how far those will go. But certainly, we're continuing to get some inbound interest. We are in some more advanced discussions on a couple of deals, which we think could be announced even later this year. But no agreements have been signed at this point. So nothing to report today that we are advancing some discussions... Operator: The next question comes from A.J. Rice with UBS. Albert Rice: First of all, I guess, you're moving towards this year. It sounds like you think you'll be free cash flow positive on a full year 2025 basis, assuming the fourth quarter comes in with a couple of hundred million positive for you. Is that -- as you begin to move to a position where that's ongoing going to be the case. Does that change your thinking on capital deployment, amount of CapEx you're going to spend, other initiatives, maybe tuck-in deals with outpatient or other things? Any thoughts on that? Kevin Hammons: Thanks, A.J. Absolutely, I think that it frees us up a little bit and does allow us to think, and be a little more strategic in terms of how we think about either deploying capital. It gives us some optionality of whether we use incremental free cash flows to further delever the company to -- which in effect would have a virtuous cycle benefit because it reduced future cash flows. We could use it where there are opportunities for some tuck-in deals to spend capital more strategically in areas of things that we think could generate further EBITDA. So it does free stuff and should then again, create a little more of a virtuous cycle for us. Albert Rice: Okay. And then, I mean it's early, I know, but when you look at '26 and you're starting your budgeting process, et cetera. Are there headwinds or tailwinds that you would call out that we should keep in mind as we try to model '26? Kevin Hammons: Yes. I think I could point out a few things. Certainly taking into consideration the divestitures that we've completed this year, Lake Norman and ShorePoint early in the year, Cedar Park divestiture kind of midyear. We did recognize some prior year SVP for Tennessee that's about $15 million to $20 million that we'll have this year towards the settlement gain that we recognized this quarter. As I think about 2026, directionally, some of the things -- Medicare rate increase will be strong for 2026. We potentially there's a couple of other SVP programs out there in Georgia, Florida, Indiana, the rural health fund, which we don't know, can't quantify at this point, but that should be incrementally positive for us. And then we're making -- continue to make some growth investments. And as you just mentioned with positive free cash flow this year continue on into next year may allow us to further invest in incremental growth capital. Jason Johnson: I might add, Kevin, this is Jason, that you might want to include that $28 million legal settlement this quarter. Exclude that from the jump off from the 2025. Operator: The next question comes from Ben Hendrix with RBC Capital Markets. Benjamin Hendrix: Just a quick question for Kevin and Jason in turn. Just a little bit more color on your early observations in your roles. Kevin, you mentioned you've visited some facilities, any surprises or anything out of expectation in your review of the platform? And then any initiatives you guys are looking at? You talked a little bit already about capital deployment. But anything in operations or balance sheet management that could kind of deviate from your prior practice? Kevin Hammons: Thanks, Ben. I appreciate the question. I think the short answer is to say, I'm really excited about the direction of the company, and I'm confident that we have the right strategies and people in place to execute on our opportunities. We've had a -- I believe, a very smooth transition of leadership. And I believe we're already picking up momentum in a number of key areas. As I mentioned in my prepared remarks, we have taken the time to visit several local health systems. We've met with health system leaders and I think substantially all of our major markets already. They're very enthusiastic about the progress we're making. And I just -- and becoming increasingly confident that our investments, our strategic priorities, and the resources that we're appropriately laser-focused on those most important aspects of our business. I think we'll see some of that come to fruition here in the near term with a few areas. I'm highly focused on quality of care. So our quality, ratings, our patient and physician experience, employee satisfaction, and I won't take my CFO hat on, and I'll continue to be laser-focused on free cash flow and making sure we've made such great progress over the last, probably, 9 quarters in a row on free cash flow trending positively, now that we're getting to kind of cross over from being negative to positive free cash flow. I think that's going to give us a lot more opportunity. So as I think though about those kind of 5 priority areas for myself and the progress that we're already making on quality and getting focused on the others. I think that will help really accelerate what we can do in the future. Jason Johnson: Brian, this is Jason. Kevin alluded to as CFO hat so. I'm in the position of following the guy who's still here. And Kevin put into place to focus on adjusted free cash flow in that virtuous cycle, and that's -- we're continuing to make sure that we're laser focused on that. So no change there. I do think about that, we got the ERP fully implemented earlier this year. So continuing to optimize that as a big focus. Evaluation of the most efficient use of proceeds from any divestitures, whether that's investment in capital or deleveraging through debt repurchases. So from my standpoint, it's just -- I've been here with Kevin for a number of years. So I understand what his vision is financially and aligned with it and we're continuing on. Benjamin Hendrix: Great. Appreciate that. Just a quick follow-up to a prior comment. With the sequential surgical trend you saw from 2Q into 3Q, anything changing in the way we should think about typical 4Q elective seasonality? Kevin Hammons: I do feel that with the improvement in payer mix in Q3, it gives me a little more confidence that Q4 could look more like the normal seasonal recovery. There was some concern that if commercial patients did not come back in Q3, and you get late in the year and people have not met their co-pay and deductible yes, they may put it off until early 2026. It's looking less likely that, that will occur. But with the continued kind of headlines around health care and some uncertainty, we did not want to get ahead of ourselves in terms of guidance, or suggesting that it could be better. But I think we're in a pretty good position coming into Q4. There's also potentially an opportunity that people are concerned who have exchange insurance, about losing it. There may be some more of that comes back in Q4. It's a relatively small component of our net revenues, is less than 5% of our net revenues. So I don't think it's a real material needle mover for us, but it potentially could be a slight positive. Operator: The next question comes from Andrew Mok with Barclays. Andrew Mok: I think I want to just follow up on some of those encouraging volume trends. Were those trends you saw exiting 3Q, or at the start of 4Q? And from a category standpoint, what are you seeing? And is the payer mix improvement generally driven more by the employer-based coverage, or the ACA? Kevin Hammons: So we saw the payer mix improvements really beginning early Q3 in July. So the -- we saw that improvement throughout Q3. So I think our expectation would be that, that will likely continue into Q4. Now from a comp perspective, Q4 of 2024 was strong and particularly kind of the post-election period, we saw consumer confidence kind of spike in Q4 of last year. So we will have that to climb over. But all in all, directionally and sequentially, I would say that we should continue -- or we expect that we could continue to see some improvement Q3 to Q4. In terms of where we're seeing improvement in terms of the breakdown? It was primarily in commercially insured business, although we did see improvement in exchange as well. But again, the exchange business is a relatively small component of our overall net revenues. Andrew Mok: Great. And on the government side of things, Indiana is one of your largest states, which I think has the large -- one of the largest declines in state Medicaid enrollment to date. Are you seeing the impact of tighter Medicaid eligibility in states like Indiana impact your Medicaid volume results? Kevin Hammons: We've not. We've not experienced any significant impact, specifically to Indiana from that. Operator: The next question comes from Jason Cassorla with Guggenheim. Jason Cassorla: Can you guys hear me? Kevin Hammons: Yes Jason. Jason Cassorla: Okay. Got it. I just wanted to touch quickly. I think you noted kind of thinking about 2026 and the favorable Medicare IPPS coming in. Obviously, the -- we're waiting on the final outpatient rule. But like as you think about -- if the outpatient were to come in as proposed, like how do you think about the net of those two pieces as it relates to 2026? Were they largely offset each other? Or are there nuances from a Medicare rate perspective if the OPPS comes in as proposed? Kevin Hammons: I would say with the proposed outpatient, but we know an inpatient proposed outpatient, I still think it's a little net positive to 2026 over 2024. Sorry, 2025. Jason Cassorla: Okay. Great. And maybe just more of a high-level question. On the ambulatory front, I know you have new access points opening up, including a few ASCs. But as you step back, can you just discuss your ambulatory strategy or remind us, help frame maybe what inning you're in, in terms of building out those access points and how that's helped your market share position? And anything else along those front would be very helpful. Kevin Hammons: Sure. So we are -- continue to look at access points. We've been investing in those for some time. I think each market -- in our markets, each market is a little bit different. We've taken a little different strategy in those markets where we've had capacity constraints on the inpatient side. We have invested in more inpatient dollars, such as this past year, we opened up new towers in Knoxville, Tennessee, where we added, I believe, 58 beds, and we added a new patient tower in Foley, Alabama. Both of those markets, we had capacity constraints. Currently, we do not have any of those kind of larger construction projects on the inpatient side in flight. And so as we kind of move through '25 into 2026, more of our dollars will be focused on the access points, whether that's urgent care, freestanding EDs, ASCs, and so forth. And so I think those are lower dollar. We can do more of them kind of for the same amount of capital. Now we have been opening 3 to 4 freestanding EDs per year. We have, I believe, 3 ASCs scheduled for opening this quarter here in 2025 -- in the fourth quarter of 2025. We'll probably target kind of 6 to 8 ASCs for next year in 2026 along with some additional freestanding EDs and possibly some urgent care centers. And then we're always also acquiring clinics and hiring new doctors into our existing clinics as well. Operator: The next question comes from Stephen Baxter with Wells Fargo. Unknown Analyst: This is Mitchell on for Steve. Can you please highlight what drove the 5.6% growth in same-store revenue per admission, and kind of what you see as a sustainable rate there? Jason Johnson: Steven, this is Jason. About 1/3 of that 5.6% improvement in same-store net revenue per AA is a result of the Tennessee and New Mexico state-directed payments programs that were approved in the second quarter. And then the rest of the improvement is payer mix related. And there is some offset. We did have a little bit lower acuity. Kevin Hammons: I might -- just to add in terms of kind of what's sustainable. We think a mid-single-digit net revenue growth and net revenue per growth is a sustainable number. And between your Medicare rate increases our commercial rate increases, we expect acuity to recover going forward. Right now, there is some dilutive impact on the net revenue per AA with the softer outpatient surgeries, particularly orthopedic and cardiac surgeries, which have been areas of softness. But as those come back, we should see a lift in the net revenue per AA, just that they're higher acuity services. Operator: The next question comes from Josh Raskin with Nephron. Josh, your line is open. You may now ask your questions. We appear to have lost connection with Josh... Joshua Raskin: I'm sorry, do you guys hear me? Kevin Hammons: We can. Joshua Raskin: Sorry. Can you speak to trends from payers around denials and underpayments, maybe just an update there and more importantly, around maybe the mitigation of those pressures? And I'm curious if you're using any external vendors? Or is it all internal services on the RCM side and maybe any changes that have been there through the year? Kevin Hammons: Sure. So we called out really third quarter last year and in 2024, a big spike in denials. And since that time, it's stabilized. It is not really gotten any worse. But we continue to invest in our physician adviser program. We're investing in some AI tools in terms of how we do denials with our internal revenue recycle team. We are using a combination of third-party vendors as well as internally developed products on that for purposes of our revenue cycle team. Our revenue cycle is managed internally with our own team that they do use a combination of products. So as we get better at it, I would say we've been able to kind of hold things stable, which would indicate that the payers are probably also denying more claims, but we've been more efficient or better at overturning some of those denials in order to kind of keep things status quo. Joshua Raskin: Perfect. Perfect. That's helpful. And maybe just a quick one. Flu season. It seems like off to a little bit of a slow start. I assume that's contemplated in guidance, and I'd be curious if you guys are seeing any updates into October as we kind of move into flu season? Kevin Hammons: Yes. It is contemplated in guidance, and we haven't seen any big pickup yet in our facilities and the heavy flu. So at this point, I'm not sure we'll -- what we'll see yet for the remainder of the quarter, but we have kind of taken that into consideration. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Hammons for any closing remarks. Kevin Hammons: Thank you, everyone, for joining us on the call today. I want to close by reiterating my thanks for our team members at CHS for their commitments and confidence through the leadership transition as we approach the future together. If you have any additional questions, you can always reach us at (615) 465-7000. Have a good day, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Community Health Systems Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Anton Hie, Vice President of Investor Relations. Please go ahead, sir. Anton Hie: Thank you, Chuck. Good morning, and welcome to Community Health Systems Second Quarter 2025 Earnings Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; and Kevin Hammons, President and Chief Financial Officer. Before we begin, I must remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described under headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss today exclude gains from early extinguishment of debt, impairment gains or losses on the sale of businesses and expense from business transformation costs. With that said, I'll turn the call over to Tim Hingtgen, Chief Executive Officer. Tim L. Hingtgen: Thank you, Anton. Good morning, everyone, and thank you for joining our second quarter 2025 conference call. Before we get to the quarter's results, I want to address the announcement made yesterday afternoon that I decided to retire at the end of September. I'm stepping back from my role as CEO for personal reasons, the most important one being that I want to dedicate more time to my family and personal pursuits. And while I have loved the opportunity to serve as the leader of an organization that is devoted to helping people get well and live healthier, the job of CEO requires the highest degree of time, energy and commitment, and my family has very generously supported me in my commitment to giving everything I have to leading this organization. I've been thinking about that a lot this year. I want to be more present for them at this stage of my life and at this stage in theirs. I also have some personal pursuits that I want to explore while I'm still young enough and eager enough to try new things. This is not a decision that was made easily or quickly or without regard to what's best for CHS. I wrestled with whether to retire and when to retire in part out of a sense of loyalty to the organization, but even more than that, out of my sincere desire to continue to be a part of the progress happening in this company and the opportunities and achievements I still see ahead. Those will continue to happen under Kevin's leadership, I am sure. But after thinking about it a lot and consulting with my family, this is the appropriate decision. Let's call it a difficult, honest and for me, a necessary choice. I'll be here through the end of September to support a seamless transition. But truthfully, Kevin could step into the role of CEO today and things would be just fine. He knows CHS as much as anyone, and he cares deeply about our company, our people and the patients who choose and rely on CHS health systems for their medical care. I want to thank the CHS Board for their faith in me and the CHS team for the privilege of being their leader and thank you to our investors for your confidence in CHS. So now with that, let me make just a few brief remarks about the quarter, and then Kevin will add quite a bit more detail and color about our results and what we see ahead, including potential impact from the Big Beautiful Bill. In the second quarter on a same-store basis, net revenue increased 6.5% year-over-year. Inpatient admissions were up 0.3% and adjusted admissions declined 0.7% with a 2.5% decline in surgeries and a 1.9% decline in ER visits. While patient volumes were lower than expected and hampered our overall earnings results, we are confident that our past development in capital investment strategies have positioned CHS health systems very well to capture patient demand once consumer confidence returns, and it always has. Our development strategies include physical capacity and service line expansions with a balanced focus on both inpatient and outpatient care. And we are intentional about broadening the footprint of our health systems through the ongoing recruitment of primary care, specialty physicians and other providers. Specifically, through our year-to-date recruitment activities, we have over 200 providers currently scheduled to commence in the second half of 2025, including backfilling for the departure of certain independent specialists. We have a strong clinic services operations team, and we are committing significant resources towards ensuring the successful and rapid ramp-up of our newest providers. Recent service line and capacity expansions in Knoxville, Naples, Laredo, Birmingham and other key markets continue to ramp up and gain market share, and we have several new outpatient access points set to open in the coming months, including new ambulatory surgery centers in our Birmingham, Boley and Tucson markets. Today, CHS operates more than 40 ASCs, a critical component of our market growth strategy and being well positioned to grow and serve consumer demand. We also continue to make progress on other strategic initiatives. Since our last earnings call in April, we completed the divestiture of Cedar Park Regional Medical Center in Texas and continue to improve our maturity and leverage profile through successful debt refinancing and retirement transactions. Now I'll turn the call over to Kevin. And as I do, I just want to once again express my full confidence in his upcoming leadership of Community Health Systems. Kevin? Kevin J. Hammons: Thank you, Tim, and good morning, everyone. Before I begin with the review of financial and operating results, I want to take a moment to acknowledge Tim's contributions to CHS over the past 17 years. Since joining the company in 2008, Tim has brought an invaluable amount of experience and insight into our organization and has been instrumental in leading the development of regional health care networks across the country. Tim's long track record of success as an operator, his leadership qualities and his natural way with people have been an asset to CHS and all of our teammates from us here at the corporate headquarters and throughout our entire organization. For me personally, Tim, I want to say that it's been my pleasure to have been your partner here at CHS and to serve alongside you as your CFO. I believe I can speak for everyone when I wish you the best in your future endeavors. Turning to the results for the second quarter. CHS executed well on many of the controllable aspects of our business, such as supplies expense, wage rate growth and overhead costs. However, we believe that external factors have affected the demand for health care services across our markets over the past few months. Last quarter, we noted some deterioration in our acuity mix versus expectations with softer demand for elective surgical procedures within our commercial book. While we had expected the mix profile to improve with the typical seasonal factor of commercial patients meeting their deductibles and the flu volumes dropped off, this improvement did not materialize in the second quarter as expected, which led to some loss of operating leverage and slight degradation in EBITDA margin year-over-year and versus our forecast. Despite the adverse volume and mix profile, CHS continued to make good progress on strategic initiatives, as Tim noted in his prepared remarks. On June 30, we completed previously announced divestiture of our 80% ownership in Cedar Park Regional Medical Center to the minority partner, Ascension Health for $436 million. And in May, we successfully refinanced all $700 million of our outstanding 8% Senior Secured Notes due 2027, using proceeds from our offering of a new 10.75% Senior Secured Notes due 2033 and also tendered and redeemed $584 million principal value of our outstanding 2028 unsecured notes using $438 million in cash on hand. Turning back to operating results for the second quarter. Same-store net revenue increased 6.5% year-over-year and was primarily driven by rate growth, including the recognition of revenue under Medicaid state-directed payment programs in New Mexico and Tennessee, a portion of which was related to prior periods. Same-store inpatient admissions increased 0.3% year-over-year, while adjusted admissions declined 0.7%. Same-store surgeries declined 2.5% and ED visits were down 1.9%. Adjusted EBITDA for the second quarter was $380 million compared with $387 million in the prior year period and included approximately $75 million in net contribution from the recently approved state-directed payment programs in New Mexico and Tennessee. Margins for the second quarter was 12.1% versus 12.3% in the prior year. Turning to expense management, we continue to perform well on labor cost with an approximate 4% year-over-year increase in average hourly wage rate, which was consistent with our range of expected growth for the year and again includes the impact from significant growth in the number of employed positions, which was consistent with our expectations. Contract labor expense at $40 million was down to approximately $5 million year-over-year on a consolidated basis and was flat sequentially. We also continue to perform well on supplies expense, which was down year-over-year and when adjusting for the impact from the new SPP programs in New Mexico and Tennessee was essentially flat as a percentage of net revenue with the prior year period. We believe there remain opportunities in this area as we stabilize and mature our new processes with our ERP. Medical specialist fees were $152 million in the second quarter, essentially flat year-over-year on a consolidated basis and representing 4.9% of net revenues, consistent with the prior year period. Cash flows from operations were $87 million for the second quarter and $208 million for the year-to-date. Note that cash flows from operations as reported includes $74 million in outflows for taxes on gain on sale, primarily for the Lake Norman and ShorePoint transactions, which were paid out of divestiture proceeds and were not considered in our annual guidance. When excluding this figure, our cash flows from operations were $282 million for the year-to-date and free cash flows for the second quarter were marginally positive. Note that the funds from the new state-directed payment programs in New Mexico and Tennessee likely beginning to flow in the third quarter, and the company should also see positive free cash flow in the back half of the year. Additionally, we anticipate receiving the previously discussed contingent consideration related to the Tennova-Cleveland divestiture and the proceeds from the sale of our reference lab business to Labcorp by the end of this year. We have received many inquiries from the investment community about the financial impact from the recently signed Budget Reconciliation or One Big Beautiful Bill Act. Based on our analysis, impacts to state-directed payment programs will be phased in beginning in 2027 through 2038. We project the combined impacts from lowering the provider tax threshold and the phase down to Medicare linked rates across CHS states will reduce EBITDA by approximately $300 million to $350 million cumulatively over the next 13 years with no impact in 2025 or 2026, an immaterial impact in 2027 and then building from there. Our estimate reflects the estimated net reduction relative to total Medicaid reimbursements based on current Medicaid reimbursement rates. Our analysis does not take into account any impact from Medicaid work requirements or the various provisions that could affect enrollment in ACA plans such as expiration of the extended tax credits since these are much more difficult to predict. Additionally, this analysis does not assume any benefit from the proposed rule fund due to the uncertainties of how those monies will be distributed nor do we assume any mitigating factors from expanded SDP programs, cost reductions, potential service line changes, strategic investments or other actions that we make in order to offset the financial impact to CHS. In the upcoming months, CHS will support industry efforts to aggressively pursue legislative and administrative fixes to the bill. We assume the opportunities to do so will increase as voters better understand how the cuts affect their households. On the subject of the Budget Reconciliation Act, I think it is also important to note that the interest deduction under Section 163(j) of the IRS code, which we have discussed on several occasions in the past, was restored, which will increase the amount of interest CHS can deduct for tax purposes. And along with the accelerated depreciation provisions will have the benefit to us of lowering our annual cash taxes by approximately $40 million to $60 million beginning next year. Now moving on to our 2025 financial guidance. Based on our operating results through the first half of the year and the lower-than- expected volume growth heading into the third quarter, combined with the impacts in the second half of the year from the recently completed Cedar Park divestiture and the new state-directed payment programs we are tightening our adjusted EBITDA range for the full year 2025 to $1.45 billion to $1.55 billion. While we are pleased to receive the additional funding in New Mexico and Tennessee, which will be helpful to maintain service lines in the markets we serve, we believe it is prudent to take a more conservative approach to the underlying business given the impact from macro factors that we have observed in the second quarter. This concludes our prepared remarks. So at this time, we will turn the call back over to the operator for Q&A. Operator: [Operator Instructions] And the first question will come from A.J. Rice with UBS. Albert J. William Rice: I want to just wish Tim best wishes going forward. And Kevin, congratulations. Maybe I'll ask about 2 items on the guidance. Volumes, obviously, it seems like those are coming in a little more sluggish than expected. To what extent did you make a tweak in your second half expectations, if you did on volumes? And maybe talk about the dynamics you saw intra-quarter? Was there any variation intra-quarter on that? And then on -- also on the guidance, the operating cash flow, I know year-to-date, your free cash flow, I think it's about $200 million -- or operating cash flow rose $200 million. And I think the guidance calls for $600 million to $700 million. I know there's some unusual items like the DPP program and the way you get paid for that. Can you just bridge us a little bit from what you're seeing in the first half and how you get to that second half number? Kevin J. Hammons: Thanks, A.J. Let me start off. In terms of volume, intra-quarter, really, if we go back to March of this -- of the first quarter, we began to see some decline in consumer confidence. The consumer confidence consistently declined in April, May and June to the point where we're seeing now the lowest consumer confidence probably since COVID levels. So I'm not sure we saw a significant decrease kind of month-over-month, but certainly, as the consumer confidence is a leading indicator and it has continuously declined, we're taking that into consideration. I will say that as we exited June, we did see -- kind of the final week of June beginning to see some recovery in volume back to prior year levels. And as we look out into kind of this first part of July coming into the third quarter, although the levels are not where we had maybe originally anticipated, we are starting to see some stabilization in our volumes relative to prior year. If we look out over the course of the year, where we had maybe originally guided towards a 2% to 3% adjusted admission volume for the year, I think a new updated guidance would look more like 0% to 1% adjusted admissions for the year. Currently, we're at 1% year-to-date. So hopefully, that gives you a little bit of color around the volume trends. Cash flow, as we think about our guide kind of remain the same. A couple of things I'd point out. Our adjusted cash flow from operations, we reported $208 million, but that did include the $74 million cash tax payment on the gain on sale. That cash comes out of the divestiture proceeds. When you add that back in, cash flow from operations in the first half of the year is $282 million, which is almost halfway there for our full year guide -- at least the low end of our full year guide. And typically, our fourth quarter is by far the largest cash flow generating quarter of the year. The DPP programs that were approved in the second quarter in New Mexico and Tennessee, those were approved just in the final days of the quarter. We've not received any of that cash yet. So those payments will be coming in the back half. So with those payments and historically better fourth quarter cash flow generation, we expect to be able to hit the range with effectively our EBITDA guidance staying relatively flat from where we were at the beginning of the year. And our year-to-date cash flow, I think, will be positive in the back half of the year as well. Albert J. William Rice: If I could just jump in with one follow-up. There have been some pending DPP programs that were relevant to you, Indiana, Alabama and to a lesser extent, Florida, potentially topping up their program. Is there any update on the status of those in light of the One Big Beautiful Bill? Kevin J. Hammons: There is. So Florida has submitted for an update to their rate under their existing program. That submission was in on time, and we would expect that to be approved, and there should be a small tailwind for us at the point in time that gets approved. Indiana, likewise, has submitted their preprint to CMS for a new state-directed payment program, which will replace their provider tax program that currently exists in the state. We would expect that to be a much more material benefit to us. That preprint was submitted before the deadline, and we fully expect that, that one will also be approved. We don't have the ability to really estimate the amounts, and we don't do that until those programs are approved, but the insights we have today and given our footprint in the state of Indiana, we would expect that to be a material benefit to us. In terms of Alabama and Arkansas, they are not that far along yet, but we understand there may still be a path for them. It's a little less clear to us at this point, but I know those states are still working on some opportunities. Operator: Your next question will come from Brian Tanquilut with Jefferies. Brian Gil Tanquilut: Tim, congrats on the retirement and Kevin, good luck. Maybe my first question, as we think about what the right run rate is for earnings, thinking about given the DPP from the quarter, I'm thinking like $305 million. Is that the right way to think about it or maybe slightly higher than that if we back out the prior period contribution from the Tennessee DPP? So can you just walk us through how we should be thinking about the right run rate for EBITDA going forward? Kevin J. Hammons: Sure, Brian. Thank you. $305 million, I think, would be -- is too low because that's really taking out the entire DPP money that we recognized this quarter. You would want to include the current period quarter portion of that, call that roughly $30 million. So starting at $335 million -- but even at that point, volumes in the second quarter were really depressed. And we don't think that's the current run rate, particularly, as I mentioned, as we're exiting the quarter and seeing some visibility into some stabilization. I would say that the real run rate in our mind is probably something in the $360 million to $375 million as a starting point. And then as we get back to positive volume growth. And we believe, as Tim mentioned in his remarks, there are times when we go through periods where volumes seem to dry up, but they always come back. We believe that most of what happened this quarter was care that's being deferred for financial reasons, the patient behavior, but that will come back. So kind of as a baseline starting point in the $360 to $375 range and then opportunity to grow from there. Brian Gil Tanquilut: That makes sense. And then maybe, Kevin, just to double-click on your comment on the OBBBA impact. Maybe if you can share with us just how you are thinking about that number, meaning like what assumptions go into that or maybe how we should be thinking about kind of trying to build that ourselves? Kevin J. Hammons: Yes. I mean there's some probably pretty complicated math behind those. So we really went through kind of state-by-state exercise, taking a look at which states are expansion states, which states are non-expansion states, ratcheting down both the rate of -- Medicaid rate for where we have commercial -- average commercial rate on Medicare and then the states that are expansion states that have taxes above the 3.5%. Those get ratcheted down, I think, 50 basis points each year beginning 2028. Operator: The next question will come from Ben Hendrix with RBC. Benjamin Hendrix: With the recognition of the DPP revenue from Tennessee and New Mexico and then also the developments on the commercial elective weakness, maybe you could kind of just recap the bridge to the revised 2025 EBITDA guidance for us. Kevin J. Hammons: Sure, Ben. We started, call it, the midpoint at $1.525 billion. If you add in -- and that did not include any DPP [indiscernible] Tennessee -- add in, call it, $140 million of DPP monies from Tennessee and New Mexico, back out, call it, $20 million to $25 million from the divestiture of Cedar Park roughly $70 million, which is probably the miss in the second quarter and then the remainder being kind of revisions to the back half of the year based off of our previous expectations to get us to our new guide of $1.5 billion at the midpoint. Benjamin Hendrix: Got you. And then just a follow-up on some of the mix trends you're seeing. I know that payer mix has been a topic of discussion in recent quarters. I was just wondering if you could walk through the components of payer mix trend you're seeing and then Medicare Advantage, in particular, the type of growth you're seeing there. Kevin J. Hammons: Sure. The biggest declines we had were in surgical. And about half of those surgical declines were orthopedics. Most of the declines were primarily commercial Blue Cross business. So that's where we're seeing the biggest headwinds, which certainly impacted our net revenue per adjusted admission, impacted the flow-through to EBITDA and also lends us to believe that the consumer confidence and impact on household incomes and how people are spending their money, making decisions in health care is really the true reason for some of the headwind on surgical and care delivery at this point. It's those patients who have the highest co-pays and deductibles that are being most impacted. And I think even if you look at some other industry across the country where we're seeing consumers not spending money, their discretionary income on things. So again, that's the biggest decline. In terms of the exchange business, overall volume of exchange business was up, but acuity of exchange business was severely down with the biggest component of that being surgeries of exchange patients. So there, again, led us to the same conclusion because most of the exchange contracts have some higher co-pays and deductibles. Benjamin Hendrix: Congratulations to Tim on retirement and to Kevin and Jason on the appointments. Kevin J. Hammons: Thanks Ben. Operator: The next question will come from Jason Cassorla with Guggenheim. Jason Paul Cassorla: Great. Best of luck, Tim, in your retirement and congrats, Kevin. Maybe I just want to start on leverage. You've got some cash coming in, in the second half. You've done some refinancing activity earlier this year, but are there other areas you're hoping to refinance at this point, maybe drive some incremental interest cost savings, whether debt takeout or otherwise? And kind of just a follow-up to that, you're still about a little less than 1.5 turns away from your below 5.5x leverage target, maybe only a turn when factoring the back half of cash generation, incoming proceeds and payments. But perhaps can you just walk us through the remaining building blocks that get you toward that below 5.5 target at this point? Kevin J. Hammons: Thank you. Yes, happy to walk through that. So right now, as we look at our debt stack, we've got some 2027s -- $1.750 billion of 2027 that are our next current maturity. Those become current in March of 2026. And we've been pretty diligent over the years of trying to -- or disciplined, I should say, maybe over the years of trying to make sure we take care of those debts and not get too close to things becoming current. So that's top of our list of things we want to get handled and get that debt pushed out. Now that debt currently has a coupon of 5% and 5.8%, probably a little bit lower than the market is going to absorb right now, and we'll see a little bit of additional interest expense from that. But as we continue to make progress on some divestitures and chipping away other pieces of debt, we'll have an opportunity to offset any of those interest expense increases from the rate and continue to lower our leverage. As we look out in the nearest term over the next couple of quarters, as I mentioned, we've got the proceeds coming in from the Labcorp sale, which is almost $200 million and we have the contingent payment from the sale of Tennova Cleveland, which we should -- that's in the area of $100 million. So we should be getting approximately $300 million coming in, in the back half of this year. And then we're continuing to pursue some additional divestiture opportunities. There's a number of transactions that are in various stages. We're still getting some inbound interest, and we'll continue to look at that to manage our portfolio, not only where we believed we have the best opportunities to invest and to grow, but then also with some opportunities to maybe divest -- put that money to other use, whether that's directly paying down debt or investing in some growth opportunities, both of which would help us delever. I think we've given that a goal of below 5.5x by 2027. So we've got a little bit of time, although time is clicking away here -- ticking away. But I would go back and if you track our leverage over the last 2 years, we have consistently been bringing it down over a 2- year period. I'm fully confident we'll continue to make progress there and get to our goal. Jason Paul Cassorla: Got it. Okay. Helpful. And maybe just as a follow-up, on the heels of the Labcorp deal, obviously, a nice cash flow -- cash inflow there. But maybe are there other opportunities for the enterprise that you're either evaluating to maybe outsource or maybe other non- core assets that you could look to offload that could drive that incremental cash or even EBITDA benefits at this point? Kevin J. Hammons: Great question. We continue to look at our business, seeing where we can make little tweaks similar to what we did. Our outpatient reference lab business is something that was not a core competency. And I actually believe that by completing this deal with Labcorp, we're going to provide a better experience for our physicians and also potentially get some savings to the company. We'll be using Labcorp almost exclusively for our reference lab and outsource business, and we'll be getting better pricing where we had been using them sporadically in the past or other outsource services, we can move that to Labcorp at a better pricing going forward. But we continuously looked at our business, I don't know that we have anything currently in flight that I would call out as being something that we could monetize. There are areas of our business that we consider as we grow and invest and develop that may be sources of revenue for us in the future. And those are something that we're looking at and which could be margin accretive if we were to decide to do that or get to a point where we think it's viable that we could sell some services. Operator: The next question will come from Andrew Mok with Barclays. Andrew Mok: I want to follow up on volumes because I'm having a hard time reconciling the lower volumes that you're calling out with some of the call-outs of accelerating cost trends from payers. Was there anything else you saw impacting volume trends beyond consumer confidence that might be more regional specific or anything on the policy front that you suspect is driving a hesitation to use the health care system? Kevin J. Hammons: Maybe the only other item I might call out, and it is admittedly difficult when patients don't come to our system to know exactly why they aren't coming and who those patients are when they're not showing up. But the other item that I would call out would be immigration. And certainly, in some of our markets that may have larger concentrations of the immigrant community in states like Arizona and Texas, possibly even Florida. There have been well-documented instances of individuals in the immigrant community not participating in some normal everyday things, not going to church, school, or going to the hospital, not going to concerts, doing things like that. I know the hospitals are no longer considered a sanctuary location, and there is concern even among immigrants with legal status that there's some fear in that community. That's likely caused at least in some of our markets, some softness in the volumes. Andrew Mok: Great. Maybe just as a quick follow-up. I appreciate all the color on the estimated impact of state-directed payments. Is there any way you can share thoughts for how the expiration of enhanced subsidies might impact your business next year? Kevin J. Hammons: That was difficult to quantify in any real way. So I can say what we're doing relative to that is investing in some -- with our lobbying efforts in Washington and continue to work on that from a legislative standpoint. But in terms of quantifying, no, we don't have an estimate at this point. Operator: The next question will come from Stephen Baxter with Wells Fargo. Stephen C. Baxter: I just wanted to kind of continue the guidance bridge conversation just to make sure that we understand kind of how you're carrying things forward. So I think the items you're flagging is the $70 million underperformance on a core basis during the quarter, the $25 million for Cedar Hill. Did you give us the all-in increase to Medicaid supplemental program expectations? I think there's more than just $100 million to -- maybe $120 million that you kind of let on before. I'm just trying to really understand as we think about the back half of the year relative to the $70 million underperformance, I guess how much of that are you carrying through into this guidance revisions that you made? Kevin J. Hammons: Thanks, Stephen. Yes, let me give you some more clarity on those state-directed payment programs. And sorry, if I did not make that clear. So we had previously indicated $100 million to $125 million of state-directed payment possibility as there is an annual run rate for Tennessee and New Mexico. That was just a 12-month run rate for each of -- or for the combined 2 states. In the second quarter, we actually picked up a retroactive piece back to 2024 for Tennessee plus 6 months of Tennessee and 6 months of New Mexico. So for the full year 2025, those 2 states will be about $140 million. That's the amount we're putting in our guide kind of just the midpoint for the DPP program. So that's the addition starting -- again, I'll run through it quickly, $1.525 billion at the midpoint was a starting point. We added $140 million. That's the $100 million to $125 million run rate plus the retroactive piece. Then taking out $20 to $25 for Cedar Park, taking out the second quarter miss and then adjusting our expectations in the back half of the year slightly. Stephen C. Baxter: Okay. Got it. And just it's really helpful to have these -- the sizing around the impacts from the bill. Is there an absolute number you can give us for what the current annual run rate of these programs are, so not including any of the out-of-period stuff, but just so we can maybe contextualize this as a percentage decline, that would also be, I think, pretty helpful to people. Kevin J. Hammons: No, I don't have that number exactly. We really look at those state-directed payment programs, once they're in place, they become part of the normal Medicaid reimbursement strategy for that state and normal Medicaid kind of reimbursement process. Those programs oftentimes have many different variations within a state, both at the district level, county level and state level. States then make decisions about increasing their rates or increasing the programs at various stages once they're in place. So we don't really call those out separately because they -- again, once in place, they kind of move more as an aggregate number within the state versus each individual program being on its own. Stephen C. Baxter: Got it. Okay. And maybe just one more, if I can squeeze it in. Just could you talk a little bit -- I know a lot of this, you think, is driven on the volume side by the consumer confidence changes kind of in the early part of this year. Are you seeing any kind of volume change in the Medicare part of your business, given that obviously, it seems like there would generally be less economic sensitivity there. I'd be curious just kind of your comment on Medicare specific trends, if possible. Kevin J. Hammons: Yes. We haven't seen much change in the Medicare book of business. And interestingly, the Medicare book of business has the lowest deductible component. So that is the group of patients least impacted, I think, by some of this consumer confidence issue. I think that really further supports maybe our belief that what's driving some of the patient behavior is around financial decisions. And so those patients are government-insured patients that don't have high co-pays and deductibles, haven't really changed their behavior in terms of coming to receive health care. Operator: The next question will come from Josh Raskin with Nephron Research. Joshua Richard Raskin: I'll congratulate Tim as well and Kevin and Jason as well. I want to go back to the difference in trends that you guys are seeing from the volume perspective relative to some of the hospital peers and certainly relative to the commentary from the payers, and I appreciate the commentary you've made. But do you think there's any difference from whether it's geographies or lines of business or outpatient networks that could explain that? Do you think others are embracing more technology or AI on the RCM side? Do you think any of that could be contributing to this? Kevin J. Hammons: There could be some differential in terms of location, types of markets, urban versus nonurban type markets. It's hard to say exactly. Again, I would point to when patients don't show up, it's very hard to necessarily know why or to track that. But I do think the differential between urban markets and nonurban markets could be part of that. In terms of difference between what we're experiencing and the payers experiencing, much of their cost increases could be coming from pharmaceutical side, maybe behavioral business, not necessarily a change in acute -- payments to the acute providers. I think their headwinds really are probably somewhere else. And otherwise, I can't really reconcile to them. Tim, I don't know if there's something you might want to add on this. Tim L. Hingtgen: Yes, Josh, thanks for the question. I'll add on to the payer answer. I think the other area where I'm not going to say it's an outsized impact, but we've been speaking for several quarters on our investment in physician adviser services and really honing in on what we believe we should be getting appropriate reimbursement for care and services delivered. We have not seen an increase in our downgrades and denials as a percentage of net because of those efforts. And I hope it means we're keeping more of the rightfully earned dollars coming into our pockets versus into the payers' pockets. So that's one element I would throw in there. I don't think it's material, but we have not allowed that slippage to continue, which we said we'd be fixated on as a strategy for the company. In terms of your other question regarding strategy and/or technology and AI, that has also been a core strategy for CHS. I believe I mentioned last quarter, our investment in growth in robotic surgery platforms, we continue to see really strong growth in our robotic-assisted surgeries in the company. So I don't think it's due to any underinvestment into emerging technologies or services in our communities. In terms of the AI component, one of the things I'm really proud of is our investments into the development of a strong data science group here at CHS. We have some of the leading industry experts on supporting our efforts. We have deeper insights into the business as a result of that. And I'd also layer on the investment into the ERP, the enterprise resource planning tools. Again, we're, I think, in the early innings of that investment, but the insights that's gleaning into our business and our operations and our opportunities, I think it will be a really strong benefit and tailwind to the company for many quarters and years to come. So I don't think there's really anything in terms of where we maybe missed it strategically. I think it really is a lull in consumer confidence as we've called out. And as I said in my prepared remarks, I can't remember a time in this industry where the consumer hasn't come back. We still believe we provide absolutely essential services to the communities we serve. Joshua Richard Raskin: Great. Great. That all makes sense. Just a quick follow-up on the Labcorp. Were your reference labs, was that -- were those assets EBITDA positive for you in the past? And then is it conceivable that having Labcorp take care of those assets is actually additive to EBITDA? Kevin J. Hammons: We don't have an exact measure because it wasn't a business that we ran separately, but certainly, we've done a fair amount of work before making the decision to sell that part of our business. As I mentioned, it was not a core competency of ours. It may have been marginally EBITDA -- or there may have been some marginal EBITDA generation from that relatively small. And I think that, again, overall, getting some cash upfront and providing a much better experience for our physicians will be much more beneficial to our practices and ultimately to our EBITDA going forward. Also keep in mind that -- even our employee physicians did not use our in-house outreach lab business exclusively. We were still sending portions of our business out to Labcorp to Quest to other third-party labs. So we really have now an opportunity to partner with Labcorp on this and bring just a better solution with their technology, and it is their core competency, and they'll be able to deliver those services at a cost cheaper than we could provide them ourselves. Operator: The next question is a follow-up from Ben Hendrix with RBC. Benjamin Hendrix: Great, thank you very much for squeezing me in here with one more. I just -- we've gotten a lot of questions on the rural health transformation program and the $50 billion allocated under the OBBB Act. Any way to frame kind of your contribution there to what extent you're including those funds in your outlook? And how do we frame kind of what the benefit could be even if just an assessment of how much of your program would be eligible for those -- for that program? Kevin J. Hammons: Great question, Ben, and one we've received a couple of times already and one we're thinking about quite a bit. Again, we're investing in lobbying efforts around that. There is no clear answer at this point as to how that money is going to be spent or divvied up amongst the rural health providers. So that's all yet to be determined. I believe my understanding is 50% of that will be at the discretion of CMS and the other 50% given to the states to determine and even they may determine differently in each state, how they distribute the money. So a lot more to come. I also understand that there's been a proposed bill in the Senate to increase the amount from $50 billion to $100 billion. So that is still yet to come. As we look at our portfolio of hospitals, I would say roughly 40% of our beds, we believe would qualify in terms of a definition of rule. But even that isn't entirely clear because throughout the medical regulations in CMS, there's multiple definitions of what is rule. And I'm not sure which is the exact one that will apply here. We're giving our best estimate that is about 40% of our beds. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Tim Hingtgen, Chief Executive Officer, for any closing remarks. Please go ahead, sir. Tim L. Hingtgen: Great. Thanks, Chuck, and thank you, everyone, for joining the call today. I want to close by thanking the amazing people who work across the CHS organization for the opportunity to serve as their CEO and to support their commitment to provide quality compassionate care for all of their patients. And I want to say once again that I'm grateful to be passing the torch to Kevin Hammons because he's a capable and committed leader for CHS. I look forward to all of the good things ahead for Community Health Systems. If you have any additional questions, you can always reach us at (615) 465-7000. Have a great day, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day and welcome to the Community Health Systems, Inc. First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, signal a conference specialist by pressing the star key followed by zero. Please note today's event is being recorded. I would now like to turn the conference over to Anton Hie, Vice President, Investor Relations. Please go ahead. Anton Hie: Thank you, Rocco. Good morning, everyone, and welcome to Community Health Systems' first quarter 2025 conference call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer, and Kevin Hammons, Chief Financial Officer. Before we begin, I must remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as risk factors and in our annual report on Form 10-K, and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We have also posted a supplemental slide presentation on our website. All calculations we will discuss today exclude impairment, gains or losses on the sale of businesses, and expense from business transformation costs. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thanks, Anton. Good morning, everyone, and thank you for joining our first quarter 2025 conference call. We ended last year with very strong volume growth, and we were pleased to carry that momentum forward into 2025. For the first quarter, same-store admissions increased 4%, same-store adjusted admissions increased 2.6%, and on a same-store basis, net operating revenues increased 3.1%. We have been pleased with the demand for health care services across our core portfolio markets. The first quarter growth was driven by an outsized impact from a heavier flu season than the prior year quarter. Additionally, we continue to realize returns on targeted capital investments and expansions and the benefits of our strategic and operational initiatives, including capacity management, transfer center operations, service line development, and growth in our physician practices and other outpatient types of care. We are especially pleased with our progress towards our target of $1 billion plus in divestiture proceeds which we plan to use to reduce debt and improve the company's leverage. Since our last quarterly earnings call in February, Community Health Systems, Inc. completed the previously announced divestitures of ShorePoint Health System in Florida and Lake Norman Regional Medical Center in North Carolina as well as the unannounced sale of our 50% ownership interest in Merit Health Biloxi. Last week, we announced plans to sell our 80% interest in Cedar Park Regional Medical Center in Texas to the current joint venture partner, which we expect to close in late second quarter or early third quarter. While divestitures are not yet complete, we expect that activity to slow down substantially as the year goes on, enabling us to fully focus on further growth opportunities across our core markets. Yesterday, we announced debt refinancing and buyback transactions that will further reduce leverage and improve our maturity profile. Kevin will cover that in more detail in a few minutes. Now, I'd like to touch on some of our strategic objectives moving forward into 2025. This year, we are highly focused on three foundational areas essential for every health care provider. First, delivering high-quality care and exceptional patient outcomes. Next, ensuring operational expertise and rigor in every market. And finally, demonstrating financial discipline and performance. We are making progress in each area and a very specific activities underway to advance in these critically important functions. Next, we have been strategically developing both acute care and ambulatory services including our acquisition of ten urgent care centers in Tucson late last year as well as incremental investments in ASCs and we have added new freestanding EDs to the portfolio too. In each Community Health Systems, Inc. affiliated health system, our ability to balance acute care hospital services with ambulatory sites of care leverages the unique benefits of each care setting to create comprehensive service options for our patients. We believe this approach, which we have been pursuing for nearly a decade now, further positions us well for the future of health care delivery. And we continue to invest in innovation including AI, emerging technologies, and partnerships that advance patient care, support our workforce, and relieve administrative burden. As the year goes on, we will highlight some of these areas more specifically and share the progress we are seeing. Before turning the call over to Kevin, I want to acknowledge the fact that health care providers are currently facing a number of uncertainties. Navigating any potential changes that may come out of Washington in the weeks and months ahead makes planning more challenging. But our team is closely following these developments and advocating for policies that maintain and strengthen our health systems. And all health care delivery systems to ensure Americans will have needed access to essential health services. As we complete the first quarter, I want to express my appreciation to our team, leaders across our organization, our physicians, nurses, clinicians, and caregivers, all of our support teams sharing the commitment to help people get better and live healthier, and for that, I am grateful. Now let me turn the call over to Kevin Hammons, who will offer more information about the first quarter and the year ahead. Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim mentioned, we have made progress across many fronts, so before walking you through operating results for the quarter, that were generally in line with expectations, I would like to provide a brief update on the progress we made in continuing to position the company for future success, particularly through opportunistic divestitures and management of our debt. In early March, we completed the divestiture of ShorePoint Health System in Florida, and on April 1st, closed on the sale of Lake Norman Regional Health System in North Carolina. Total gross proceeds for these two transactions of $544 million was received and recorded in the first quarter. Last week, we announced an agreement to divest 80% ownership in Cedar Park Regional Medical Center to the minority partner Ascension Health for $460 million, which we expect to close late in the second quarter or early in the third quarter of 2025. Completion of the Cedar Park transaction will bring the total in-year proceeds to just over $1 billion. Consistent with our commentary last quarter and along with an additional potential divestiture now in advanced discussions, we could exceed this target materially. Each of these transactions reflects attractive double-digit multiples on trailing EBITDA, leading to meaningful deleveraging and increased shareholder value. Last night, concurrently with earnings results, we announced the issuance of $700 million in new 10.75% senior secured notes due 2033, with the proceeds to be used to redeem all $700 million of our outstanding 8% senior secured notes due 2027 at par. Additionally, we have commenced a cash tender offer for all of the $626 million outstanding 6.875% senior unsecured notes due 2028 at a price of 75, utilizing cash on hand and availability under our revolver to retire these notes. These transactions will further reduce the company's net leverage improve our maturity profile, and enhance shareholder value while not meaningfully affecting free cash flow. Furthermore, we are getting all of this done despite the recent dislocation in the capital markets. At quarter end, net debt to trailing adjusted EBITDA was 7.1 times, improved from 7.4 times at year-end 2024 and 7.9 times at year-end 2023. Now turning back to operating results, in the first quarter of 2025, we saw continued momentum with strong overall volume trends and cost controls across most categories, leading to financial results that were generally in line with our expectations and representing a solid start to the year. The continued strong demand in our markets led to same-store admissions growth of 4% year over year, adjusted admissions up 2.6%, and ED visits up 2.4%, while same-store surgeries were down 3%. Same-store net revenue per adjusted admission was up 0.5% year over year as rate growth from commercial plans and the Medicare fee for service annual update were partly offset by unfavorable shifts in payer and acuity mix, as well as declining Medicaid rates. Adjusted EBITDA for the first quarter was $376 million compared with $378 million in the prior year period, and margin was 11.9% versus 12% in the prior year period. The impact of payer downgrades and denials remained stable in the first quarter of 2025 relative to the prior quarter, reflecting our ongoing utilization management efforts and physician advisor program. However, that benefit was erased by the delays in payments under certain state supplemental programs. Money is now flowing from these programs, so we believe we are on track to meet our annual cash flow guidance. With our enterprise modernization initiative, Project Empower, we continue to implement new workflows to generate savings opportunities and gain new insights into our business as the Oracle environment further hardens. I believe our stabilization is on track, and I am confident in the value this project will produce for the company. As it relates to the 2025 financial guidance, we are maintaining the outlook that we provided in February. Consistent with prior practice, we have not considered in our guidance any additional divestitures beyond those that have already been announced, and we have also not included directed payment program reimbursement for New Mexico or Tennessee as those programs have not yet been approved by CMS for 2025. We do not have any update relative to either of those programs, but still expect their eventual approval. Recall, we believe if those programs are approved, they would add an incremental $100 to $125 million to our annual guided run rate of EBITDA. This concludes our prepared remarks. So at this time, we will turn the call back over to our operator Rocco for Q&A. Operator: Thank you. At this time, we will pause for a moment to assemble our roster. And today's first question comes from Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, good morning guys and congrats on the quarter. Maybe, Tim, as I think about, you know, just the volume performance here, and balancing it, obviously, with the revenue per adjusted admission, I think that is mostly flu and the margins. I mean, just curious how you are thinking about where the business can go going forward, both from a volume perspective and your ability to manage or flex through the cost structure. And, also, any thoughts you can share with us on how you are thinking about tariffs potentially impacting your supplies and other input costs that you have to deal with. Tim Hingtgen: Sure, Brian. I will kick that off, and I will turn over to Kevin to touch on the tariff question. In terms of the quarter and the flu impact, we, you know, we did see, you know, an outsized impact from the flu as I commented on earlier. It did have, I think, some squeeze effect on some of our lower acuity surgery volumes in the quarter, largely on the outpatient side. You know, due to either provider illness, staff illness, or perhaps patient illness. We also are tracking to see if there are any consumer changes in terms of the reset of co-pay and deductibles and their willingness to take or receive care with the reset of those deductibles. We are tracking that very closely. But in general, in terms of how the the core book of business performed, excluding the flu impact, we are really pleased to see so many strong signs of success across the portfolio. We had really strong EMS volumes with gains in trauma. So it was not all related just to basic influenza related illness volumes. We also saw strong physician practice visits in both primary care but also in our surgical and procedural specialists. Good growth in our cardiac service line as it relates to procedures in our cath labs, particularly higher acuity cardiac service lines as we continue to invest. And then we also saw an outsized growth in our robotic surgery case loads again, reflecting our investments into some new advanced platforms across various robotics platforms out there. Again, in terms of the durability and the investability in our markets, to to to attract and grow new lines and and higher levels of business, we still see that line of sight as straight and narrow through the portfolio. The other thing I would point out is transfer center continues to perform really, really well and provide you know, basically daily insights as to where we can go next to continue to invest. Whether that be in service lines or technology or new capacity. We still see growing opportunities throughout the portfolio, which lets us build into into future quarters and future years. And then the last thing I would point out is just in the ASC space. Despite the drop in some of our lower acuity cases, primarily GI, we did have another strong growth quarter in our ASC environment as we continue to incrementally add one to two ASCs per quarter. So we still see durability for the long run as we diversify the mix of surgeries happening in various sites of care across our markets. Kevin Hammons: Brian, I will touch on just a couple of other points of your question. In terms of expenses, you know, we feel that even with some of the the softness resulting from the flu, we still had very strong inpatient admissions, and we were able to control our expenses with the added load of inpatients. And we believe that we will be able to continue to maintain and control expenses throughout the year. We also think that there are some tailwinds for us as we continue to stabilize our new ERP and gain insights into the business and see there you know, some some tailwinds being able to take out some additional cost. Relative to tariffs, you know, just a reminder, we are a member of HPG, our group purchasing organization. Approximately or in excess of 70% of our supplies are purchased through the GPO. With that, we have fixed pricing. Typically, contracts are three years through the GPO, so we have some price protection there. Approximately half of our purchasing through the GPO is domestic purchasing, which is so would not be subject to tariffs. And then, you know, beyond that, it is a mix of countries. Less than 5% of our purchases are from China, which would have the most risk I think, in the current environment relative to tariffs. So it is a very small part. And, again, the excuse me, the other purchasing is spread out across a number of different countries, and I think it is yet to be determined what the risk is there. Brian Tanquilut: I appreciate that. And then maybe my follow-up, Kevin, is I think about the balance sheet and know, obviously, you have a refi that was announced yesterday. So just curious how we should be thinking about, number one, you called out the potential upcoming divestiture, and then maybe curious about free cash flow guidance and what is embedded and what is not in the guidance. And also just proceeds from the recent divestiture announcements. You know, Lake Norman, I know it came in on April 1st. So just anything you can share with us as we try to think about modeling the balance sheet and cash flows for the next you know, one to two years? Thanks. Kevin Hammons: Sure. So the proceeds from Lake Norman that closed on April 1st, those proceeds were actually received on 3/31, so they were on our balance sheet. Sitting in the cash balance. As was the proceeds from ShorePoint which were received earlier in March. A portion of that was still sitting in cash. A portion of it had been used to pay down some on the ABL. Those proceeds will largely be used to do the tender of the unsecured notes that we meant released yesterday or announced yesterday. In terms of the remainder of the year, you know, I think we are on track in terms of our cash flow guidance. Even with the additional divestiture of Cedar Park Regional Medical Center that we announced, in that, you know, taking place or anticipating closing kinda late in the second quarter, early third quarter, I do not think it is gonna have a material impact on the cash flow. Equation. For the remainder of the year. So that is part of why we have not made any adjustments to that. And with the refinancing, you know, although we are paying a higher interest rate on the $700 million that we are refinancing, net of the impact of the tender offer for the unsecured, will have a slight benefit in reducing interest expense for the year, but still within our guidance range. AJ Rice: Thank you. And our next question today comes from AJ Rice at UBS. Please go ahead. Thanks. Hi, everybody. I understand the comment on the Tennessee and New Mexico DPP programs. Are you hearing anything about whether that is business as usual or those been put on hold for any particular reason? And I know in your case, you had three states, Alabama, Arkansas, and Indiana. That had you know, some level of discussion about potentially expanding or adding a program. Any updates on what's happening with those? Kevin Hammons: Thanks, AJ. So it has really been, you know, kind of quiet. We have not heard anything specific about Tennessee or New Mexico. Nor have we expected to hear anything. Best we can tell, things are moving forward. We do know that in the recent past couple weeks under this current administration, there have been a couple DPP programs approved in other states. I believe New Hampshire and Arizona were the states that programs have been approved. So it does appear that things are moving and that there is not a complete moratorium. On these plans that I would tend to believe is a positive. Absent hearing anything else. But we are just still in a wait and see. And but as we sit here today, we know of no reason that they will not be approved going forward. In terms of the other states, Indiana has been discussing a program. It has passed the state house. I believe a bill has also passed the state senate, maybe with some revisions. The state legislature is still in session for another week or two, so nothing final has come out. But it is looking positive that they may pass a program in Indiana. I'm sorry. Alabama is still early on in their discussions. And I do not expect to hear anything at this point. It is just too early to know. AJ Rice: Okay. And maybe my follow-up question, I'll just ask you a little bit about the public exchanges. Do you have an update as to how much of your volume and what kind of year to year growth you are seeing on the public exchanges this year and any updated thoughts on or advocacy that you see for extensions? Kevin Hammons: Sorry. You broke up a little bit, but I believe our net revenue from the exchanges is less than 6% of our total net revenue. We are seeing you know, growth in that business. But it is still a relatively small portion of our total net revenue. And then in terms of advocacy for the extension of the enhanced premium tax credits for the exchange volume, I think, you know, reading the current headlines, we are very active in the advocacy efforts there. I think it is too soon to tell as to whether those will be extended beyond their current expiration. We remain very active in our advocacy efforts to to make sure for the AJ Rice: Okay. Thank you so much. Operator: Thank you. And the next question today comes from Joshua Raskin with National Research. Please go ahead. Joshua Raskin: Hi. Thanks. Good morning. You guys hear us okay? It sounds like you guys are breaking up. Hopefully, you hear this. So just in response to the first question in response to an answer you gave before, can you speak more to the strong primary care and surgical specialist visits? Do you have a good sense of how much of that is sort of overall the market versus your specific initiatives? And are you seeing follow-through care, you know, after and procedures after those visits? Tim Hingtgen: Sure, Joshua. Can you hear me okay? I just want to do a mic check here. Joshua Raskin: Yeah. A little in and out, but I think you are okay now. Tim Hingtgen: Okay. Sorry about that. In terms of our clinic visit, again, I will speak to our employed provider base. Although we have some anecdotal information from independent providers across our health systems as well. But in terms of our employed affiliated provider base, we saw strong growth in both primary care, you know, you could argue is related to the spike in influenza. So, again, not using that as our canary in the coal mine. We focus more intently in terms of how our specialist volumes were pulling through the quarter. We did see good gains in same store and in non-same store specialists throughout the first quarter. Again, we have been sequentially adding on to those volumes for the last several quarters, so we see it as a good read-through for long term prospects in our markets. In terms of the procedural pull-through, in some specialties like cardiology, the growth in new patient visits we do believe did improve our cath lab pull-through within the quarter. I also mentioned some strengthening of higher acuity cardiac services. So we believe there is some attribution to the growth of those employed in the cardiology practices, for instance. We did see some slowdown in GI even though we had good practice visits, we saw a slowdown in GI procedures throughout the quarter. Again, that is the one that we somewhat attribute to perhaps timing with co-pays and deductibles resetting and summary apprehension by patients to take that elected care so early in the year until their co-pays and deductibles have been met. So we will track that one throughout the year. That was the one area of softness that we did not expect. Joshua Raskin: Alright. Perfect. And then my big question is just in terms of payer behavior, I heard you talk about sort of stability there. But just specifically around denials and pre-authorizations. Are there variations on a geographic basis, on a line of business basis, on a specific plan basis that you are seeing? Operator: Please stay on by for a moment while we come on here. Please stand by. And we have reconnected the speaker location. Please proceed. Kevin Hammons: Alright. Can you hear us better now? Joshua Raskin: I do hear you. Yeah. We didn't hear much of the answer though. So I don't know if you don't mind starting over. Kevin Hammons: Apologies. Which one, Joshua? Was it for both the clinic visits and the denials and downgrades? Joshua Raskin: No, we heard all the all the procedural pull-through commentary. It was it you sort of cut out after the plan behavior and, you know, segments, plan specific geography. Kevin Hammons: Sure. So to your question for denials and downgrades, we are really seeing it across all regions. And across all service lines. So it it is nothing that I would call out as being very specific to a payer or or or a service line or a region but more general in nature. Joshua Raskin: Alright. Perfect. Thank you. Operator: Thank you. And our next question today comes from Andrew Mok at Barclays. Please go ahead. Andrew Mok: Hi. Good morning. You reiterated the guidance despite absorbing additional denials, and medical specialist fees. I guess based on that, should we be thinking about the lower half of guidance or is there anything coming in stronger to offset those incremental headwinds? Kevin Hammons: So the headwinds, you know, related to downgrades and denials, were baked into our original guidance. We had indicated, you know, we started to see an increase in the third quarter of last year. They really stabilized in the fourth quarter and remained consistent. We will anniversary that or anticipate anniversaring that in the back half of this year. And so we did build that in to our original guidance. So I don't think that would be an incremental headwind as we think about where we're at you know, relative to our full year guidance. We are absorbing the additional divestiture as you indicated. You know, for the back half of the year. But it's still early. It's only after one quarter, and I think that we're, you know, within the guidance range. And, you know, we do obviously reserve the rate as we think about any future divestitures if we get anything else across the finish line. And with potentially DPPs being approved, those could all further change how we think about guidance, and we would think about updating at that point. But as we sit here right now, I don't think the one divestiture was material enough to make a change to our guidance. Andrew Mok: Got it. And maybe just a follow-up. So it sounds like you guided for elevated medical specialist fees, but it still sounds like it is maybe outpacing those early expectations. Can you comment on the categories where you are seeing incremental specialist fee pressure? Thanks. Kevin Hammons: Yeah. So we guided to an 8 to 12% increase in medical specialist fees, so that's what we baked into our guidance for the full year. We were at 9%. So, you know, call that within the range of where we were expecting. It is a pain point and continues to be a pain point. The majority of that is in anesthesiology. Probably over 50% of the increase is in anesthesiology or 50% of our medical specialist fees. We are seeing a little bit in radiology starting to pick up. But the primary pain point at this point is still anesthesiology. Tim Hingtgen: Yeah, I agree. And if I could just add on to that, in terms of our mitigation tactics for that. As you know, we built out a platform to insource hospital-based provider services successfully, managing the transition of APP to, you know, the ED and hospice side over the last I'd say, almost two years. We've since added anesthesia insourcing to the mix. We called out last quarter one of our major markets moving that to an in-source platform. When the cost increase or the ask from the outsourced provider we believe is unreasonable, and we can in-source at a lower cost and drive better quality and a value. We are doing so. We have a couple more programs that are being in-sourced already on the docket for this year. We're trying to leave some cap space, if you will, for us to be able to pivot really quickly in other markets should we get further demand that we don't believe are reasonable for outside services. We also have just begun the insourcing process in our first radiology program, leveraging again our internal expertise and skills to try to mitigate any future cost pressures or extraordinary cost pressures across that hospital base specialty as well. Andrew Mok: Great. Thank you. Operator: Thank you. And as a reminder, ladies and gentlemen, if you would like to ask a question, our next question comes from Stephen Baxter at Wells Fargo. Please go ahead. Stephen Baxter: Hi. Thanks. Just wanted to follow-up on AJ's question about DPP programs. I know that there's nothing in your guidance for the 2025 components of the Tennessee or New Mexico program, but I believe there were, you know, retroactive portions of that related to 2024 if they were approved. I think towards the end of the year. Just could you remind if you recognize those in the first quarter or if not, you know, what would you expect recognition to occur? Kevin Hammons: Stephen, I'm sorry. Could you speak up just a little bit? We're we're having a little hard time hearing you. Just a little bit. Stephen Baxter: Yeah. Sorry. But I hope this is better. Just asking about the Tennessee and New Mexico supplemental payment programs. I know that the 2025 components are not in your guidance yet, but to the extent that, yeah, I believe there is retroactivity related to 2024 if it was approved. Just wondering if that was recognized in the first quarter or would that be recognized later in the year. Just looking for an update on that factor first. Kevin Hammons: Sure. Sure. So you're correct. There is a retro piece for Tennessee back to July 1st of 2024. That actually has not received full approval yet. So we have not recognized that component either. So that is still out there. And that would be in addition to the $100 to $125 million run rate that we've talked about on an annual basis, pending approval of that. Stephen Baxter: Okay. And then just to expand a little bit on, you know, the payer mix dynamics, you discussed. You know, I think I understand some of the, you know, discussion around acuity, but I guess specifically on you know, the lower year over year commercial mix. I mean, is that lapping the, you know, the denials and downgrade impact, or is there something else to consider there? And then just hoping you could expand a little bit on you mentioned Medicaid rate decreases. I was hoping you could, you know, potentially flush that out a little bit. Kevin Hammons: Sure. Let me start off. And Tim, feel free to jump in. So you know, the flu certainly, we believe, had an impact on care in the first quarter, not only on acuity, but also some disruption. We also have seen you know, a reduction in elective procedures and we're seeing more of that reduction in commercial business. And I think it's a combination of potentially the flu, but also some of the disruption in the economy, some of the discussion of recession and fear of tariffs or potential impacts of tariffs. And what that may have. And when you think about your patient population, those with higher deductible co-pays and and you know, high deductible plans. Are probably the most at financial risk in the first quarter before their co-pays and deductibles have been met. And that's where we saw the biggest declines in elective procedures, particularly outpatient and in the elective surgeries within that commercial space. Tim Hingtgen: Yeah, I agree. And the other item that's impacting the net revenue per adjusted admission, we did, because of the outsized impact of flu, I think, have some of the highest levels of medical volumes relative to surgical volumes that we've had in some time. Roughly, you know, again, 75% of our case volumes in the quarter were medical, and typically, we'd be running two-thirds. So I think there was just some dilution impact there. We did see our case mix index increase for both medical and surgical in the quarter, but overall, it kind of came in a little bit lower than the prior quarter because of that dilution impact of the higher medical. Which typically runs a lower acuity index. Operator: Thank you. And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Tim Hingtgen for any closing remarks. Tim Hingtgen: Great. Thank you, Rocco, and thanks to all of you for joining our call today. As always, if you have additional questions, you can reach us at 615-465-7000. Thanks again, and have a great day. Operator: Thank you, sir. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Operator: Good day, and welcome to the Community Health Systems Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I'd now like to turn the conference over to Anton Hie, Vice President of Investor Relations. Please go ahead, sir. Anton Hie: Thank you, Scott. Good morning, and welcome to Community Health Systems's fourth quarter 2024 conference call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Miguel Benet, President of Clinical Operations and Chief Medical Officer. Before we begin, I must remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our Annual Report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss exclude gains from early extinguishment of debt, impairment gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expense from business transformation costs, expense related to employee termination benefits and other restructuring charges and change in estimate for professional claims liability. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Anton, and thanks everyone for joining our fourth quarter earnings conference call. I want to highlight some key performance measures for the full year and later Kevin will cover results for the quarter. I'll start today with the strong growth we are achieving across our CHS-affiliated health systems, resulting in record same-store volume levels for the full year 2024. Versus prior year, same-store increased 3.2%, same-store adjusted admissions increased 2.7% and same-store surgeries increased 1.3%. Growth like this is enabled by our capital investments, strong capacity management and the pursuit of strategic value-generating opportunities across our core portfolio. In 2024, that included significant expansion in outpatient access such as primary care, specialty practices and urgent care centers. In addition to de novo projects, we acquired 10 urgent care clinics in Tucson, Arizona, broadening our geographic footprint and ability to care for more patients in this market. We opened two new free-standing emergency rooms in fast-growing communities, bringing our current count to 19 free-standing EDs across the portfolio.to We ended the year with a total of 47 ambulatory surgery centers. Within our markets, we are very well-positioned for outpatient surgery and as a result, same-store ASC cases increased 14% last year. We also completed two major campus expansion projects, including new inpatient bed towers, emergency department and surgical services capacity. These projects have further improved our competitive position in our Knoxville, Tennessee and Baldwin County, Alabama markets and both continue to ramp-up nicely and we invested in procedural capacity, such as expanding and upgrading cardiac cath lab and other procedural spaces in several health systems last year. Same-store net operating revenues for the year increased 5.5% and adjusted EBITDA for the year improved 6%, which includes the benefit from supplemental state-directed payment programs in the fourth quarter, which Kevin will discuss in more detail later. We also saw improvements in both labor and supplies as a percentage of net revenue. Turning to our portfolio. In 2024, we completed divestitures in Cleveland, Tennessee and in North Carolina. We also plan to finalize other announced divestitures in the first quarter: ShorePoint Health in Florida and Lake Norman Regional Medical Center in North Carolina and we are in discussions, which will likely result in additional strategic divestitures in 2025. We anticipate the sale of these assets will generate meaningful proceeds and de-leveraging value. While 2024 was a very good year in many regards, it was not without challenges. On our last call, we mentioned the impact of downgrades and denials, which continue to be a troubling trend for healthcare providers. However, that situation has shown some stabilization since the third quarter. Our utilization management and physician advisor programs are performing as expected as these clinicians advocate for our patients to receive the appropriate care in appropriate settings, and as we pursue payment for those services. Medical specialist fees and subsidies continue to be a pressure point, particularly in anesthesia services. To mitigate this trend, we have scaled our proven capabilities for managing in-sourced hospital-based services beyond hospitalist and emergency medicine into a growing number of anesthesia programs. In the fourth quarter, for instance, we've rapidly insourced anesthesiology in one of our larger markets, a move, which we are confident will lead to better, more integrated care and services in the most cost-effective manner. We anticipate further expansion of internally managed, hospital-based provider services in 2025, which is leading to greater provider satisfaction and stability, positive quality outcomes for our patients and the opportunity for cost savings. This is just one of many strategic initiatives highlighting how CHS is now a more agile organization and equipped to rapidly adjust to and overcome macro trends and industry headwinds as they arise. Now I'd like to spend a minute on our clinical achievements in 2024. We are proud of our advancements across many measures, including reductions in risk-adjusted mortality rates and hospital-acquired infections, and further advancements in patient safety. By the end of 2024, we reached our best-ever reduction in the serious safety event rate, down 90% from our baseline in 2013. We also saw notable gains in our patient experience measures. These results are made possible by the skilled and compassionate teams working across our organization. Our work to recruit and retain a highly capable workforce continues to yield impressive results. In 2024, overall employee retention was particularly high, and we achieved our best retention rate for registered nurses in the past five years. I want to thank our frontline caregivers and support teams, our local leaders and our corporate teams for all they do every day to ensure quality care for our patients. We are proud of our progress throughout 2024. We believe, we accomplished what we said we would do and finished the year strong by building momentum that we can carry forward. We look forward to even more progress in 2025. Looking ahead, we expect our investments will continue to produce incremental growth. We are intensely focused on ensuring the availability of access and capacity for all of our services, to help our patients get the care they need conveniently and without delay. Numerous initiatives in 2025 are designed to enhance appointment scheduling, care navigation and to help facilitate needed follow-up services, all of which support our patients and can drive additional growth. With our Enterprise Resource Planning platform now fully implemented, we have more insights and data than ever before. These tools can help drive efficiencies, streamline workflows and reduce costs and this year, we will continue to leverage partnerships and innovation to further advance patient care and support our workforce. As always, we remain dedicated to delivering high-quality healthcare services for the patients and communities who count on us every day. With that, let me turn the call over to Kevin Hammons, who will provide more context about our fourth quarter and 2024 results and guidance for the year ahead. Kevin? Kevin Hammons: Thank you, Tim, and good morning, everyone. We continue to see strong demand for care in our markets, leading to the best same-store revenue growth of the year, up 6.5% in the fourth quarter on a 3.4% increase in inpatient admissions and 3.1% growth in adjusted admissions. Same-store ED visits were up 1% and surgeries were up 0.9%. In addition to the strong volumes, same-store revenue growth reflects a 3.3% increase in net revenue per adjusted admission, driven by rate growth, including the Medicare inpatient rate update and incremental reimbursement under Medicaid supplemental payment programs, partly offset by lower acuity. Adjusted EBITDA for the fourth quarter was $428 million, compared with $386 million in the prior year period. Margin for the quarter was 13.1%, up from 12.1% in the prior year period. For the full year of 2024, adjusted EBITDA totaled $1.540 billion, compared with $1.453 billion in 2023, with margin of 12.2%, an improvement of 60 basis points from the prior year. During the quarter, recognized an incremental net benefit of approximately $40 million from Medicaid supplemental payment programs versus prior guidance, primarily relating to the approval and recognition of the New Mexico program for the period July 1st through December 31, 2024. As Tim noted, the impact of payer downgrades and denials has stabilized for us since calling it out in the third quarter. Thanks to our ongoing utilization management efforts and physician advisor program. However, we will remain vigilant in our work and advocacy, regarding this troubling trend that is affecting all healthcare providers. Turning to expense management. We were again pleased with our performance on labor costs with average hourly rate up approximately 4.7% year-over-year in the fourth quarter, reflecting an increase in the number of employed physicians, and approximately 4% for the full year 2024, consistent with our expectations. Contract labor spend was $36 million in the fourth quarter, down another $5 million sequentially and bringing the full year 2024 total to $170 million, down an impressive 36% from full-year 2023, reflecting our success with recruitment and retention. We also continue to see improvement on supplies expense, which declined 50 basis points year-over-year to 15.5% of net revenues in the fourth quarter and for the full year 2024 declined 60 basis points to 15.4%. This reduction in supplies expense as a percent of net revenue, reflects some early wins in our management of supplies as a result of implementing our ERP, increased reimbursement from Medicaid supplemental programs, as well as the growth of admissions outpacing our surgical growth for the year. Offsetting these gains during the fourth quarter, we experienced somewhat sharper increase in medical specialist fees versus expectations and an acceleration from the previous three quarters. Specifically, medical specialist fees exceeded expectations, increasing approximately $20 million on a same-store basis or approximately 12% year-over-year to $170 million in the fourth quarter and for the full year totaled $640 million up 10.9% on a same-store basis from 2023. As Tim noted, we rapidly brought anesthesia care in house in one of our larger markets and also took over operations, when a regional contractor began experiencing severe financial distress, both of which we view as strategic investments that will lead to better results and visibility over the longer-term, despite the upfront costs and short-term margin dilution. While we have made good progress with our in sourcing initiatives, we anticipate further pressure in medical specialist fees over the near-term. In 2025, we anticipate these costs to grow in excess of typical inflationary trends, but still well below the spikes that we saw in 2022 and 2023. Cash flows from operations were $216 million for the fourth quarter, up from $90 million in the fourth quarter of 2023 and $480 million for the full year of 2024, which was consistent with our guidance for $400 million to $500 million and up from the $210 million in 2023. This year-over-year growth in cash flow primarily reflects higher adjusted EBITDA, the reduction in cash interest and improvements in working capital, including the conversion of accounts receivable. For the full year 2024, we deployed with our guidance and down from $460 million in 2023. Transitioning to divestitures during the fourth quarter, we completed one small divestiture of Davis Regional Medical Center in Statesville, North Carolina and announced agreements to divest our other remaining North Carolina facility, Lake Norman Regional Medical Center in Mooresville, as well as the ShorePoint Health System in Florida. We anticipate both of these transactions will close in the first quarter of 2025, providing nearly $550 million in gross proceeds. These transactions reflect attractive double-digits multiples on trailing EBITDA, leading to further deleveraging. In addition to these previously announced transactions, we continue to advance discussions on additional divestitures that we expect to announce in the near future, also at very attractive multiples. All told, these pending and expected transactions should generate more than $1 billion in total proceeds, which we expect to lead to meaningful deleveraging and increased shareholder value. At year end, net debt to trailing adjusted EBITDA was 7.4x, improved from 7.6x in the prior quarter and 7.9x at the end of 2023. We continue to believe, we have more than adequate liquidity to meet our needs going forward with approximately $500 million of borrowing capacity under our ABL, along with available working capital and pending asset sale proceeds. We look forward to providing additional details on these transactions, as they become available. Finishing up 2024, we completed the implementation of our new ERP and workflows under Project Empower as scheduled. The final phase, which involve transitioning onto new workforce management tools for HR, payroll and timekeeping allows us to move beyond the investment and implementation phases and begin focusing on optimizing our use of the new tools and realizing tangible benefits throughout the remainder of 2025. We estimate that, as a result of this work, we will save between $40 million and $60 million this coming year. Moving on to our initial guidance for 2025. We anticipate net revenue of $12.2 billion to $12.6 billion, adjusted EBITDA of $1.450 billion to $1.6 billion, cash flow from operations of $600 million to $700 million and capital expenditures of $350 million to $400 million. Our guidance does not include directed payment program reimbursement for New Mexico or Tennessee, as those programs have not yet been approved by CMS for 2025. If those programs get approved for 2025, we believe, it will add an incremental $100 million to $125 million to our annual guided run rate of EBITDA. Likewise, we have not considered in our guidance any additional divestitures beyond those that have already been announced. If completed, any such transactions would reduce net revenues and EBITDA in 2025, the amount of which is dependent on timing of completion, but would also allow further reductions in our leverage and would therefore be accretive to our equity value. This concludes our prepared remarks. So, at this time, we will turn the call back over to the operator for Q&A. Operator: We will now begin the question-and-answer session [Operator Instructions] The first question will come from Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, good morning, guys and congrats on the quarter. Maybe Kevin my first question for you, as I think about the guidance for 2025, maybe if you can just help us bridge 2024 to 2025? I know there's so many moving pieces here. And then, if there are any specific callouts for one timers that we need to consider maybe for Q1? Kevin Hammons: Sure. Thanks, Brian. Appreciate it. As I mentioned, the guidance does not include Tennessee and New Mexico DPP and only includes the announced divestitures. So maybe to do a high-level bridge, starting with EBITDA, where we finished up 2024 to $1.54 billion, I think we could take out approximately $40 million of DPP funds that were recognized in 2024 in the fourth quarter. That was the New Mexico piece. Take out $50 million to $60 million related to the announced divestitures as we go in, so roughly, call it, $100 million reduction, add in organic growth of $75 million to $100 million in 2025, and that gets you back to the midpoint of our guide of about $1.525 billion. Even without the DPP, at that midpoint, it would still be deleveraging given that we have about $550 million of proceeds coming in related to those divestitures. And then, factoring in if or when Tennessee and New Mexico get approved, and we do fully expect them to get approved that would add an additional $100 million to $125 million to that annual run rate of EBITDA. Brian Tanquilut: Got you. Okay. That makes sense. And then maybe, Tim, as I think about some of the things that you've done in 2024, you're still looking to do some divestitures here, but you've also added some urgent care locations. Just curious how we should be thinking about where you stand today on kind of the strategic moves that you still want to do and I know you mentioned that, you've got a couple of deals here in the pipeline, but once we get past that, I mean, how should we be thinking about kind of like the moves that we should expect out of you guys? Tim Hingtgen: Sure. Thanks, Brian. I'm happy to shed some color on that. Obviously, we're pleased with our ability to invest in and grow the core portfolio. We've been speaking to our investable opportunities for the last several years and it's always good to see that pull through in terms of the volume and earnings progression. I think we called this out in a number of occasions, but it's a smaller portfolio generating roughly these similar amount of net revenue as three or four years ago. So we know that our investments are yielding the intended outcomes, caring for more patients and driving that type of growth. Now in terms of where we go next, we still have some runway left on, obviously some past capital investments, particularly around our expansion projects. I called out that, they're ramping up nicely that by any stretch of the imagination. We built them for further growth capabilities in the quarters ahead. Also, we've also talked extensively about where we're investing our capital dollars and it goes beyond just inpatient capacity and procedural capacity on our campuses. They're really driving that access point strategy. So, we have a pipeline of incremental ASC expansions or de novo projects underway. We also have more freestanding ED projects, in flight, some of them going through certificate of need processes. So, we still see a good portion of portfolio still having investable opportunities for more organic growth. In terms of the post-acute and behavioral health side of the business, we think we've done a nice job of growing that side of the business. We believe there's also more expansion opportunities and growth opportunities in that regard. And then the last thing I'll put out there, again speaking to where we have insights into the business, beyond just the ERP implementation of seeing where we can better manage the business, for the last, I'd say, seven or eight years, we've leveraged the Transfer Center rather extensively to always help us identify new opportunities for service line expansion. We continue to see in the majority of our transfer center markets the ability to expand our service areas by taking in patients from further out as we add those specialties, so we don't believe we've reached the end of that road either. Again, a lot of growth opportunities on an organic basis. Brian Tanquilut: Hi, Tim, maybe if I may follow-up, just as I think about your mid-teens EBITDA margin guidance and you did 13% -ish coming out of Q4. So putting all this the things that you mentioned together and then maybe considering medical specialist fees, what's that line of sight like and what will it take for you to hit that mid-teens target number? Tim Hingtgen: I'll let Kevin start with the answer kind of where we peg that mid-term guidance. I'll add a few things at the end, which I think tie back to my comments. Kevin Hammons: Sure. There's a couple of things. We've had a little bit of drag with some medical specialties, which even though we do believe they're continuing to increase, we are getting some stabilization. Our work with ERP and getting that project completed, which has also been a little bit of a drag on us, but should turn into a tailwind. And with the functionality and the work and visibility we have and improving decision support, we think we can take out some material cost. We've made some -- what we believe to be really good investments in capital growth projects and then we continue to believe we can get some leverage on both acuity and payer mix as some of our markets grow. Tim Hingtgen: Yes. And I would layer onto that opportunities for margin expansion, obviously, over the next couple of years, hopefully with some moderation in inflation and continued strengthening in payer mix and rates on the commercial side of the business. Obviously, there is some risk embedded with the governmental programs. But in general, targeting the payer mix through our access point strategy has worked out really well for us. We also see some opportunities, as I said to ramp up these projects and improve our fixed cost leverage. So I think that will pull through in terms of being that midterm target as well. Kevin Hammons: Maybe the last point I'd make is, as we continue to delever and have opportunities for deleveraging, we are getting to positive free cash flow, able to get our debt down and lower our cash interest. Even if we aren't at those mid-teen margins being positive on those other things will generate sufficient cash flow and sufficient EBITDA to continue to progress and make the investments that we need. Operator: The next question will come from Ben Hendrix with RBC Capital Markets. Please go ahead. Ben Hendrix: Great. Thank you guys very much. Just wanted to follow-up on some of your thoughts on DPP. First of all, in 4Q, the $40 million of New Mexico DPP that you recognized, just wanted it seems to be about twice what you'd expected. Does that reflect just conservatism around this program initially versus your expectations, or was there something structurally that changed that drove that outperformance? And then just secondly, the exclusion of DPP and guidance suggests a more cautious stance than what we heard back in October. Clearly, just wanted to get your latest thoughts on your assessment of the risk of these programs and how you're thinking about them under the new administration. Thanks. Kevin Hammons: Sure. Thanks, Ben. We did not include the New Mexico or Tennessee programs in our guidance in 2024. So although we've been working closely with the state and following very closely with that program, we weren't sure of the timing of approval, so we did not include it in the guidance. It was approved, I believe, in December, so that we were able to recognize and we recognized the period from July 1st through December. So two quarters' worth recognized all in the fourth quarter. I think kind of, at the end of the day, what we had provided on an outlook back after the third quarter was those two states combined, we believe should contribute about $100 million to $125 million to an annual run rate of EBITDA. We still believe that that's the right number, so it's in line. New Mexico is really in line with our expectations around that, but we just did not have it in the guidance for 4Q, because of timing and uncertainty around the approval process. Going forward, again, we do expect those programs to get approved, New Mexico, which is basically a renewal and then Tennessee to get approved here. Right now, I understand, there's a freeze on communications from CMS until we get confirmation of the secretary and leadership there. But that should be coming hopefully soon and we don't see that there is probably going to be a big headwind. We believe, these programs will continue relatively in their current form going forward. They've been successful programs. Many states -- actually, there's been bipartisan support in both red states and blue states. And if I think about the current administration and where some of these programs are used to a high degree in states like Texas and Florida and more recently Mississippi, Tennessee also being a red state that has applied for one. I don't see that they will not be approved going forward. Tim Hingtgen: Yes. And then I'll add on to that. I think Kevin's spot on. Obviously, Medicaid has traditionally been an under-funded payer source for us. So, these programs are critically important to sustaining the level of services to the Medicaid population and irrespective of whether it's a red state or a blue state, giving people coverage and access to healthcare is such a critical issue for their well-being, but also just from I guess I'll say from a political agenda as well, making sure that we're not taking things away from people that are so important to them, especially as we transition to the new administration. I do think, in terms of the programs, we're doing a lot of work around lobbying activities. Obviously, making sure that the reason why these programs are important is clearly understood by our elected officials. And as Kevin said, we've had broad support in our discussions with many of them to get these programs adjusted or modified to strengthen the access to healthcare in their communities. So we hope that bodes well for us going forward in terms of the durability of the supplemental programs. Operator: The next question will come from A.J. Rice with UBS. Please go ahead. A.J. Rice: Hi, everybody. Thanks for the question. On the organic growth of $75 million to $100 million is this part of the bridge you talked about earlier. Can you imagine just giving us some sense of what you're thinking of for same store revenues, same store volume, same store margins perhaps. I know you've had a slight uptick in the overall margin, but I don't think that teases out what the same store number is. I apologize if I missed it. But just some metrics around what you think the underlying same store portfolio is doing. Kevin Hammons: Sure. Thanks AJ So in terms of kind of volume, we're looking at 2 to 3% volume growth in 2025, similar in pricing. So you can think about net revenue growing, growing in the mid-single-digit area contributing margin wise, slight increase in same store margin is more of that organic growth we would expect to flow through to the bottom line. In terms of some inflationary trends, we're thinking about something in the neighborhood of 3.75% on salaries and wages. That's a little bit less than 2024, but still not back to where we had previously thought. You know, something probably in the 3% range on most other expenses from an inflationary trend with the exception of medical specialist fees, we're probably looking at and we budgeted for an increase in the 8% to 12% range on medical specialist fees. It was up 12% this year, or I'm sorry, 10.9% for the full year. And so we're kind of budgeting in that 8 to 12% and then on ERP to help offset some of those inflationary increases. We're looking at some offsetting savings as a result of our ERP work. And now having that fully implemented in the $40 to $60 million range. A.J. Rice: Okay, that's helpful. And then just not to belabor the DPP program questions, but some of your peers felt like Tennessee got approved at least for the 6 month stub in ‘24. It doesn't sound like you booked any either in 24 or in your guidance for ‘25. Can you comment on that? And then also I know for some time you're one that has some major states that have not yet adopted DPP programs or at least have not upgraded DPP programs to the extent that they might and specifically people typically call out Alabama, Indiana and Arkansas. Any update on where those stand at this point? Kevin Hammons: Yes, I can give you an update on those. So Tennessee in January we did get word that the program in Tennessee was approved. At least the structure of the program. But the funding for Tennessee's DPP program has not yet been approved. So just being prudent and conservative in our guidance, without the funding being approved and the freeze on communications coming out of Washington or out of CMS, we decided not to put that in our guidance, but again, fully expect that that funding does get approved. Tennessee, the TennCare program was a block grant program. So I think there was an additional level of approval that was needed or waiver for that going forward and we're just waiting on that final step. In terms of additional states, we do have some pretty meaningful states. Indiana, Tennessee and Arkansas and Alaska, which do not have programs, do not have DPP programs or at least not fully implemented. Indiana is probably the farthest along, although no certainty of where that ends up. We do know that the state legislature is considering it. They're in session right now and there's a plan that's been presented for them for approval, so that is farthest along. We are in discussions in Alabama and Arkansas. I would say that they're a little farther behind or maybe said differently there at the earlier, earlier stages of considering and developing plans in those states. But all of those states have certainly expressed interest in taking a look at these programs and looking for additional Medicaid funding through these. We view these programs really as just part of Medicaid funding overall. We typically consider Medicaid or delivery of Medicaid business at a loss. These programs help bridge that gap as part of the reimbursement for Medicaid and I know the states are looking for some additional money, so we would expect some potential there but Alabama and Arkansas probably not in 2025. That's probably a 2026 is the earliest. Operator: Your next question will come from Andrew Mok with Barclays. Andrew Mok: It looks like you're forecasting operating cash flow to improve the $150 million to $200 million in 2025 on a lower EBITDA base. So hoping you could flesh out the drivers of that better conversion? And then as a follow-up, to the extent that there's an incremental $100 million plus from the state-directed payment programs, would that all drop through to operating cash flow? Kevin Hammons: Sure, Andrew. Thanks for the question. So there are a couple of moving parts on the cash flows. So the New Mexico DPP program that we did recognize in 2024, that was in the fourth quarter. That $40 million roughly would be paid in cash received in 2025 and so that's a nice carryover and would contribute to the cash. Also, as we wrapped up our implementation of our ERP conversion, that has been a drag on cash flows for us. Although we've been backing out the income statement impact or at least a portion of the income statement impact of that program from adjusted EBITDA. We've not backed out the cash component of that from cash flows. So I think that also contributes to some improved cash flow generation in 2025. Another positive impact is we've gotten word that our tax refund is being processed by their IRS. This is the tax refund that we've been waiting on for a number of years. So we would expect roughly $70 million to $75 million of cash coming in on that. Those will be offset. We will have higher cash interest payments in 2025 primarily related to the timing of cash interest payments, particularly around the refinancing, which we did refinance some debt this past year at a higher interest rate. But just the timing of payments will cause cash interest to increase about $40 million in 2025. So that will be offsetting. Andrew Mok: Got it. That's helpful. And then just to clarify a point on the state-directed payments. I think you called out $100 million to $125 million in incremental annual benefit from Tennessee and New Mexico. That doesn't include the retro Tennessee piece. Is that correct? Kevin Hammons: That is correct. That does not include the retro Tennessee piece. So that would be in addition. And those programs will accrue to our cash flow will flow through EBITDA and cash flow as well. Operator: The next question will come from Stephen Baxter with Wells Fargo. Unidentified Analyst: This is Mitchell on for Steve. I wanted to see if you could quantify the continued hurricane impacts in Q4. And do you expect volumes to fully recover in 2025? Kevin Hammons: Sure today, we had -- as we indicated in our guide for Q4, we expected about a $10 million impact from the hurricane. It was as expected, and really didn't see any additional impact. We have one hospital that continues to be shut down as a result of that hurricane was shut down for the entire quarter and into Q1. The assets that were impacted by the hurricanes Shore Point Health System, our assets that we are being sold. Those were deal was announced, and we expect that deal to close here in the first quarter. So we do not expect any ongoing impact since those assets will be gone. Operator: [Operator Instructions] Our next question will come from Josh Raskin with Nephron Research. It seems that our questioner has disconnected. This leaves no questions in the question queue. I would like to turn the conference back over to Mr. Tim Hingtgen for any closing remarks. Tim Hingtgen: Great. Thank you, Chuck, and thanks to all of you for joining our call today. As always, if you have additional questions, you can reach us at (615) 465-7000. Thanks again, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Community Health Systems Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I'd now like to turn the conference over to Anton Hie, Vice President of Investor Relations. Please go ahead. Anton Hie: Thank you, Jay. Good morning, and welcome to Community Health Systems's third quarter 2024 conference call. Participating on today's call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer and Dr. Miguel Benet, Executive Vice President, Clinical Operations. Before we begin, I must remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss exclude impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expense from business transformation costs, expenses related to employee termination benefits and other restructuring charges and change in estimate for professional claims liability. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Anton, and thanks everyone for joining our third quarter earnings conference call. I'd like to begin by addressing the impact of back to back hurricanes, Helene and Milton. The hurricanes impacted several of the communities we serve, primarily in Florida, Georgia and East Tennessee. As a result, in late third quarter, and early fourth quarter, CHS hospitals most likely to experience severe impact ramp down services and canceled elective procedures. In total, three of our facilities were evacuated and closed consistent with local orders. The biggest impact occurred in our ShorePoint Health System located South of Tampa, Physicians Regional Healthcare System in Naples and Tennova Newport in East Tennessee. Most significantly, ShorePoint Punta Gorda experienced major damage due to flooding. The hospital remains closed today and remediation efforts are currently underway. Hurricane readiness and response has proven to be a core competency at CHS, and I want to note that the effort to safely evacuate patients was enabled by terrific coordination between our hospitals, our CHS transfer center operation and numerous other corporate resources that worked around the clock to be ready for Helene and then Milton. Our hearts go out to all affected by these terrible weather events. And I just want to mention that our CHS Cares Fund, which was established to help employees in need of financial assistance following an unforeseen disaster or situation has already been supporting 100s of impacted team members. Kevin will talk more about the financial impact of the hurricanes on the third quarter results in just a moment. Despite the late quarter hurricane impact, same-store volumes improved with a 2.4% increase in admissions and a 2.6% increase in adjusted admissions over the prior year quarter. Surgeries improved 3.1% led by growth in lower acuity outpatient cases driven by our consistent investments into ambulatory surgery sites of care. While patient demand for services was good overall, inpatient acuity skewed lower than expected affecting net revenue, which totaled $3.09 billion in the quarter. Adjusted EBITDA was $347 million. Our third quarter results were impacted by a continued increase in denials and downgrades by insurers. We are seeing some payers aggressively deny payment for medically necessary services that have been provided for our patients. For several quarters now, the challenges we and our industry are facing regarding increasing denial activity by payers has been well documented. And over the last few years, in response to this challenge, we have stood up and enhanced utilization review program and centralized physician advisor services to ensure our patients are placed in the correct care status and that we receive the appropriate payment for their care. As a result, our physician advisor service has been able to obtain a high rate of reversal on initial payer denials. Nevertheless, the rate of denial activity by payers continues to grow and has continued to pressure our top line. We are making incremental investments in our centralized patient financial services processes and teams as well as our Physician Advisor Program to continue to advocate for the appropriate classification of care for our patients and payment for the services our health systems provide. While the quarter did not fully meet all of our expectations, I remain very proud of our team's ability to face unexpected challenges head on, and I'm optimistic about our opportunities. We expect normal seasonality improvements in the fourth quarter and we remain optimistic that our focus on adding incremental inpatient capacity, outpatient access points and recruitment of specialists necessary for Ohio Acuity service lines will position our health systems for growth into 2025 and beyond. We have been delivering upon our strategic growth plans across our health systems fueled by key capital investments. A few recent and notable investments include our Knoxville North Tower expansion, which opened earlier this year and is ramping up well. The new capacity was a catalyst for strong incremental patient volumes, posting a double-digit increase versus the same quarter last year. And this Saturday, we are opening a new patient tower and incremental surgical capacity in Baldwin County, Alabama. These developments are core components of the nearly $200 million campus expansion taking shape there, all of which will create capacity for incremental market share gains in this rapidly growing region. On the outpatient side, we now operate a total of 18 freestanding ED locations following the opening of new centers in Huntsville, Alabama and Lake Granbury, Texas. We also completed the expansion of the hospital emergency department at Grandview Medical Center in Birmingham, Alabama. All of these projects have resulted in immediate volume growth. And we recently announced a definitive agreement to acquire Carbon Health's 10 urgent care locations in the Tucson, Arizona market. This will expand our urgent care footprint to 17 locations across that market. We expect that transaction to close this quarter. My confidence in our strategic direction, health system leadership team and especially the women and men who provide care for our patients is at an all-time high. The services we provide are critically important to our patients and communities, and our commitment to provide that care while also achieving strong operating and financial results is unwavering. With that, Kevin, let me turn the call over to you. Kevin Hammons: Thank you, Tim, and good morning, everyone. Underlying demand for care in our markets remained strong, leading to the same-store volume growth, including a 2.4% increase in admissions and a 2.6% increase in adjusted admissions. Same-store ED visits were up 0.8%, and surgeries were up 3.1%. As a result of Hurricane Helene, during the third quarter, one of our facilities was forced to evacuate patients, and several facilities saw delays in scheduled electives. We estimate an approximate $7 million impact during the third quarter from missed revenue and incremental costs. However, ShorePoint Health Punta Gorda remains closed due to the extensive damage suffered from both hurricanes and will continue to be a headwind throughout the fourth quarter as it will be closed for the remainder of the year. Net operating revenues for the quarter were $3.09 billion, up slightly year-over-year on a consolidated basis. On a same-store basis, net revenue increased 5.1%, which remained consistent with our target for mid-single-digit growth for the year. The same-store top line growth was driven by the 2.6% increase in adjusted admissions along with 2.5% growth in net revenue per adjusted admission, which largely reflects improved rates and incremental reimbursement under State Medicaid programs, partly offset by lower acuity. We were pleased to see solid volume growth, including growth in our commercial book. However, the service line mix of the business was less favorable than expected, with overall case mix index down 60 basis points from prior year, reflecting declines in both the surgical mix and the surgical CMI. Adjusted EBITDA for the third quarter was $347 million compared with $360 million in the prior year period. Margin for the quarter was 11.2%, down from 11.7% in the prior year period. Contributing to the lower than expected EBITDA, we've continued to experience significant increases in initial denials and downgrades by managed care plans, with more than half of the incidents coming in the Medicare Advantage book. While denial activity is not new, the tactics used by the payers have become more aggressive, and we have experienced an approximate doubling of denials in the quarter compared with the prior year, which is an increase above our expectations. This resulted in an approximate $10 million headwind for the quarter. As Tim noted, we are taking action to help ensure that the care we are providing is properly classified and reimbursed, including further expansion of our centralized physician advisor program along with additional steps to mitigate increased denials in the future. Moving to expense management. We were once again pleased with our performance on labor costs. Average hourly wage rate increased 3.9% year-over-year, consistent with our expectations for the full-year. Contract labor spend was down 24% year-over-year and declined $4 million sequentially to $41 million in the third quarter, which was better than our expectations and reflected the continued progress made possible by our recruitment and retention efforts. We continue to see a meaningful improvement in controlling supplies expense, which on a same store basis was down 1.3% per adjusted admission in the third quarter. As we move more hospitals onto our new ERP, we are gaining additional insights we can leverage to improve efficiencies and reduce supply expense. Medical specialist fees increased $15 million or approximately 10% from the prior year period with notable pressure in anesthesia. This was slightly higher than expected in the third quarter, but overall, we've remain pleased with the progress of our hospital-based provider in sourcing initiative. Since launching in August of 2023, the in source platform has expanded significantly in coverage of ED and hospitals programs and is only just beginning in anesthesia with the first large market coming online in the fourth quarter. We have an active pipeline of additional programs coming in house in the coming months and many others under consideration. During the quarter, we booked a $149 million increase to our professional claims liability accrual based on a review by our new actuary. This change in estimate considers the national trend of outsized verdicts and propensity for larger claim settlements that have been experienced more recently, which is broadly being referred to in the industry as social inflation and the exposure of adverse development in our outstanding claims if this environment persists. Although we've not been the subject of any recent nuclear verdicts, we have experienced an increased settlement amounts over historical averages, including those in jurisdictions that have historically resisted this behavior. Furthermore, the majority of this change in estimate relates to claim activity and development from previously divested hospitals and is therefore not reflective of our current run rate of new claim activity, which has been much lower as we have made material improvements in our safety and quality outcomes. In fact, our improvements in some cases are industry leading, and I've asked Dr. Miguel Benet to comment for just a minute on some of these most recent accomplishments. Dr. Benet? Miguel Benet: Thank you, Kevin. CHS has a long standing commitment to advance the clinical quality and patient safety, and that commitment is ingrained into our culture at every level of the organization. We're very proud of the many positive results that we are achieving, especially this year, and we are confident that we can continuously improve quality and safety, producing better outcomes and higher value for our patients. CHS began monitoring our organization wide serious safety event rate more than a decade ago. Significant improvements in this area have saved lives and spared thousands of patients from preventable harm. That work continues, and I would like to highlight achievements in three specific areas, including: First, we've achieved a nearly 20% improvement in our risk adjusted mortality index from the prior year period, which puts CHS in the top quartile of all U.S. hospitals. There are many initiatives that have led to this accomplishment, including a companywide focus on immediate treatment of patients with sepsis. We've also achieved a nearly 24% improvement versus the same period last year in our patient safety and adverse event composite from CMS, which measures effectiveness in protecting patients from complications. The improvement places CHS in the top 5% of hospitals nationwide. And we're pleased to report a 27% year-over-year improvement in our precursor safety event rate, continuing our trend of reducing serious safety events almost every quarter, since the baseline was established in 2012. Our data science program is maturing and providing insights to help identify areas like these where we can optimize our clinical outcomes and deliver further improvements across the organization. Of course, it is the physicians, nurses and other caregivers who commit daily to providing high quality care for their patients and make these accomplishments possible. We certainly appreciate your dedication to quality and safety. With that, Kevin, I'll turn it back over to you. Kevin Hammons: Thank you, Miguel. Back to our financial review. Cash flows from operations were $67 million for the third quarter of 2024 compared with $29 million in the year ago period. The year-over-year improvement in cash flow primarily reflects improved cash flow from changes in working capital, including conversion of accounts receivable as expected. Capital expenditures for the third quarter of 2024 were $70 million and for the year-to-date were $251 million on track for our 2024 guidance range of $350 million to $400 million. In August, we completed the divestiture of Tennova Cleveland and used part of the proceeds to extinguish approximately $143 million of principal value of our 5⅝% senior secured notes due 2027 through open market repurchases, utilizing cash on hand. We continue to make progress towards our $1 billion divestiture plan. We anticipate the majority of the remaining transactions to be complete -- to complete this plan will likely be signed in the fourth quarter with final closings carrying over into the first quarter of 2025. At the end of quarter, net debt to trailing adjusted EBITDA was 7.6x, consistent with the prior quarter, and improved from 7.9x at year end 2023. We continue to believe we have more than adequate liquidity to meet our needs going forward with approximately $440 million of borrowing capacity under the ABL along with pending asset sale proceeds. Our implementation of a new ERP and workflows along with standardization of data under our Project Empower enters the final innings. As of October 1st, we have all of our subsidiaries up and running on the new financial and supply chain platforms and transitioned into our shared service environment. We are on track to complete the implementation of the ERP by transitioning on to the new workforce management tools for HR, payroll and timekeeping, thus completing the bulk of the transition work in the first quarter of 2025. As we enter 2025, we will benefit by having the investment in disruption behind us, and we can focus on optimizing our use of the new tools and benefit realization. With one quarter remaining in 2024, we are adjusting our guidance range as we continue to assess the impact of Hurricane Helene and Milton on our operations. Specifically, we now anticipate 2024 adjusted EBITDA of $1.5 million to $1.54 billion, which consistent with prior guidance, does not include any contribution from potential new supplemental payment programs nor does it assume any future divestiture activity. While not yet providing formal guidance for 2025, in response to repeated investor inquiries and in the interest of transparency, we are providing an initial estimate of the potential benefit from the new or expanded state directed payment programs in New Mexico and Tennessee. Both programs have been approved by the respective legislatures and governors and submitted to CMS, where they are currently awaiting approval. At this time, based on our interpretation of the programs as designed and the various puts and takes. We estimate an aggregate EBITDA benefit of approximately $100 million to $120 million annually. This concludes our prepared remarks. So at this time, we'll turn the call back over to the operator for Q&A. Operator: We would now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, good morning guys. Maybe, Kevin, I'll touch on that last comment you made just on the DPP. So $100 million to $120 million, this is just for New Mexico and Tennessee. And then is this net of provider taxes just to clarify that? Kevin Hammons: Yes. That is the aggregate amount from both Tennessee and New Mexico on an annual basis and is the net EBITDA benefit. So that would be net of the provider taxes. So there would be a gross-up impact on net revenue and then additional expense. It is also net of what we may see in terms of sunsetting some existing reimbursement benefit and maybe some additional cost that we could incur as a result of these plans being approved as we've seen in the past and some other state. So that is what our current estimate is of our EBITDA benefit on an annual basis. I would remind everyone that if those are approved in the fourth quarter, as we expect, they will be. Those plans are retroactive back to July 1, 2024, so we could potentially get six months' worth of that, again, if CMS approves them during the fourth quarter. Brian Tanquilut: Understand. And then maybe, Kevin, as I think about your EBITDA guidance change and the free cash flow guidance change, maybe if you can bridge me from that $40 million cut to EBITDA to the 100 plus -- or $100 million cut to free cash flow, just curious. Kevin Hammons: Sure. There's a couple of other things that I'd point out. So obviously, a big one there is the reduction in EBITDA. The denials and truly the slowdown in the adjudication process is also having an impact on our cash collections. A number of the claims that have been denied are still not through the final adjudication process, and that seems to be continually slowing down. So we've taken that into consideration. There is a small amount of some state program monies that we, as stock, might get approved in the third quarter that will be approved in the fourth quarter, but the cash for those will likely slip into the first quarter of 2025. So that's just a matter of timing. And then with one of the divestitures in Pennsylvania that we have announced that we expect to close in the fourth quarter, we are selling working capital with that. So net working capital get pulled out in the anticipated collections related to those receivables won't be in the fourth quarter. Brian Tanquilut: All right. Got it. Thank you. Operator: Next question comes from A.J. Rice with UBS. Please go ahead. A.J. Rice: Thanks. Hi, everybody. Just to go back to that guidance change on the EBITDA. So a reduction of about $40 million at the midpoint. I think $18 million of that is in third quarter variance, hurricane and otherwise. So that leaves about $22 million for the fourth quarter, if I've got the numbers right. You've got, I'm sure, additional hurricane impact given the timing of the second hurricane. You probably -- I don't know whether there's a change in your accruals for liability based on the update charge in the third quarter, but is that part of the dynamic? And then are you making any operational changes in your assumption for the fourth quarter? Kevin Hammons: Thanks, A.J. So I think your math there is right. About $18 million of the $40 million change at the midpoint is the quick to the miss in Q3. Then I would say the remainder is really split between the fourth quarter hurricane impact with Punta Gorda being shut down for the entire quarter as well as the disruption we had when Milton hit early in the quarter, there's certainly some EBITDA or some EV business that we won't get back from those days. Hopefully, we'll recover some of the elective surgeries. There really is no operational changes being made. In terms of the MedMal expense, our increased liability really does not impact our go-forward run rate materially. We had already been increasing the run rate of expense. So that's kind of been baked in, and this adjustment really was going back and looking at the base claim amounts. But in terms of run rate, we don't see that having a big impact. I do also want to point out relative to our guidance change on net revenue. We did bring down net revenue of $100 million at the midpoint. And that's largely due to reflecting the announced divestitures in Commonwealth and North Carolina, the one small hospital in North Carolina and taking the fourth quarter revenue down because we expect those to be complete -- deals to close here during the quarter. And then a smaller portion of that net revenue adjustment was again the hurricanes and denials. A.J. Rice: Okay. That makes sense. Maybe just my follow-up question on those denials you're seeing, you said it's mainly concentrated in Medicare Advantage plans when you drill down, is this mostly related to the change associated with the two-midnight rules that MA plans are having absorbed and that's creating confusion or is there other areas of focus on these denials that are being implemented? Kevin Hammons: How I would describe that is I think maybe the two-midnight rule is the impetus, but we're just seeing the payers be more aggressive across many areas of denials. So they're expanding the population of the claims, in which they're denied, and we're seeing it, again the majority of it is in the MA book, but we're seeing more denials in the commercial book as well. So that's where we're seeing the impact above the prior trend and above what we hadn't previously anticipated. A.J. Rice: Okay, thanks a lot. Operator: And the next question comes from Andrew Mok with Barclays. Please go ahead. Andrew Mok: Hi, good morning. Just wanted to follow-up on this denied claims headwind. One, when did that start to materialize as a headwind in the quarter? And two, what can you do to combat this going forward? Do you have a stronger appeals case for these newer denials than what you would typically have? Thanks. Kevin Hammons: I think it was really kind of throughout the quarter. They've continued to ramp up. And really, it's the slowdown of the adjudication process that continues to kind of expand and we're -- as noted by our adjustment in our guidance in the fourth quarter, at this point, we're expecting that to continue to be a problem somewhat going forward as well. So I can't say that there wasn't one event during the quarter that would have pointed to, hey, this is changing, but we just continue to see a slow ramp-up in denials as well as the time frame for the adjudication process. We have been successful in about 25% of the cases that have been denied and these are -- we're looking at cases greater than two-midnights that have been denied. We've been successful in about 25% of those, getting those paid as an inpatient, but there still remains a material amount, almost 70% of those initial denials from claims this year that are no longer considered or still in the process of not been finally -- final adjudicated. Tim Hingtgen: Yes. Andrew, this is Tim. I'll add on to that. We have been experiencing increased denials throughout the year that most of that activity is coming out of the prior year because there's quite a tail on the actual denial appeal process. So what we saw in this quarter was an acceleration off of the run rate that we had in the first and second quarter, and that's the $10 million delta Kevin called out, it was -- that's the incremental increase that we did not expect a bounce in the third quarter. Andrew Mok: Got it. And if I could just follow-up. Is this broad-based activity across most of your payers? Is this more concentrated among a few? Thanks. Kevin Hammons: It's relatively broad-based. Tim Hingtgen: Yes, I would agree. Kevin Hammons: And maybe to your other question about things that we're changing or can do going forward. we do now are in a position to have physician advisor coverage across our entire portfolio as well as having a more robust kind of appeals capabilities to go after some of these initial denials. Andrew Mok: Great. Thanks for the color. Operator: The next question comes from Ben Hendrix with RBC. Please go ahead. BenHendrix: Thank you very much. Just a follow-up on the $22 million of the EBITDA guidance that you expect in the fourth quarter. Is it possible to parse that out between the impact from Punta Gorda and the other hospitals versus claim denials. Just trying to get an idea of if those claim denials are expected to continue to accelerate into fourth quarter? Then if there's any impact on acuity in that number from the outpatient acuity, if there's just -- if you can just parse out kind of the impact within that $22 million. Kevin Hammons: Yes. I would say more than half of that $22 million is hurricane impact. I would say the denial impact would look similar to Q3. And then the remainder being hurricane impact. Ben Hendrix: Thanks for that. Just a quick follow-up on the softer acuity. Can you talk to the -- or the drivers of that outpatient acuity softness? Is that just calendar related? We heard one of your peers talk about kind of forecast expectations for maybe some higher volume of lower acuity in the second half. I'm just wondering if you see that persisting through the rest of the year and then how that might look like for 2025? Thanks. Tim Hingtgen: Hey, Ben, this is Tim. I'll start it off and invite Kevin and Miguel to chime in. Just to clarify, the softness in the acuity that we called out was on the inpatient surgery side of the business. We had good, strong surgical growth in the quarter, as we pointed out earlier in our remarks, but that was primarily on the outpatient side of the business. We did see growth on inpatient surgery, but they were in the lower acuity inpatient surgery category. I think impacting that inpatient surgical acuity was just some continued site of care migration of our total joints to the outpatient side the last year. In the previous quarters, we had more inpatient total joints. We see more of that migrating into the ambulatory surgery environment. And just to clarify, we believe we're capturing that within our ambulatory surgery environment. We did a large expansion in one of our orthopedic focused [indiscernible] in Indiana, that is really ramping up very nicely. So that does have an impact on the surgical acuity. We did see softer inpatient surgery volumes on elective spine cases. We saw some softness on the CVT and Vascular services. Those are the areas where we believe we'll pick those back up in the fourth quarter with focused efforts of getting those patients back in for their care. Just to point out, our clinic visits in the third quarter, we always say that's a decent bellwether of what we can expect for volumes down the road. We did have really strong clinic business even factoring in the hurricane impact market. So we have no reason to believe that demand is just a softening overall. We believe it's more of a timing issue. Ben Hendrix: Thank you. Operator: And the next question comes from Stephen Baxter with Wells Fargo. Please go ahead. Stephen Baxter: Hi, thanks. I know it's early for 2025 commentary, but just wanted to get your sense of how we should think about perhaps the 2024 revised guidance of the jump-off point because I guess, first, wondering like is it reasonable to expect essentially getting back all of the hurricane headwind, and you move into 2025? Or would you expect that there'd be any lingering disruption there? And then I guess, as we think about this incremental $10 million of denials, I assume obviously you're factoring in a bit similar for the fourth quarter. I guess what we also then have to consider as a headwind to maybe Q1 and Q2 before you lap that and maybe all these things are offsetting and this is a good jump-off point? Or should we think about it perhaps differently, let's get some insight there? Thanks. Kevin Hammons: Sure. So there are some moving parts. But I think 2024 is a good jumping off point, we will have some divestitures here either in late fourth quarter or early first quarter that would need adjusted. Certainly, the DPP programs, which are not in 2024 and not in our guidance that we're hopeful to get approved here in the fourth quarter, but we certainly expect those to be in place in 2025, assuming CMS approves those so that's kind of a meaningful change for us. In terms of disruption around the hurricane, it will take some time before we get insurance business interruption insurance settled. But some of this disruption that we're seeing here in the third and fourth quarter, we will be getting reimbursed through business interruption insurance. But again, that will take some time, and it's not going to be this year. And I would hope that with the full-year ahead of us in '25 that we can come to some agreement with the insurance companies and get that settled in in 2025 as well as having some reimbursement for property damage in 2025 as well. So again, some moving parts, but I think from base operations, we're continuing to make progress with some of our strategic investments, opening the new tower here in the fourth quarter that Tim mentioned earlier in the year, another one in Knoxville, and as we continue to recruit specialist and make other investments in outpatient locations, I think we can continue to grow volume and grow earnings from there. Tim Hingtgen: I think that's well said. Stephen, I'll add on in terms of hurricane disruption. For the Pintogorda facility that remains closed, that's part of our short point health network, which has a larger hospital in Port Charlotte. We have been successful to migrating some of that care over to the Port Charlotte campus to mitigate some of that disruption of having a campus shut down, but we do not have the access for ED services. We also had a larger behavioral health program that is running at a more reduced capacity at the Port Charlotte campus. So there's some things that we can't necessarily overcome within one quarter. So just want to put some color around that. In terms of the timing of Milton unlike Helene happening in the last week of a quarter, with Milton being in the first week of the quarter, we do see opportunities to work those patients back into the surgical side, the procedural side of the business for sure through the remainder of the quarter. We stay close to those patients and providers. Right now, it call me the case after a major natural disaster. Those patients maybe don't come back the first week or second week after an incident like this. They're trying to get their homes and their lives back in order, but we believe we can get them back in by the end of the quarter. Operator: And the next question comes from Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, thanks for letting me ask the follow-up. Maybe, Kevin, as I think about the revenue per adjusted admission, the KPI for the quarter, just curious, I mean, as I look at the payer mix improving, obviously, you called out acuity, but how should we be thinking about putting all that together in the outlook for revenue per admission? Kevin Hammons: There's opportunity to continue to grow that. Certainly, getting acuity back will be beneficial. A couple of the other moving parts there, Brian, I would point out is with redetermination, and we've lost some Medicaid business, but we are picking up more in health care exchanges, which is beneficial to us. We have seen some movement from commercial insurance and the health care exchanges, which isn't beneficial, but still in the managed care numbers. We've had some geographic movement during this quarter. And not all commercial contracts and all locations are equal. So if you lose -- have lower commercial business in one location, that may have higher rates and you're picking up commercial business in another location that has lower rates. It's still flowing through is commercial business and commercial volumes. But we may have been reimbursed less for it. So there was some geographic movement during the quarter. All that, I think, kind of washes out in the end over the course of the year. And we don't see that being a headwind for us going forward and I think will continue to grow off of that. Reimbursement rates, as you know, for Medicare are going to be favorable for next year. On our commercial contracting, we're seeing increases similar to what we've experienced this year. And then with some of the Medicaid DPP programs could materially increase our realization on Medicaid business going forward. Brian Tanquilut: And then maybe, Kevin, one last for me. As I think about the divestitures, I mean, you sound fairly confident that we're still on track to hitting some of your goals there. How are you thinking about valuation and just the ability to close deals or I believe announced deals by year-end, given some of the moving pieces in the industry right now? Kevin Hammons: Yes. I would say for this $1 billion book that we're trying to get completed here, it's going to average out to about a 10x multiple and these facilities will average out. There'll be probably high single-digit margin hospitals in a 10 multiple. So one, it should help our leverage; two, it should help our margin profile going forward. And that's pretty consistent with where our valuations have been in the past. Over the past several years, at least on average, where we've been in the 10x to 12x multiple. So still feel very good about the multiple that we're getting and being able to get these across the finish line. Brian Tanquilut: Awesome. Thank you. Operator: And the next question comes from Josh Raskin with Nephron Research. Please go ahead. Joshua Raskin: Hi, thanks for letting me in here. So just want to confirm Tennessee and New Mexico. I know you talked about a potential retro of the half year, maybe $50 million, $60 million. I assume that's not in guidance for 4Q, right? You're waiting for that to be completed at CMS level, right? Kevin Hammons: That is correct. It is not in our guidance for 2024. We've kept it out of guidance, because it's not approved by CMS yet and had not previously quantified it. But at this point, we did want to quantify at least what annual math looks like to give you some insight on how we're thinking about this going forward. Joshua Raskin: Got you. And then I'm just curious, we're hearing a lot about these IV shortages. And I'm curious if you're seeing any impact that you're at the hospitals in terms of procedures and at that level, are you seeing any impact from these IV shortages at this point? Miguel Benet: Hey, Josh, this is Miguel Benet. So far, we have not experienced any operational disruptions in large part, because Faster is not our primary source for IV fluids. We largely partner with BD for sourcing those stocks. Also, we are aware, of course, of the broader risk in the industry because of the shortages due to the Faster plant disruption and about potential buying across the industry to basically ramp up stock. So in preparation for that teams have implemented the logistics efforts and the shifting of inventory between our affiliate hospitals and basically stocking up so that we can stay ahead and keep our operations flowing without interruption. Joshua Raskin: Okay. Perfect. And then just last one for me. Just on the exchanges. Do you get a sense of what percentage of your admits are coming from the exchanges at this point? And then has that slowed down at all as the reverification process in Medicaid has come to an end? Kevin Hammons: Our kind of percentage exchange business is about 7%, roughly, which is consistent with national averages of kind of the population enrolled exchange business. So I think we're pretty close to national average as it relates to that. We've not seen any real material change recently, I guess, other than to say that we are picking up some additional exchange business as states have taken some of the Medicaid people off the Medicaid roles. We have seen a decline in Medicaid volume and a pickup in exchange volume without seeing much of a change in our uninsured business. Joshua Raskin: Thanks. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Tim Hingtgen for any closing remarks. Tim Hingtgen: Thank you, Dave, and thanks to all of you for joining our call today. As always, if you have additional questions, you can reach us at 615-465-7000. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Community Health Systems' Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please also note today's event is being recorded. I'd now like to turn the conference over to Mr. Anton Hie, Vice President of Investor Relations. Please go ahead. Anton Hie: Thank you, Rocco. Good morning, and welcome to Community Health Systems second quarter 2024 conference call. Joining me on today call are Tim Hingtgen, Chief Executive Officer; and Kevin Hammons, President and Chief Financial Officer. Before we begin, I must remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss exclude impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expense from business transformation costs, expenses related to employee termination benefits and other restructuring charges. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thanks, Anton. Good morning, and thank you for joining our second quarter conference call. At the midpoint of 2024, we are pleased with our progress, including a solid second quarter that produced both volume and earnings growth. In the second quarter, same-store net revenues increased 4.7% compared to the same period last year. Adjusted EBITDA for the quarter was $387 million compared to $373 million in the second quarter of 2023. Same-store admissions improved 3%, adjusted admissions improved 3.2% and surgeries were up 0.6%. About surgeries, I want to note that the second quarter increase is on top of a record surgery volume quarter for the company last year. So we were pleased to see same-store surgical volumes reaching yet a new high in the second quarter this year. This progress is driven in part by particularly strong outpatient case volumes, including in our ambulatory surgery centers, whose performance and results are complementary to their local affiliated CHS health systems. We also experienced generally strong outpatient volumes, including growth in emergency department visits, urgent care and in physician practices. In addition to year-over-year same-store growth, we also achieved sequential improvements over the first quarter of 2024 and we expect to carry this momentum into the second half of the year. Much of our growth is attributable to the strategic investments made in our markets which include ongoing physician recruitment and capital investments to expand access and capacity. We've invested more than $3 billion into our health systems since 2018 which includes new and replacement hospital facilities, bed and procedural space expansion, new technologies and a wide spectrum of access points and outpatient services. Earlier this year, we opened our new tower at Tenova, North Knoxville, where performance is already exceeding initial expectations. And a major expansion is underway in South Baldwin County, Alabama, which remains on track to open this year and will create incremental capacity and produce more growth in this rapidly growing market. Other recent openings include a freestanding emergency department in Huntsville, Alabama, which brings our company count to 18 freestanding EDs in total. Several new physician practice locations and investments to expand procedural space and services in multiple CHS hospitals. Regarding our portfolio, it has been widely reported that Novant Health ended its plans to acquire our North Carolina hospitals. That was an abrupt decision. But given the FTC's lawsuit, we were prepared for the possibility that the transaction would not be completed. We rapidly deployed CHS resources to support our North Carolina team and to further evaluate our position and potential future opportunities in the market. That work is ongoing. The divestiture of our Cleveland, Tennessee Hospital is on track and expected to be completed in the third quarter. Additional transactions are underway, and we continue to carefully review inbound interest related to other markets. We're very pleased with progress related to recruitment and retention of our workforce and the programs in place to support our teams. We hired nearly 3,000 registered nurses during the first half of 2024, and our nurse retention rate is very strong at its highest level in a decade. Our centralized recruitment program has expanded to include allied health positions in areas such as imaging, pharmacy, lab, respiratory and surgical services. Across these positions, hiring is up by more than 14% year-over-year. Other facets of cost management have been an area of strength this year with contract labor, supplies and other expenses trending down in the second quarter. Innovative solutions to improve care delivery in our business operations are another area of specific focus. During the second quarter, we announced an expanded partnership with Mark Cuban Cost Plus drugs. All of our hospitals will now be able to purchase select drugs from the Cost Plus drug marketplace, initially resulting in hundreds of thousands of dollars in savings and enabling the potential for even greater savings over time. On July 1, we deployed the third wave of our affiliated health systems onto our enterprise resource planning platform. The initiative, which we internally refer to as Project Empower now supports more than half of our hospitals and will be fully deployed by the end of the year. This investment is yielding deeper insights into our business functions, and we expect to identify opportunities for additional standardization, expense management and value creation as our experience with this enhanced operational tool matures. Our clinicians, caregivers and local leadership teams are making a real and positive difference in every community we serve. On Tuesday, we released our 2024 Community Impact Report, and I hope you have the opportunity to take a look at it. We are so proud of the quality of care and the breadth of services we provide and also what that means to our community as we generate meaningful economic impact. We are committed to causes that improve health and well-being, and we are powered by an amazing group of people who care deeply about others and who ensure that our purpose to help people get well and live healthier is always fulfilled. With that, Kevin, I'll turn the call over to you. Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim indicated, we were pleased with financial results as we delivered another quarter of steady improvement, which again was consistent with our expectations and reflects strong execution by our operating teams and the demand environment in our markets. The momentum in volume growth that began last year continues, leading to same-store growth across all key metrics, including a 3% increase in admissions, a 3.2% increase in adjusted admissions, a 1.1% increase in emergency department visits and a 0.6% increase in surgeries against a strong 6.2% surgical volume comp in the second quarter of 2023. Net operating revenues for the quarter were $3.140 billion, representing consolidated year-over-year growth of 0.8%. On a same-store basis, net revenue increased 4.7%, in line with our target for mid-single-digit growth for the year. The same-store top line growth was driven by the 3.2% increase in adjusted admissions, along with a 1.4% growth in net revenue per adjusted admission, which primarily reflected improved rates and incremental state Medicaid reimbursement partly offset by geographic mix shift. While we continue to see some shift from our Medicare fee-for-service business into Medicare Advantage in the second quarter, we were pleased to see solid commercial volumes with same-store adjusted admissions growing in line with the Medicare Advantage book. Adjusted EBITDA for the second quarter was $387 million, compared with $373 million in the prior year period and up slightly on a sequential basis, generally in line with our expectations. Margin for the quarter was 12.3%, up from 12% in both the prior year period and sequentially and consistent with our previous guidance for full-year margin in the mid-12% range. This performance reflects strong cost controls as a result of our ongoing efforts to drive productivity and efficiency gains in the face of lingering inflationary pressures on labor, supplies and other expense categories. We were again pleased with our performance on labor costs in the quarter. Average hourly wage rate was up 4% year-over-year, in line with our expectations for the full-year 2024 and helped by improved productivity and reductions across premium pay categories. We also continue to deliver improvement on contract labor spend, which was down approximately $3 million sequentially to $45 million and down $29 million or 39% from $74 million in the second quarter of 2023. Note this decrease in contract labor was slightly better than our expectation of contract labor remaining at approximately $50 million per quarter for the year. So we are pleased with the continued progress that reflects our recruitment and retention efforts along with lower hourly rates for contracted nurses. On supplies expense, we delivered an 80 basis point reduction as a percent of consolidated net revenue and same-store supplies expense per adjusted admission declined approximately 2% year-over-year. We were particularly pleased to see outperformance in the hospitals where we have implemented new technology and workflows and as part of Project Empower, which is providing better insight into procurement savings opportunities that we believe will continue to grow. Medical specialist fees were up slightly sequentially and increased approximately 5% from the prior year period, consistent with our expectation for a 5% to 10% increase for the full-year. We have been pleased with the progress of our hospital-based provider in-sourcing initiative since taking over operations from the former APP nearly a year ago and continue to evaluate further in-sourcing opportunities. Provider and other business taxes increased $25 million compared to the prior year quarter, primarily as a result of increases in Medicaid supplemental programs. Cash flows from operations were $101 million for the second quarter of 2024 compared with $86 million in the year ago period. Year-over-year improvement in cash flow primarily reflects improved earnings performance as well as lower cash payments for interest and improved cash from working capital, including accounts receivable, offset by higher cash tax payments. Capital expenditures for the second quarter of 2024 were $88 million and for the first half were $181 million on track for our 2024 guidance range of $350 million to $400 million. The divestiture of Tenova, Cleveland remains on track to close in the third quarter with estimated proceeds of approximately $160 million plus additional contingent consideration. And we believe that one or more additional transactions could close within the calendar year, providing substantial capital for the company to redeploy. As we have previously discussed, we estimate combined potential proceeds of more than $1 billion through a handful of transactions that are in various stages of evaluation or negotiation. In May, we priced an upsized tack-on offering of an additional $1.225 billion of our 10 7/8% senior secured notes due 2032. Using proceeds and cash on hand to redeem all of our $1.116 billion of remaining 8% senior secured notes due 2026 and to extinguished $130 million principal amount of 2028 notes for $98 million in cash. By capturing this discount, these transactions resulted in a combined pretax gain from early extinguishment of debt of approximately $26 million during the quarter. The net interest impact of this transaction is an increase of approximately $35 million on an annual basis. But given the timing of completion, the net effect on cash interest in calendar 2024 is minimal. Additionally, in June, we amended and extended our revolving asset-based loan facility, extending the maturity of our $1 billion ABL from November of 2026 to June of 2029. At quarter end, net debt to trailing adjusted EBITDA was 7.6x, slightly improved from the 7.7x last quarter and 7.9x at the end of 2023. We believe we have more than adequate liquidity to meet our needs going forward with approximately $600 million of borrowing capacity under the ABL along with the pending asset sale proceeds. Let me pivot and provide a brief update on Project & Power. We recently completed our third wave of deployments, implementing our new financial and supply chain systems and workflows at 25 additional hospitals and related businesses. We now have Oracle Business Systems running in 47 hospitals, and we are on track to complete our rollout by January 1 of 2025. With the first six months of 2024 in the books, we are tightening our guidance range for the full-year and slightly increasing the midpoint to reflect our increased confidence. Specifically, we now anticipate 2024 adjusted EBITDA of $1.520 billion to $1.600 billion, which consistent with prior guidance does not include any contribution from potential new supplemental payment programs nor does it assume any unannounced divestiture activity. While we are not providing formal quarterly guidance, I would remind everyone on the call that the third quarter is traditionally the softest quarter of the year from an earnings perspective due to seasonal factors, including heightened vacation activity, among both patients and physicians. Consistent with typical patterns, we expect the fourth quarter to be our strongest quarter of the year from an EBITDA and cash flow perspective. At this time, we'll turn the call back over to the operator for Q&A. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Today's first question comes from Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, good morning guys. And congrats on the quarter. Maybe, Tim, my first question, as I think about your comments on Novant and Kevin's comments about still kind of like that $1 billion goal of divestitures this year. How are you thinking about kind of the visibility into asset sales or your ability in your mind given the FTC's objections to the Novant deal to be able to announce further divestiture opportunities over the course of this year? Kevin Hammons: Sure, Brian. Let me take that. So with the Novant deal, obviously, Novant was kind of in-state provider. And what we're seeing, particularly in many of the other opportunities for divestitures is the group of buyers is changing. And many of both for-profit and non-for-profit health care systems are looking outside of their traditional area of service to expand the FTC, I think, has been somewhat of an issue for transactions now for a few years. So as I look at the remaining opportunities and current deals that we're negotiating right now, the buyers are all out of market, typically out of state, similar with the Cleveland, Tennessee deal that we've already announced. The buyer is a non-profit based in Georgia. And so we really don't see any headwinds on being able to complete the other deals that we're currently working on. Brian Tanquilut: Got it. Okay. And then maybe, Kevin, we're getting a lot of questions on trying to size the potential opportunity or a tailwind from the DPP payments, New Mexico and Tennessee. I know you haven't really given the quantification of that, but anything -- any comment you can make to help us try to frame the benefit from those things? Kevin Hammons: Sure. We've been a little hesitant to be out there given that these programs are not yet approved by CMS. And in fact, New Mexico has not yet been submitted by the state's CMS. So what I would say is we do believe these programs are material to us. But until we get a little more clarity in terms of what's going to be approved and in what form just a little hesitant to go out there with any quantification. But that said, we do believe that they'll be materially beneficial to us. Brian Tanquilut: Got it. Understand. Thank you. Operator: Thank you. And our next question today comes from AJ Rice at UBS. Please go ahead. AJ Rice: Thanks. Hi, everybody. A lot of discussion this quarter about public exchange volumes, how that's helping year-to-year, what percentage of total it is as well as also the two midnight rule. Do you have any thoughts you can give us on how that's impacting your results this quarter? Kevin Hammons: Sure, AJ. We have certainly seen a decrease in observations and an increase in kind of short stay admissions. Now we attribute a significant portion of that to the work that we've done internally with our physician adviser group that's helping us qualified those short stays for admissions. And I would say in terms of behavior from the payers, we're still seeing a pretty significant amount of denials and downgrades coming from the payers. But all that said, we have made progress in reducing the number of observations increasing short stays that we believe is beneficial. In terms of exchange business and maybe related to redetermination, we have seen a decrease in the volume of Medicaid patients. But likewise, we've seen an increase in commercial business. Now we don't have complete line of sight when a patient comes in with an exchange insurance maybe versus a regular Blue Cross commercial insurance. But if we look over across our portfolio, we see the decrease in Medicaid with an offsetting increase in commercial, we believe that substantially most of that business is getting picked up by commercial. We're not seeing a similar increase in self -pay. So we're not losing it to the uninsured, but probably picking it up is commercial exchange business. I would think that we look a lot like national averages in terms of where we are in the exchange business. We have benefited by being in states like Florida and Texas that have had some of the highest exchange business enrollment. So that's been beneficial for us. AJ Rice: Okay. Maybe to follow-up. Kevin Hammons: Yes, maybe last point I'd make on that. There is a pretty wide variation from market-to-market with exchange penetration. AJ Rice: Interesting. Just a follow-up question. You mentioned increased or continuing payer scrutiny on observation status case. I wanted to broaden that out. There's been this discussion about the labor impact and maybe getting some of that in the rates. Are you still seeing that in your managed care rates are getting a little help catch up on labor and broader than just two midnight rule. How about just utilization review activity? I know some of that got used up with the Change Healthcare cyber Attack. Is that all back to normal at this point? Kevin Hammons: Yes. So in terms of rates, our reimbursement or new contracted rates are coming in for next year pretty similar to where they came in this past year, probably the last two years. So I still believe that some of the incremental labor cost is flowing through. The rate increases we're getting are still about 100 basis points above what we had seen traditionally and looked a lot like what they look like coming into 2024. In terms of the change health care, we did not experience a significant disruption related to change. So that, I would say has kind of worked its way through, and we don't have any real lingering impacts from that. AJ Rice: Okay. Thanks a lot. Operator: Thank you. And our next question today comes from Ben Hendrix at RBC Capital. Please go ahead. Ben Hendrix: Thank you very much. Just a quick question to follow-up on the growth you've seen on the exchange side, been a lot of questions about the fate of the enhanced subsidies in 2026. I wanted to get your thoughts on the impact you've seen from that contribution to growth in exchange volume? And then what you think the levers are for maybe retaining some of that coverage assuming that we do see a kind of a roll-off of those enhanced subsidies beyond 2025? Thanks. Tim Hingtgen: Sure, Ben. This is Tim. I'll take that one, and Kevin, feel free to weigh in. In terms of the look forward for the expiration of some of those enhanced subsidies in '26 as you framed out. A lot of it obviously depends upon the political scene at that particular point in time. So lots of debate in a wildcard there. I can tell you, from an efficacy standpoint, we remain very active in making sure that we're telling our story through the Federation of American Hospitals and our own lobbying activities across our states to make sure that everyone understands the importance of the affordability of the exchange business to make sure we continue with some of the gains we've experienced over the last several years. Again, we can't quite size up what the risk is, but we're very, very involved in making sure that we're advocating for continuation of that type of funding. Ben Hendrix: Thank you. Operator: Thank you. And our next question today comes from Steve Baxter with Wells Fargo. Please go ahead. Stephen Baxter: Yes, hi. Thanks. Two questions here. I guess, first, it would be great to hear you talk a little bit about the same-store growth on the volume side. We expect in the back half and whether you expect surgical growth could be better as you kind of maybe go against some easier comps? And then the second question, the other OpEx, looks like it's a pretty big step up sequentially on a dollar basis. I would have thought that maybe could have been Medicaid supplemental payments, but then I'm not really seeing that in the revenue per AA. So just trying to understand what's driving up the other OpEx dollars sequentially? Thank you. Kevin Hammons: Yes. Let me start with the other OpEx dollars. So it was up approximately 130 basis points of net revenue. 100 basis points of that increase is related to the supplemental provider tax payments that were recorded this year. Of course, with those, we do get supplemental revenue and will take an increase in provider tax payments with the additional revenue at any point. But that is what drove up that other operating expense line item. There is some timing differences as the provider tax payments do get separated from the revenue recognition. So that can be a little bit lumpy from quarter-to-quarter. So it's not an exact one for one or two for one or what have you. But overall, the net revenue from those provider tax did flow through the net revenue line in there as well. Tim Hingtgen: And Steve, I'll touch on the volume, the same-store volume growth. With the key drivers for us, obviously, the return on the investment for some of those growth projects we've been talking about, including our incremental beds in the Knoxville market and other bed expansions over the past several quarters in our key markets. We've called out really successful physician recruitment over the last couple of years. We're still ramping up those providers very successfully, which I think led to the strong clinic visits in the first and second quarters of this year, which we believe bodes well for procedural volumes in the latter half of the year. We also had some really good improvements in capacity optimization, length of stay management about a 5% improvement over prior year quarter, which opened up more capacity. Putting all three of those things together, we have our transfer center that can then place more patients in our facilities. So we've got more specialty coverage, more capacity and the ability to grow our inpatient and outpatient business from outlying markets. We had a really good ED admission quarter, good BMS volumes. Strong growth in our rehab programs, our post-acute settings. And as we've already called out, we've had some benefit from the 2-midnight rule clarification as well as the work of our physician advisers. So we believe the fundamentals are solid and something we can build upon in upcoming quarters. Operator: Thank you. And our next question comes from Andrew Mok with Barclays. Please go ahead. Unidentified Analyst: Hi, this is Evan on for Andrew. A couple of your peers took up acute admissions expectations for the back half of the year and you alluded to structurally higher demand. Just curious to get your views on that and how it relates to your outlook? Thanks. Kevin Hammons: In terms of higher demand in the back half of the year, I think we're seeing demand continue to come back into the health care system. Historically, the back half of the year has been slightly better than the first half of the year. And I think our guidance kind of reflects that in terms of revenue and EBITDA being slightly better in the back half of the year heavily weighted to Q4. And as we've said, kind of multiple times over the past quarter, I believe what returned first back into the system kind of post -- some of the pandemic with government insured patients, commercially insured patients work a little slower to come back in, primarily as a result of some of the inflationary trends in high deductibles and co-pays. And I think the longer we get out or the longer those patients have been outside the system the more likely they are that they actually do come back. Maybe with their conditionings having gotten even a little bit worse, but we're starting to see a pickup in business and screenings and checkups and all of that leads ultimately to higher acuity services down the line. And we're seeing a better balanced growth between commercial and government-insured patients than we saw in the early part of last year, and we do expect that to continue through the remainder of the year. Unidentified Analyst: Thanks. Operator: Thank you. [Operator Instructions]. Today's next question comes from Josh Raskin with Nephron Research. Please go ahead. Josh Raskin: Hi, thanks. Just quickly on the cash flow. I'm just curious if there were any timing issues in the quarter and maybe what specifically drove that increase in accounts payable? Kevin Hammons: Hey, Josh, the big timing issue in the second quarter really relates to our annual payment of our 401(k) match. We make that just once a year it's about a $65 million to $70 million payment. And then in the back half of the year, we start to recoup that as we continue to accrue for that match. It's a non-cash expense for the remainder of the year. So that's always a headwind in the second quarter for us and so we do expect not only not to have that in the first quarter, it was annual bonus payments. The accruals for both of those items will be helpful in the back half of the year and then collections always are stronger in Q4, which leads to the fourth quarter being typically our strongest cash flow quarter of the year. Josh Raskin: Got you. That makes sense. And then just on the volumes. Last quarter, I think inpatient sort of screened is a little bit stronger than outpatient and that seems to flip a little bit this quarter. So was there something specific that drove that? Kevin Hammons: I'd point to a couple of things. We continue to make some inpatient capital investments. We opened up a new bed towers. I believe Tim has mentioned in his comments in Knoxville that was opened in March. So that is helping drive more inpatient business. Some of our other higher acuity service lines that we've invested in driving some of the inpatient and then converting some of the observations to the short stay admissions is also helping on the inpatient side. But then we are also seeing good growth in outpatient. Our investments kind of vary market-by-market, depending on where we have capacity needs. We're investing on the inpatient side, where we have available capacity. We're making investments on the outpatient side. So we're pretty balanced there as I see it right now. We also have another inpatient tower opening up in the fourth quarter in Foley, Alabama, which should also help drive some incremental inpatient business for us. Tim Hingtgen: Yes, Josh, this is Tim. I would describe our growth relatively balanced on the inpatient and outpatient side. There may be some slight fluctuations quarter-to-quarter, but we've targeted our investments to grow both of those areas of business, I guess, I would say in relative relation to each other. There is some variation by market. But the good strong outpatient surgery growth that we've referenced earlier, obviously, was specific -- a specific area that we targeted over the last several years, including with our ambulatory surgery center investments with joint venture partnerships. So we've been really deliberate about making sure we're putting outpatient access where our consumers want it and need it so that we can continue to capture more of the total share of spend in our markets. Josh Raskin: All right. Thanks so much. Operator: Thank you. And this concludes today's question-and-answer session. I'd like to turn the conference back over to Tim Hingtgen for any closing remarks. Tim Hingtgen: Great. Thank you, Rocco, and thanks to all of you for joining our call today. As always, if you have additional questions, you can reach us at 615-465-7000. Have a great day. Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Operator: Good day, and welcome to the Community Health Systems First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Anton Hie, Vice President of Investor Relations. Please go ahead, sir. Anton Hie: Thank you, Chuck. Good morning, everyone, and welcome to Community Health Systems' First Quarter 2024 Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Lynn Simon, President Healthcare Innovation and Chief Medical Officer. Before we begin, I must remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation on our website. All calculations we will discuss exclude impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expense from business transformation costs and expenses related to employee termination benefits and other restructuring charges. With that said, I'll turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thanks, Anton. Good morning, and thank you for joining our first quarter conference call. At CHS, 2024 is off to a good start with the solid operating and financial results achieved in the first quarter. Same-store net revenue increased 5.7% compared to the first quarter of 2023. Same-store admissions increased 3.8% and adjusted admissions were up 1.9%. The prior year comp was our most challenging of the year with strong same-store admissions growth of 4.8% and adjusted admissions of 9.4%. So we were very pleased to see continued strong demand. Same-store ED visits increased 3.4% in the quarter, and surgery slightly increased -- in the first quarters of both 2023 and 2024, surgical volume was well above the first quarter of 2019, beating our pre-COVID baseline by approximately 10%. Growth, coupled with strong expense management, led to 120 basis points of margin expansion year-over-year. Adjusted EBITDA came in at $378 million, up 12.8% from the prior period on a consolidated basis. With growth in our core portfolio outpacing the impact of prior period divestitures. This first quarter performance puts us very much in line with the guidance provided in February, but our work is not yet done, and our leaders remain focused on the opportunities ahead of us. We continue to make steady progress in each of our near-term priorities, and we are especially pleased with investments that are accelerating growth. We opened our new tower in Knoxville, Tennessee, a few weeks ago, and our Baldwin County, Alabama campus expansion remains on schedule to open by the end of the year to address the strong demand for health care services in that fast-growing market. Investments continue into incremental access points to expand outpatient capacity in multiple markets, which included the opening of 2 new ASCs during the quarter in our Tucson, Arizona, and Cedar Park, Texas markets. Another high-impact initiative that we've been updating you on is our work to in-source the management of certain hospital-based medical specialties. In a minute, Kevin will share details about how the financial impact from this initiative is tracking to our expectations, but I want to address the clinical and operational improvements we are seeing. We now manage 29 ED and hospitalist programs and across the board, we are realizing better quality metrics, improved throughput, lower premium pay utilization and greater patient satisfaction. These improvements are consistent with our enterprise goals, and it is gratifying to see so much progress, especially when you consider that we have been self-operating these programs for less than a year. We've expanded our efforts to in-source select anesthesia programs with 2 sites already in place and additional opportunities expected to come online in the months ahead. We don't often take the opportunity to share our internal programs that are driving alignment across the organization, but today, I want to mention that we recently hosted our 2024 Health System CEO and medical staff leadership conferences. We spent time reviewing our goals and the initiatives that will drive results over the next few years. It was energizing to see so much commitment from our local health system leaders, who are absolutely focused on executing our strategies and leveraging the resources and support available across the CHS organization. I remain excited about the opportunities ahead this year and into the future. During the conferences, we also discussed our enthusiasm to be on the leading edge of innovation, leveraging our size and scale to discover new opportunities and to improve care design, delivery and outcomes, utilizing technology and joint venture partners that are focused on moving health care forward. Last quarter, Dr. Miguel Benet talked about our partnership with Google Cloud and worked to unify our data into a single platform that can enable the future use of AI in health care setting. This quarter, I've asked Dr. Lynn Simon, President of Healthcare Innovation and our CMO, to share more about innovation across CHS and in particular, our new partnership with Mark Cuban Cost Plus Drug Company. Lynn? Lynn Simon: Thanks, Tim. Over the past several quarters, we have implemented a number of innovative programs at CHS, including remote monitoring for people with chronic conditions, virtual support for people living with depression and anxiety and other behavioral health issues. An AI-informed early warning system that alerts caregivers to potentially concerning trends during childbirth and a virtual tech-enabled telesiting initiative that is improving safety for hospitalized patients at high risk for falls. As we consider our approach to innovation, we also recognize there are opportunities to rethink and even disrupt the way we purchase products and services. As an example, our relationship with Mark Cuban Cost Plus Drug Company has the potential to generate significant advantages for our affiliated hospitals by addressing rising drug cost and drug shortages. We recently became the first health care system to purchase injectable drugs produced in the new Cost Plus Drug manufacturing plant in Dallas. Specifically, we purchased epinephrine, a life-saving drug on the FDA's list of current drug shortages and norepinephrine for our hospitals in Texas and Pennsylvania. Through this strategic partnership, CHS will be advising and collaborating with Mark Cuban Cost Plus Drug about additional ways we can address pharmaceutical cost, avoid drug shortages, reduced waste and improved medication administration safety and patient care. We expect this work to benefit not only CHS, but also other forward-looking health care organizations. Tim? Tim Hingtgen: Thanks, Lynn. Before I turn the call over to Kevin, I'd like to recognize CHS hospitals and providers for a product accomplishment. A recent report from the company reputation a global online reputation management firm that specializes in industries such as health care, financial services, hospitality and property management recognized CHS as #1 among the 50 largest health care systems for online reputation. And this is the third year in a row we've ranked #1. In 2023, our hospitals earned a cumulative average 4.5-star rating on review sites such as Google, and our providers earned 4.8 stars. This speaks to our commitment to safety, quality and patient experience. We appreciate the confidence of our patients and thank our local health systems for all they do to make health care accessible, compassionate and worthy of this very positive feedback. Now I'll turn the call over to Kevin to review financial results. Kevin? Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim indicated, we were pleased with financial results delivered in the first quarter, which put us on track to achieve the guidance for 2024 that we provided in February. We are also pleased to see the momentum in volume growth that began last year continued into the first quarter of 2024 with 3.8% growth in admissions, 1.9% growth in adjusted admissions and 0.4% growth in surgeries, stepping over a particularly difficult comp from prior year. Net operating revenues for the quarter were $3.140 billion, representing consolidated year-over-year growth of 1%. On a same-store basis, net revenues were up 5.7%, driven by 1.9% growth in adjusted admissions and 3.7% increase in net revenue per adjusted admission, which was positively impacted by improved rates, incremental state Medicaid reimbursement and strong inpatient growth. Although volume improvements continue to be led by increases in Medicare Advantage, business, we did see a slightly more balanced growth profile in the first quarter of 2024 with improvements in commercial business as well. Adjusted EBITDA for the first quarter was $378 million compared with $335 million in the prior year period and $386 million in the fourth quarter of 2023. Considering the sequential effect from the Bravera divestiture that closed late last year and lower recognition of Mississippi Medicaid expanded funding in the first quarter compared to the fourth quarter. We view our production with nearly flat sequential EBITDA as a sign of progress. Margin for the quarter was 12%, a modest decline sequentially despite the typical seasonal headwinds that affect first quarter performance, such as higher unemployment taxes and annual resets of copays deductibles in our commercial book. On a year-over-year basis, margin improved 120 basis points. We believe this is a strong start relative to our guidance for mid-12% adjusted EBITDA margin for 2024. And we expect further margin expansion through strong cost controls, continued volume growth and top-line leverage. We were again pleased with our performance on labor costs in the quarter. The average hourly wage rate increased approximately 3% year-over-year. Recall, we are anticipating an approximate 4% average hourly inflation rate for the full year 2024. Our progress in contract labor continued in the first quarter with contract labor spend of approximately $48 million compared to $52 million in the fourth quarter and approximately $85 million in the first quarter of 2023. This performance was consistent with expectations and primarily reflects reduced utilization of contract nursing as a result of our retention and recruitment efforts as well as a lower hourly contract labor rate. We were also pleased to see continued progress from our in-sourcing and other initiatives to address medical specialist fees that have surged over the past 2 years. Medical specialist fees were flat compared to the first quarter of 2023 and slightly down from the fourth quarter. As Tim noted, we have seen strong operational improvements in the 29 ED and hospitalist programs that we have brought in-house since last fall and 2 anesthesia programs brought in-house thus far. We believe we can continue to scale up these in-sourcing efforts and are well positioned to keep further increases under control despite ongoing pressure, including those in anesthesia. Cash flows from operations were $96 million for the first quarter of 2024 compared with $5 million in the year ago period. This improvement was primarily the result of improved earnings as well as the timing of collections from the buildup of certain accounts receivables at year-end, which resulted in the overall net decrease in accounts receivable of approximately $39 million from December 31, 2023. Capital expenditures for the quarter were $93 million, on track for our 2024 guidance range of $350 million to $400 million provided in February. As announced last week, we signed an agreement to divest Tennova, Cleveland located in Cleveland, Tennessee for approximately $160 million plus the potential for an additional contingent consideration payment. And we continue to evaluate opportunities for further divestitures across a handful of markets that could total more than $1 billion in total proceeds. The divestiture of Tennova Cleveland is anticipated to close in the third quarter -- and we believe that one or more additional transactions could close within the calendar year, providing substantial capital for the company to redeploy. Net debt to trailing adjusted EBITDA was 7.7x, slightly improved from 7.88x at year-end 2023. With $618 million of borrowing capacity under the ABL, along with pending asset sale proceeds, we believe we have more than adequate liquidity to meet our needs going forward. Regarding Project & Power, we are continuing to make progress, having now gone live with the second wave of hospitals on April 1, without experiencing any disruption in care delivery. The progress we are making is right in line with our scheduled time line, and we believe we are already experiencing the benefits of incorporating automation technologies to remove certain manual administrative tasks from our nurses workflows and improved insight into our business at the sites that are live. We believe these benefits will translate into realized cost savings beginning later this year and into future periods. At this time, we will turn the call back over to our operator for Q&A. Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Jason Cassorla with Citi. Jason Cassorla: Great. I was just hoping you could dig a bit deeper on the cash generation in the quarter. Obviously, there's seasonality considerations. You talked about that AR release. Was there any impact from change in the cyber, I didn't hear that? And then, I guess, now that we're through the first quarter, how would you expect cash generation to play out for the rest of the year, just in context of your $500 million to $650 million embedded in guidance? Kevin Hammons: Thanks, Jason. So in typical or historical fashion cash flow in the first quarter is typically our lowest cash flow quarter as a result of the reset of patient copays and deductibles and more of your receivables being patient responsibility. We did have the benefit in Q1 of getting some additional cash flow in as a result of the accounts receivable that build up in the fourth quarter, including that from the Mississippi Supplemental Medicaid program that was collected in the first quarter of this year. In terms of other kind of working capital items, they were all pretty much in line with our expectations. We always have a little bit of a headwind in Q1 with the payment of our annual bonuses, which occurs just once a year. And then throughout the remainder of the year, as bonuses are accrued, that kind of turns itself around. Similarly, we'll have that situation in the second quarter as we fund our 401(k) plan just once annually. And therefore, that also has a negative impact on second quarter cash flows, but turns around throughout the remainder of the year as we build our accruals back up. In terms of our guidance on cash flow, at this point of the year, I think we're right in line and are comfortable with where we're guiding at. Jason Cassorla: Okay. Got it. Maybe just as a follow-up, I wanted to ask on the Tennessee Hospital sale agreement, can you give us a sense on what the revenue and EBITDA contribution of that asset is -- and then what would the EBITDA multiple be implied if the Tennessee supplemental payment program is approved. It sounds like -- I guess, broadly on divestitures, it sounds like you're keeping the potential for $1 billion in proceeds. Just if there's any other like incremental color you can offer around your divestiture plans, how they're tracking and what you're seeing out there would be helpful? Kevin Hammons: Sure, we will. And let me follow-up to the second part of your first question as well related to change. We did not see any impact or nothing material as a result of any cash flow slowdown from Change Healthcare's breach. We did not use them for billing and collection purposes. So that did not have an impact on us. Relating to the divestitures. The base price of the $160 million is essentially a 10x EBITDA multiple on trailing EBITDA for Cleveland. So then any contingent payment above that, we would anticipate putting the complete purchase price somewhere in the low teens multiple on a trailing basis. And then in terms of how Cleveland, their margin profile, they operate pretty similar to our kind of corporate average margins. So you can probably do the math in terms of getting a revenue contribution. Operator: The next question will come from Brian Tanquilut with Jefferies. Brian Tanquilut: Congrats. I guess my first question, there's a lot of discussion among investors on the monthly flow or monthly trend in volumes, obviously, with the calendar moves in Q1. Just curious what you can share with us in terms of what January or February or March look like? And how is that translating to April in terms of, obviously, we're on a more normalized calendar this quarter. Kevin Hammons: Sure. So probably like most people, we saw pretty strong January and February, some softness year-over-year in March. But I would really attribute that to how the calendar lined up with February having an additional business day this year with leap year and then March's calendar had really 2 things going against it, one had one fewer business day with just how the calendar lined up. And then you also moved Good Friday and the Easter holiday into March, it was in April of last year. So that has some impact, not only from being a holiday, but also around spring breaks in a number of markets that schools often schedule spring breaks around the holidays. So we think that, that probably had some contribution to some of the volume trends that we saw in March. In terms of how we view that going forward, I think, overall, strong volume quarter for us, and we see the momentum from that continuing on and don't believe that, that calendar -- the volatility monthly in the first quarter really influence as much about how we're thinking about future quarters. Brian Tanquilut: Got it. Okay. And then maybe, Kevin, just a quick cash flow question. The payout to the NCI during the quarter was probably higher than typical. So just curious what the moving pieces are there? And how should we be thinking about NCI payments going forward? Kevin Hammons: Yes. We're still comfortable with where we kind of guided for the full year, which is about $150 million, I believe, on total NCI payments for the year. There was just some timing with some items accrued from the fourth quarter that carried forward into Q1 on NCI payments. But I would expect those to be on a more regular run rate beginning in Q2. Operator: The next question will come from Ben Hendrix with RBC. Benjamin Hendrix: It looks like SWB was a little favorable to our assumptions and to -- and perhaps to what you had guided to for the year. I was just wondering, how you're thinking about the rest of the year? And if any outperformance in the first quarter kind of pads the year expectations or if there's any reason to think that we might see some added inflation in the -- later in the -- in later quarters? Kevin Hammons: Sure. So coming into the year, we anticipated about a 4% wage inflation on an average hourly rate basis for the year. If we think about the sequence last year of inflation. It was high early in the year, began to moderate in the back half of the year, where we saw wage inflation in the third and fourth quarter in the low 3% range. That has carried over into the first quarter, although we expect for the year, there could still be some pressure on wages and maybe some potential in individual markets, maybe not across the board, but in certain markets, we can see higher wage growth than other markets, and we do believe there could be some pressure in the back half of the year. It is a nice start to the year, and we think that's very favorable in terms of our outlook and where it could ultimately end up for the full year. Tim Hingtgen: Yes, Ben, I'll add on to that. This is Tim. I think the other item that we baked into our guidance was more of the insourcing of some of these hospital-based specialties and a higher average audit rate on those professionals. So with anesthesia, more in-sourced ED and hospitals programs in our pipeline, we anticipate that we'll have some increase or had some impact on the average audit rate increase as well. We also have a good strong pipeline of physician recruitment into our clinics, which also hits our SWB line as well. Kevin Hammons: And maybe the last comment that I would make in terms of the mix, as Tim mentioned, the mix of employees coming in, many at a higher rate that could drive that up. We've also been very effective at bringing in some allied health workers and changing -- or making changes to our care delivery model that allows us to treat patients with more LPNs, nursing assistants and making those adjustments that had a favorable impact on our salaries, wages and benefits. Benjamin Hendrix: Great. And if I can just follow-up on the in-sourcing comment. Clearly, you guys have made some really good progress there. But I was just wondering if there are any risks of in-sourcing, maybe could bringing in more ED and the hospitalist impair your ability to flex staff to volume fluctuations in any way? Or is that not a concern? Tim Hingtgen: Sure, Ben. I'll start answering that one. I don't see any real risk in relation to that. We have a good mix of employed and contracted personnel. So some of the -- the staffing mechanism is through a per diem or a per day rate type of arrangement. So that is pretty flexible in terms of how we run the model. Kevin Hammons: Yes. We've mentioned this before, and maybe it hasn't been completely clear, but even where we've in-sourced these programs, not all of those physicians become employees, although the majority do. A number of those physicians are still [ $10.99 ] employees, and that [ $10.99 ] expense is down in our other operating expenses still. So that gives us some of the flexibility, I think, to address what you're talking about. Operator: The next question will come from A.J. Rice with UBS. Albert Rice: First, I was just going to ask, when I look at some of your volume metrics, same-store admissions up 3.8%, adjusted admissions $1.9 million and surgery is up 0.4%. It's a little unusual to see the inpatient side growing faster then and puts it in that the outpatient side. Can you comment on any dynamics you're seeing there? And was that surgery mix was there a divergence between what you saw inpatient versus outpatient on the surgeries? Kevin Hammons: Sure. I'll start off and Tim, please feel free to jump in. We have done a lot of work around length of stay management. And by doing that, we've opened up capacity by getting patients appropriately discharged and timely. That's helped open up capacity, allowing more admissions to be brought in. Our transfer center that we've talked about for some time, contributed significantly, particularly in those markets where we were able to add that capacity through length of stay management. So I think that has been a big favorable mover and has allowed us to grow in patient at the faster rate this past quarter. As we look out for the remainder of the year, we've also, as Tim mentioned, opened up the bed tower in Knoxville, Tennessee, on April 1. So that's going to give us some additional capacity going into Q2. And then we have the bed tower in Foley, Alabama, it's opening up in the fourth quarter. So we still see opportunities. We're growing both inpatient and outpatient, but still being able to bring in additional inpatient throughout the remainder of the year. Tim Hingtgen: Yes, I agree. And A.J., in terms of the surgery mix, we saw growth on both the inpatient and the outpatient side. So pleased to see that. On the outpatient side, I think we outpaced it on absolute numbers just with our ASC growth and our focus on driving some really strong outpatient surgical sites of care. So we're pleased to see that happen. Going back to the inpatient growth in the quarter, as Kevin said, the transfer center on this is performing as designed. We also added new specialties into markets where we had insights that we weren't able to accept those patients in prior periods. So it's good to see our service line and acuity agenda are really delivering better access to patients in the communities we serve and yielding the expected growth in acuity and revenues. Albert Rice: That's great. And maybe my follow-up, just to ask you on the payer mix, it looks like managed Medicare was up about 90 basis points and fee-for-service was the one that was down. Can you comment -- are you seeing outsized volume growth in your managed Medicare? Or is it rate or what's driving that increase as a percent of revenues? And any update on just general contracting with managed care. Kevin Hammons: Sure. So the volume increases are still being led by Medicare Advantage and substantially all of our Medicare business increases are all Medicare Advantage. What we did experience this quarter was a little more balanced growth between Medicare Advantage and Commercial. I think we had indicated in the fourth quarter that early part of 2023, MA was growing at about a 3 for 1 ratio to Commercial in the fourth quarter, it improved to only a 2-for-1 ratio, and we continued on in the first quarter at approximately that 2:1 ratio growth. So some slowing in that Medicare Advantage growth business. In terms of contracting, it's still early in the year, but we're seeing early signs that would probably point to similar rate increases for '25 that we are experiencing and looking to -- or already have locked in for '24. Operator: Next question will come from Stephen Baxter with Wells Fargo. Nicholas Giovacchini: This is Nick on for Steve. So I wanted to follow-up a little bit on the payer mix question to start. So it looked like Medicaid mix was actually up a little bit year-over-year. So I wanted to see if that was more driven by an increase in Medicaid supplemental payments or actually a patient mix shift? And then maybe just an update on what you're seeing from Medicaid redeterminations. Kevin Hammons: Sure. The increase in Medicaid net revenue is primarily due to the Medicaid supplemental programs. So kind of in terms of dollars, the Mississippi was the big change year-over-year. That program, which we'd recognized $40 million in Q4 for 6 months' worth as that program just got approved and was retroactive to July 1, one quarter's worth of that full program that was approved is about roughly $80 million on an annual basis. So we recognized the first quarter's portion of that in Q1. There was 0 of that in last year's numbers. So that was the primary driver of Medicaid increase, although we did have an increase in a small increase in Medicaid volume too during the quarter. In terms of redetermination, we're not really seeing any substantial impact. I mean there are certainly patients who are losing Medicaid insurance we're seeing a slight uptick in self-pay volume, but we're also seeing the uptick of commercial volume. So a portion of those patients, who are losing Medicaid are picking up exchange business insurance or commercial insurance that's far offsetting any of the negative impacts. Operator: Next question will come from Andrew Mok with Barclays. Andrew Mok: There's been a lot of discussion around the 2-midnight rule for MA plans and the impact that might have on acute hospitals. Would love to hear your take on the role and if and when you would expect to see any impact from our plans? Kevin Hammons: Yes. We're continuing to evaluate. I know there's been some additional guidance put out there by CMS. At this point, I think it's still early, and I'm not sure that we can really quantify the impact. There's a number of kind of moving parts around that, that include work that we're doing ourselves internally with a physician adviser program that we've stood up that allows us to ensure that we're getting better document -- or the appropriate documentation. It also -- we've kind of brought in-house the peer review process with the payers both of those things should be beneficial to us. Then this quarter, we also had the situation with Changes Breach and change. It indicated that they were going to no longer require pre-authorization for certain services. So that weighs into the calculation in Q1 as well as then some of the regulation from CMS for the payers about 2-midnight -- throw all those in, I'm not sure it's very difficult to differentiate the impact of each individual one. But I would say at least on the margins, we saw a little bit of improvement in Q1. Overall, though, denials still continue to increase. So I think there's a little bit of continued pressure. We may see some benefit in 1 area, but there's continued pressure in other areas and even on the commercial side from denials. And so I'd just again say it's kind of difficult at this point to measure, but we're keeping a close eye on it and hope we see some more clarity later in the year. Operator: The next question will come from Josh Raskin with Nephron Research. Joshua Raskin: Looking at occupancy rates overall, they're up nicely from prepandemic. I'm curious how much of that is due to change in portfolio over the last couple of years versus an organic or same-store improvement. And where does occupancy need to get to in your mind to get to that sort of 15% intermediate target on margins? Tim Hingtgen: Sure, Josh. This is Tim. I'll kick it off. In terms of the occupancy rate growth, we think that's driven through the items we mentioned previously, the growth of the transfer center, higher acuity services. There is some adjustments to the portfolio when we divest smaller, more rural hospitals with a higher bed count and a low occupancy rate. Obviously, that helps our stronger markets where we run higher occupancy rates to shine through. We don't necessarily have an internal target, if you will, because of the changes in the portfolio. The other part of the equation that makes it difficult for us to really track occupancy rates in an absolute basis is we also have outpatients in those beds, which are not factored into the occupancy rate calculation that you're seeing there. And we have seen the growth of our outpatient observation business over the last several quarters, as you know, across this industry. But in general, we are very, very focused on understanding the physical footprint of every one of our campuses to make sure that we're optimizing that footprint, decommissioning any spaces, which may not be necessary so that we're not running any additional fixed costs that are necessary for whatever volumes we can bring into that health care system. Joshua Raskin: Got you. That's helpful. And then just on supply expense, down about 80 basis points year-over-year despite sort of the shift in patient continued increase in the acuity and things like that. So what's driving the supply expense improvements? Kevin Hammons: I think there's a number of things driving some supply expense improvement. It's relatively flat on a per adjusted admission basis, which would indicate that we are stepping over inflation and managing that well. We're doing that with a number of supply chain initiatives that we have in place to ensure we're getting best pricing, taking advantage of scale and so forth. We are putting in our ERP, which we talked about Project & Power. I can't say that we're realizing a lot of savings currently yet because we only have a handful of hospitals up and running at least through the first quarter, and it's still relatively new, but it's positioning us with significant -- significantly improved information that will allow us to manage that expense going forward. Back to the quarter, payer mix, I think had -- or I'm sorry, surgical mix, had probably a significant impact on our ability to manage that supply expense with fewer high dollar implant items during the quarter. And then with the growth in net revenue, the top line growth, I think, had some dilutive impact on that calculation as a percent of net revenue, bringing in your Medicare -- Medicaid supplemental program revenue as well as the inpatient and growth in kind of medical cases, which can have a lower supply cost as a percent of net revenue. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Tim Hingtgen for any closing remarks. Please go ahead. Tim Hingtgen: Great. Thank you, Chuck, and thanks to all of you for joining our call today. We remain committed to achieving our goals for 2024 and look forward to updating you again at the midyear point. As always, if you have additional questions, you can reach us at (615) 465-7000. Thanks again, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Hello, and welcome to the Community Health Systems Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call to Anton Hie, Vice President of Investor Relations. Please go ahead. Anton Hie: Thank you, MJ. Good morning, and welcome to the Community Health Systems Fourth Quarter and Year-End 2023 Conference Call. Joining me today on this call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Miguel Benet, Executive Vice President of Clinical Operations. Before we begin, I must remind everyone this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We've also posted a supplemental slide presentation to our website. All calculations we will discuss exclude gain or loss from early extinguishment of debt, impairment expense as well as gains or losses on sales of subsidies gained from the Core Trust transaction, expense from government and other legal matters and related costs, expenses from business transformation costs, expenses related to employee termination benefits and other restructuring charges, and changes in estimates for professional claims liability related to the [indiscernible] locations. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen : Thank you, Anton. Good morning. Thank you for joining our fourth quarter and year-end conference call. To kick things off, I first want to recognize the more than 60,000 dedicated employees, providers and leaders across our healthcare systems for the excellent care delivered to patients in 2023 and always. I'd also like to acknowledge the tremendous team effort that enabled progress in every key priority established for 2023, which we have reviewed on these calls over the past several quarters. Throughout the year, we were purposely focused on advancing safe quality health care, strengthening our workforce, accelerating growth and controlling expenses. Major accomplishments in the year included volume gains across all key services as we continue to see broad-based strength in demand. New access points, strong capacity management, defined workforce initiatives and investments to optimize our competitive position, make this growth possible. Same-store admissions increased 3.5% in 2023 and adjusted admissions were up 5.3%, driving same-store net revenue growth of 4.8%. Same-store ER volume grew 1.1%, while surgeries increased a solid 5.1%. Adjusted EBITDA for the full year increased 12.3%, and our margin expanded 100 basis points year-over-year when excluding the positive impact of pandemic relief funds in 2022. When you consider a more than $200 million unanticipated increase in medical specialist fees and medical malpractice expense with a 150 basis point impact to margin, we view this performance as a clear sign of positive momentum. We continue to invest in our core markets to accelerate growth prospects and further capture market share. In Knoxville, Tennessee, construction of our new tower is nearly complete with the grand opening scheduled to take place in the next few months. This project includes new inpatient beds and an expanded emergency department. On the Alabama Coast, the major expansion of our Baldwin County campus should open before the end of the year and will also increase the number of acute care beds and the surgical capacity available within this very busy hospital. While we pursue bed additions where we are seeing strong demand and our growing market share, we also continue to invest in outpatient access points, such as ambulatory surgery centers, freestanding emergency departments, urgent care centers and provider clinics. As a result, CHS health systems are capturing patient care that is migrating out of the inpatient environment with 54% of our net revenues now derived from outpatient care. This outpatient focus includes the deliberate broadening of our ASC footprint. During the fourth quarter, we completed the expansion of the Grand View GI ASC in Birmingham, Alabama, and completed an ASC acquisition in La Porte, Indiana. And already this year, we opened a de novo ASC in Cedar Park, Texas. In addition to capital investments in our health systems, our transfer center is driving volume and higher acuity admissions, most notably in cardiology, critical care, GI and general surgery. The transfer center also gives us visibility to see where we have opportunities to invest in further service line development and physician recruitment. Work to sharpen our portfolio in 2023 included divestitures in West Virginia, Arkansas, Oklahoma and Florida. As you may have seen, the FTC recently sued to block our planned divestiture of 2 hospitals in North Carolina to Novant Health. We are limited in what we can say at this point, but we believe this divestiture is appropriate and in the best interest of the community. The case will now move to Federal Court for final determination. Proceeds from divestiture transactions enable a variety of positive activities such as targeted investments in core markets, funding potential future acquisitions and increased flexibility in debt management. We are currently evaluating inbound interest for a handful of markets that could yield more than $1 billion in additional proceeds. We have modeled several attractive scenarios, but will remain extremely disciplined in our decision-making as it relates to divestitures, acquisitions and ensuring that our core portfolio is strong and positioned for long-term success. In an effort to strengthen our workforce in 2023, our centralized clinical recruitment team continued to deliver strong results, and we finished the year with a net gain of more than 1,000 bedside nurses. We also expanded their activities to Allied Health, building 1,500 physicians in clinical support, technician and other roles. The impact was real, with the $260 million reduction in contract labor in 2023 compared to the prior year. Also, as you know, in 2023, we've rapidly and successfully in-sourced a large number of hospitalist and emergency medicine programs that were previously vendor outsourced. As a result, we now operate an internal infrastructure of resources that allows for further integration of hospital-based physician groups required by our markets. Based upon the success of in-sourcing ED and hospitalist medicine initiatives are underway to in-source anesthesia services in select markets, and we believe we can scale these new capabilities effectively and as needed. Advancing safety and quality is an ongoing daily commitment. In 2023, we achieved a record 89% reduction in our serious safety event rate from the baseline established more than a decade ago. We saw many other measures of quality care success including a 25% reduction in the overall mortality rate and a 48% improvement in postop respiratory failure rates. Looking to the future, our recently announced clinical data platform migration and partnership with Google Cloud opens the door for expanded use of AI and demonstrates how CHS is leveraging technology to drive administrative efficiencies and to improve patient care. Dr. Benet is on the call with us today to comment about the ways we are and will be using AI and machine learning across our hospitals. Dr. Benet? Miguel Benet : Thank you, Tim. Our partnership with Google Cloud enabled us to unify our data into a single platform that facilitates greater transparency, enables more real-time decision-making and that will serve as the foundation for the future use of AI in our health care settings. We call our platform THIA, or tactical health engine for intelligent analytics. Working on this platform, we are developing tools that improve patient care and outcomes and that support our clinicians and administrative teams in their work. As we leverage AI, we expect to drive efficiencies that enable our health care professionals to focus even more of their time on high-value patient interactions. For example, we can deploy this technology for continuous monitoring of patients in the acute care setting using algorithms and near real-time data to identify the potential need for early intervention. AI can be used to generate clinical summaries that physicians and nurses can edit for documentation, decreasing administrative work. Since AI can do still and disseminate large amounts of complex data, we anticipate using it to help our clinical documentation specialists, capture the complexity of care and documentation. Another example is our ability to provide patients with concise contextualized information to improve social determinants to help by using Google Maps capabilities to provide discharge patients with a list of nearby resources available in their communities and customized to their needs. We are already seeing notable benefits, including improvements in a variety of quality metrics and operational benchmarks such as reductions in mental state. There are endless possibilities, and we are just beginning to see the power of artificial intelligence and health care. In all, we are doing at CHS, we are following standards set in 2018 for ethical, safe and proper use of AI and have joined the coalition for Health AI to help frame safe and responsible use of AI in health care into the future. Tim, I'll turn the call back to you. Tim Hingtgen : Thank you, Dr. Benet. Our fourth overarching priority remains controlling expenses, which Kevin will address in his remarks, along with other comments about our financial performance in the fourth quarter and 2023 and our outlook for 2024. Kevin? Kevin Hammons : Thank you, Tim, and good morning, everyone. Overall, we were pleased to see continued solid demand in our markets and CHS' ongoing progress on our strategic priorities. For the fourth quarter, net operating revenues were $3.2 billion, representing year-over-year growth of 1.2% on a consolidated basis. On a same-store basis, net revenue was up 4.1% over the fourth quarter of 2022, driven primarily by a 3.6% increase in adjusted admissions and a 0.5% growth in net revenue per adjusted admission. Inpatient and outpatient volumes in the fourth quarter increased for both the commercial and Medicare books, reflecting the strong demand in our markets and targeted capital investments. However, the mix of that business with the disproportionate growth in Medicare Advantage versus fee-for-service and from states where our negotiated commercial rates are lower, continued to affect our net revenue per adjusted admission growth, similar to previous quarters. Adjusted EBITDA for the fourth quarter was $386 million, representing a margin of 12.1%. During the quarter, we benefited from the recognition of approximately $40 million in increased EBITDA from the Mississippi Hospital access program, of which approximately half related to prior periods. While this amount was not factored into our guidance, we effectively offset this benefit by increasing our self-insurance reserves for medical malpractice, which was recognized as a change in estimate during the fourth quarter. We believe this adjustment was appropriate based on recent experience and claims activity across the hospital industry. Overall, we were pleased with our performance on labor costs. Average hourly wage rate for the quarter was up approximately 3% year-over-year, bringing the full year increase to approximately 4% versus our full year expectation for 5%. We expect similar growth in average hourly rate in 2024 of approximately 4%. As Tim noted, our recruitment retention strategies have helped stabilize our workforce, allowing us to drive significant reductions in contract labor expense, which at $52 million represented an approximate $30 million decline over prior year and a modest decline sequentially. Recall that we typically see a material increase in contract labor utilization in the fourth quarter to help cover for seasonally higher patient demand. Meanwhile, medical specialist fees at approximately 5% of net revenue remained elevated versus historical levels, but generally consistent with the third quarter. When comparing the gross up of expenses for physicians in-sourced, from the former APP contract against the net revenue related to those physicians, we estimate that our results benefited by approximately $5 million during the quarter versus the subsidy payments previously paid to APP. We expect further opportunities in the coming quarters as we look to scale our in-sourcing efforts, but believe there continues to be pressure, particularly in the area of anesthesia. Cash flows from operations were $90 million for the fourth quarter of 2023 compared with $9 million in the year ago period. We did not see the expected improvement sequentially in accounts receivable, primarily from the temporary billing delays that we discussed last quarter related to clinical system upgrades and our physician in-sourcing initiative. Additionally, performance for the quarter was affected by growth in the Mississippi supplemental Medicaid program, AR of approximately $40 million. The slowdown of receiving payments from Medicare Advantage payers versus fee-for-service of approximately $10 million and the acceleration of interest payments resulting from our refinancing efforts of approximately $30 million. Note that we've begun receiving payments in the first quarter from the state of Mississippi for the expanded Medicaid funding program and expect significant further improvement in cash flows relative to where we finished 2023. Capital expenditures for the quarter were $110 million, bringing the full year total to $467 million, consistent with our guidance of $450 million to $500 million. In December, we completed a private offering of $1 billion of 10.78% senior secured notes due 2032. Using proceeds from the offering, and from the completion of our Bravera divestiture to redeem $985 million of our 8% notes due 2026 and to extinguish $402 million of principal amount of other debt, which by capturing discount resulted in a pretax gain from early extinguishment of debt of approximately $72 million during the quarter. Net debt to trailing adjusted EBITDA at year-end was 7.88x slightly improved relative to the third quarter. We remain well positioned to meet our needs going forward with improved operations, and $637 million of borrowing capacity under our ABL. As Tim noted in his remarks, apart from the North Carolina transaction, we are currently evaluating opportunities for further divestitures across a handful of markets that could total more than $1 billion in additional proceeds. We anticipate that 1 or more of these transactions could close within the calendar year, providing substantial capital for the company to redeploy. Project Empower, our enterprise modernization initiative launched October 1. And after standing up our shared services platform and new workflows at 15 of our facilities with no disruption in patient care, we are seeing improved visibility and insight as expected. After a pause during the year-end closing process, we will begin further implementations throughout 2024. Moving on to our initial guidance for 2024. We anticipate net revenue of $12.3 billion to $12.7 billion, adjusted EBITDA of $1.475 billion to $1.625 billion and cash flow from operations of $500 million to $650 million. When normalizing for the divestitures completed in 2023, the midpoint of our net revenue outlook represents a year-over-year growth of approximately 4% and the midpoint of adjusted EBITDA represents a growth of approximately 9%. Note that our outlook does not include the impact of any future divestitures or major acquisitions [indiscernible] does not include the impact of any debt refinancing transactions and excludes the potential benefit from a rollback of the 163(j) limitation on interest deductibility for tax purposes and the income tax refund that we have previously discussed. Additionally, our cash flow guidance includes approximately $60 million to $80 million of cash outflow related to Project Empower. As the ERP and workflow modernization rolls out to the markets throughout 2024, these investments will wind down by year-end and will become a cash flow tailwind into 2025. [Health] provide context for the 2024 adjusted EBITDA guidance relative to 2023 and 2022. There are several puts and takes that we would like to highlight. Specifically, as we set initial guidance this time last year for 2023, we had anticipated adjusted EBITDA growth of approximately 7% at the midpoint. At that time, the primary expected headwinds were the $173 million reduction in pandemic relief funds and a moderate increase in medical specialist fees, which we were able to offset through the benefits of our margin improvement program, contract labor reductions and growth in patient volumes. What we had not anticipated as we started 2023 was that medical specialist fees would spike as high as they did midyear prior to our APP transaction and that we would face additional headwinds from higher medical malpractice expense and from the outsized growth in Medicare Advantage, as we have discussed in quarterly calls since then, leading to the results you see today. Looking into 2024, we have much better visibility into these factors, while at the same time, we anticipate tailwinds from growth capital projects over the past 2 years, further reductions in contract labor, additional savings from cost control efforts and a full year's benefit from the recently expanded Mississippi Medicaid funding program. Based on these factors as well as operating results through the first 6 weeks of the year, we have a high degree of confidence in our ability to deliver on the guidance we have provided and look forward to providing updates in the coming quarters. Tim? Tim Hingtgen : Thank you, Kevin. I think now we're ready to open up for Q&A. Operator: [Operator Instructions] Today's first question comes from Brian Tanquilut with Jefferies. Brian Tanquilut : Kevin, thanks for all the color that you gave us on the cash flow. But maybe just a little more detail, just looking at the cash flow shortfall in Q4 and how you're thinking about guidance in 2024, including what seems to be a reduced CapEx spend for the year. So just any color you can share with us and yes, that would be great? Kevin Hammons: Sure. Thanks for the question, Brian. So yes, if I could just maybe kind of go back through some of the items that I believe caused the shortfall in Q4 and then maybe talk a little bit about '24. We finished Q3, I believe our accounts receivable balance was about $2.16 billion. We expected that to come down in Q4, particularly as we claw back some of the built up AR from our Cerner conversions. As we went throughout the quarter, we -- although we clawed back maybe 1/3 of that, we did not claw back all of that. We had some additional buildup in AR, particularly around some of the in-sourced physicians as well as timing of some commercial payments. The holidays fell on a weekday, the last week of December, and we didn't really have complete insight into how some of the commercial payers may pay at the end of the year. So really, we look at that as just more of a timing issue. -- then the Mississippi program came through, which the cash of that wasn't paid in December, so added to our AR. And at the end of the day, the accounts receivable balance increase instead of decreasing as we expected, had increased at the end of the year. So that was all in, call it, roughly $130 million headwind in cash flow in the fourth quarter. Then we talked about we did a refinancing in the fourth quarter. We had to accelerate in the repayment of the bonds, accelerate some of the interest payments that otherwise would have been paid in '24. So that's clearly a timing issue because now that interest is paid and we will not have that payment in '24. We also settled a legal case, the Mason case, which was about $30 million in the fourth quarter, made that payment, which was not anticipated. We just did not know the timing of when that payment was made. We had it accrued at the end of the quarter, but did not have the timing of when that payment would be made. So those are kind of led to and are, again, primarily some timing related matters. As we go into the '24, a couple of things, I'll just reiterate around the 163J interest deductibility. That has passed the house. It is in the Senate, although we don't know when or if the Senate will pass that rollback. So we've not anticipated, we've not put that in our guidance this year as well as the tax refund, which we still feel very comfortable that we're going to get, but we were wrong. I was wrong about anticipating the timing of that last year. So I'm not going to predict the timing of our government approving that this year. So if either of those come through, they would be positive. Our current cash tax estimate is $150 million to $200 million, and that could be reduced if either of those items come through. Brian Tanquilut : Got it. Okay. And then maybe as I think about -- just the expense line, any comment or anything you can share with us as it relates to your views on nurse wage inflation, contract labor utilization what's baked into the guidance and also physician service or physician specialists spend both in-house and outsourced? Kevin Hammons: Yes. So we're estimating kind of a wage inflation at 4% for 2024. -- that's right about where we were at in 2023. So I think we've baked in a conservative estimate into '24 for wage inflation and we'll certainly work harder to keep it below that, and we're actually exiting '24 at a rate below that. It was about 3.4% in Q4. On contract labor, again, as we kind of look out at the midpoint of our guidance assumes the current run rate that we're exiting '23 at, if you think about $52 million fourth quarter contract labor expense, if we say that run rate throughout '24, that would represent about a $60 million reduction in contract labor year-over-year, and about half of that would flow through to EBITDA. I do believe there's some opportunity that we can further reduce contract labor, it's still running significantly higher than pre-pandemic levels, and we still may be able to take a little bit more out of that. And then I think there was 1 more -- on CapEx, I think you had mentioned CapEx. We've had some higher CapEx over the past couple of years. We've had some large projects that were winding down. These are inpatient towers where we're adding inpatient capacity in markets where we need to add capacity and because we're full and those markets are growing, those projects are winding down. So we'll have a year with a little less CapEx also reflects the hospitals that we've divested over the past year. So we're still very comfortable with the amount of capital we're spending as well as trying to manage just our free cash flow. Tim Hingtgen: Yes. And Kevin, I'll tack on to that in terms of our philosophy and the management of our capital spending. We have a really full pipeline. We've talked about that a lot over the last several quarters. The predominant amount of that is on the outpatient side of the business, which we know does not typically have as high of a spend to get those strategic access points put into operation. So that outpatient focus continues to be an area of growth and opportunity for us across the portfolio. We're also managing that pipeline relative to the gains in staffing so that when we are ready to activate the capital, bring it online, we have a cost-effective way to drive margin and payback on that capital investment. So we're really, I think, hyper focused on phasing this in ways that are really going to be accretive to earnings in the long run. The other thing I would point out is outside of CapEx, it's just keeping some of our powder dry for opportunistic acquisitions. So we'll keep an eye on that as things emerge in the upcoming quarters. On the outpatient side of the business, you heard me reference 2 outpatient ASC acquisitions later last year. We continue to scan our markets for those types of opportunities as well. Operator: The next question comes from Jason Cassorla with Citi.. Kevin Hammons: Jason, I think we may have lost you. Operator: The next question comes from Ben Hendrix with RBC Capital Markets. Ben Hendrix : I wanted to follow up on your -- the Med Mal reserving. -- specifically your decision not to adjust that out of adjusted results? And also just your general comfort level with kind of reserves where they are now. Is there anything out there specifically on the horizon that could continue to push those reserves up higher through the year? Just any comment around your thinking there? Kevin Hammons: Sure. Thanks for the question, Ben. We debated whether or not it was appropriate to adjust that out of our adjusted EBITDA and certainly give that some consideration. At the end of the day, we decided to leave it in. We also had with Mississippi coming in, which was unexpected in the fourth quarter, we did not want to appear that we were cherry picking and only adjusting out unfavorable items. There's reasons that Mississippi would stay in because it's an ongoing program, and we did not want to create situation where we pulled it out also in the fourth quarter and then put it back in next year in just some inconsistencies. So at the end of the day, just decided to leave them both in into the adjusted EBITDA calculation. Again, the Mississippi program like other programs are ongoing and really represent reimbursement for services provided. So I think that's also appropriate. As we look ahead to '24, the malpractice environment overall, I think, is getting more difficult. We're seeing some pretty large settlements, jury awards in cases that are higher than we've ever seen historically. And I think there is a little bit of pressure in the industry at large. We're hearing that from our insurance carriers as well. We are self-insured for malpractice with excess insurance coverage above certain levels. But so we do have insurance. And here, there is some pressure there. But overall, I would expect our malpractice expense to probably come back to something a little more normal in the future as we manage through. I'd also point out that the work we've done on patient safety and quality over the years and the 89% reduction in serious safety events that Tim called out is very meaningful. And there's such a long tail on malpractice. We're still settling a lot of old claims, but the rate at which new claims are coming in is significantly lower than it had been historically. So I feel good about the future in our ability to manage that cost. Ben Hendrix : And if I may, a quick follow-up on your comments about around puts and takes on guidance. I was wondering if we could get some more detail on the kind of the key drivers of margin improvement implied for 2024. It sounds like there will be some support from lower contract labor year-over-year, and you mentioned lower wage inflation than we saw also Missisippi Medicaid, but should we also expect some normalization of payer mix trends this year? Any comments on how we bridge to the margin? Kevin Hammons: Yes. I do -- you called out a couple of the items I already mentioned. I do think there's some or we have some expectation of some normalization in payer mix trends. Rates continue to be relatively favorable. -- governmental rate, Medicare lift should be in the kind of 2.5% to 3% range this year versus 2023, it was 1.9%. I think Medicaid is about flat, excluding some of the supplemental programs. It was a negative in 2023. So those are all marginally helpful to as commercial rates are still in that 4% to 6% range, similar to 2023, but another year of those should be helpful. As we continue to grow volume and cover -- are able to cover our fixed cost that has the benefit of increasing our margin. And as our markets continue to grow, and we continue to see recovery and higher volumes, I think that's an important factor to point out. We also have our margin improvement program that we're highly focused on and putting a lot of discipline around a number of initiatives. Some of those are baked into our guidance. Many of them are not baked into our guidance, and give us the upside potential. But around the uncertainty of when those come through and to what degree we did not want to get too far out ahead and bake all of that, but we have a number of initiatives we're working on that should be favorable. Operator: The next question is from Jason Cassorla with Citi. Jason Cassorla : Great. Can you guys hear me? Kevin Hammons: Sure can. We hear you now, Jason. Jason Cassorla : Excellent. Apologies for that. I wanted to talk about the MA book, right. In the past, you've discussed how your MA book has a lower effective pricing yield compared to fee-for-service Medicare and how that dynamic has impacted results with your elevated M&A volume growth in '23. But I guess stepping in the 24, are you anticipating any offsets to this yield differential, whether that be from a contracting perspective with MA payers or new rules like the 2-midnight rule. I guess just if you have any color on the levers and areas that can help narrow that pricing yield differential moving forward? Kevin Hammons: Sure. So when you go step back when we look at our contracts, kind of on a procedure by procedural basis, the rate of reimbursement is pretty similar to Medicare fee-for-service. The realization is really where we lose money comparatively and that's what causes the discount that we talked about, and that's a result of downgrades and denials of claims. Going into '24, there certainly should be some benefit from the new guidance put out by CMS around the 2 midnight rule around preauthorizations. We expect that those could be helpful to us. It's too early to tell. We've not been able to quantify that yet in too early in '24 to really see that come through. I know some of the payers have talked about already seeing an impact in Q4, making more payments. We did not see any benefit in Q4 from that coming through. But I think directionally, it could be positive for us in '24. Tim? Tim Hingtgen: Yes, Jason, I think we're investing in a lot of clinical resources to help us monitor the environment, be more on the proactive side of this. We've talked in the past about our centralized GR investments. That was largely a registered nurse organized function under the direction of Dr. Benet. Later last year, we stood up a physician adviser, in-source physician adviser program to really be more active and proactive as much as we can be, but also to counteract any downgrades and denials that the admitting physician and the physician advisers believe is clinically appropriate for inpatient status. So we would expect to see some tail effects, positive tail effects for that in 2024 as well. Jason Cassorla : Okay. Got it. And maybe just a follow-up, and apologies if I missed this before, but I wanted to ask on that 4% revenue growth. excluding divestitures, can you just help on the building blocks of that 4% relative to your 2% to 3% kind of target for volume and pricing and mix? And then maybe just specifically on volumes, growth for 2023 was some, call it, 300 basis points ahead of your original expectations. Do you feel that the outsized growth last year kind of creates a comp issue for you in '24 kind of especially in the first half of the year? Or how would you frame the volume environment in '24? Kevin Hammons: Yes. So I would say that the 4% growth, we're looking at roughly 2% to 3% volume growth in '24, which is lower than we experienced in '23, but we still believe strongly that we can continue to grow those volumes in our markets and get something 2% to 3% volume growth. And then rate, overall, as I mentioned, we're kind of 4% to 6% on commercial rate, 2.5% to 3% on Medicare, which is a little higher than we had in '23 and about flat on Medicaid. There probably is, and we've factored in a little bit of a headwind on continued deterioration in payer mix. But when you throw all that in together, we get about a 4% same-store kind of growth on net revenue. Operator: The next question comes from A.J. Rice with UBS. A.J. Rice : Just maybe to follow up a little bit more on that payer mix question. There's been obviously a debate in the marketplace about utilization rates. Are you seeing any difference in behavior among your utilization between your MA book and your fee-for-service book and frankly the rest of the book as well. Is there anything you can tell in terms of rebound post pandemic and so forth that may show different trends across those payer classes? Kevin Hammons: I think kind of post pandemic, we certainly saw a deterioration in the actions by the MA payers where they were not downgrading or denying claims during the pandemic, they certainly began denying and downgrading significantly more claims, particularly in the MA book, although it applies to commercial as well, but more so in the MA space. And we believe that kind of hit a peak. And I think it's gotten a lot more attention at the governmental levels. We've certainly been active in our discussions with legislators, with our lobbying efforts. I know the American Hospital Association, Federation American hospitals, they've all tried to shine a light on some of the behavior of the payers. And I think that's resulted in some movement by CMS to come out with some additional guidance around their expectations, like the 2 midnight rule like some of the preauthorization requirements. We have yet to see any real change that's meaningful or measurable. But having said that, we do expect there to be some favorable movement into 2024. Tim Hingtgen: Yes, A.J., this is Tim. I'll go back to my comment. The reason we set up the physician adviser program was to make sure that we're supporting the admitting physician's decision with more collaboration with the MA plans or commercial plans in general. We have a strong compliance program across Medicare and every other payer source as well. But in general, to try to counteract some of those adverse trends, we believe we're better positioned going forward to make sure that, that admitting physician's decision is more strongly represented. A.J. Rice : Okay. And maybe my follow-up, just to ask about -- you're mentioning this divestiture activity that you plan to undertake. Is that in response to people proactively coming to you? Is it strategic decision you're making. And you talked about having as much $1 billion for capital deployment. I wondered whether you're thinking mainly about paying down debt further? Or is there some other use of that potential capital that you're thinking about? Kevin Hammons: So sure. Happy to take that one, A.J. So this is almost entirely resulting from inbound interest. But having said that, I still think we're taking an [indiscernible] look because we get inbound interest on a number of locations and facilities that we don't act on. So we're not acting on every inbound interest that comes in, but we do happen to have some inbound interest in markets that we think may make strategic sense to transact. So we're pursuing those further. We don't know at this point whether they'll come to fruition, but there is some significant interest out there that we are going through the effort to have conversations and looking to deeper and evaluate that may make sense. If -- to the extent that we get proceeds in, I think we'll evaluate the markets at the time and the other opportunities at the time on what is the best way to delever the company. My focus is clearly on delevering and balancing our capital structure, and we can do that in 2 ways. We can pay down debt, we can grow EBITDA. And if we have the right opportunity for acquisition at the time we have cash in hand, and we think that, that could be more accretive. That's something we would certainly take a look at. If the markets are such that debt paydown is the better play, I think we'd take a look at that. So I know I'm not giving you a specific answer here, but we'll evaluate based on the timing that the cash comes in, what we think is the best way to delever. Operator: The next question comes from Stephen Baxter with Wells Fargo. Stephen Baxter : Just another 1 on payer mix. I might have thought that with the growth of the exchanges or maybe potentially some catch-up in the commercial demand that you were hoping to see in 2023 that there could potentially be upside risk to payer mix. It sounds like you're a bit more cautious there. I just want to make sure we really are capturing all the dynamics that you want us to keep in mind. And then just to come back to AR briefly, just to manage our expectations, would we expect to see progress as soon as the first quarter? Like are you actually seeing or improve to date this year? Or should we be thinking about maybe a more gradual progression throughout the balance of the year? Kevin Hammons: Sure. A couple of things I'll mention on payer mix and Tim, feel free to jump in as well. So we did grow both commercial and Medicare population payer mix in the fourth quarter. So I want to be very clear, we grew both. But the MA business outpaced the commercial business by about [indiscernible] in the fourth quarter. For the full year, it outpaced the commercial 3:1. So we did make improve that proportional change was better in the fourth quarter than for the full year, but MA did outpace the growth. So as we go into '24, we look for some moderation of that, but we're still cognizant of keeping our eye on that payer mix dynamic. There's 1 other -- on AR, sorry, I forgot the second part of that question. On AR, I think we'll see some early benefits in '24 as it relates to the buildup in AR from like the Mississippi supplemental program that will largely be collected in Q1. Some of the other buildup will probably be more moderate throughout the year, but I do expect over the course of the year for us to make improvements and to recapture the remainder of the conversion AR plus the buildup on AR from some of the movement to MA more commercial payers slowing down, that should moderate throughout 2024. And over the course of the year, I expect an improvement. Operator: Today's last question comes from Josh Raskin with Nephron Research. Marco Criscuolo: This is actually Marco on for Josh. Just looking at the 2024 guidance, was wondering if you could parse out some of the $350 million to $400 million in CapEx for 2024. Is that mainly maintenance CapEx at this point? Or do you have any other notable projects in the pipeline that are coming through this year? And do you have any ability to flex that lower in 2024, if you need to? Kevin Hammons: Sure. So we have been running approximately 50% maintenance capital, 50% growth capital over the last several years if you go back and look at our CapEx. And I would say proportionately, that's still very similar in 2024 will be split about 50-50. As I mentioned, a couple of the large projects that are high-cost projects, the inpatient having patient towers and adding beds are winding down in 2024. And then with fewer hospitals as we actually sold 8 hospitals in 2023, that lowers some of our maintenance capital as well related to those. So overall, I don't think we are materially decreasing the amount of maintenance or growth capital kind of comparatively. The other thing is we've had some capital related to Project Empower over the last year, the majority of what we'll be spending in 2024 will be more on the expense side is now the systems and so forth for that project are built and the costs going forward are going to be implementation and training and rollout costs. So there's some reduction there as well. Tim Hingtgen: The only thing I would add is, to your question is, could you throttle that back? Anything is certainly possible, but similar to what we did in 2023, we were very deliberate in our investments into the core business with the intention of, as Kevin said earlier, working on projects that will help us certainly drive stronger EBITDA performance, which is a benefit to the long-term value of the company and its shareholders. So a similar equation obviously comes into play in 2024. We have a strong pipeline of projects, as I said previously, a lot of those are on the ambulatory side of the business, not as many high dollar inpatient investments that we're making in 2024. So I think it just is a normal settling of the capital spend, but we're very, very deliberate in how we're allocating our cash in that regard. Marco Criscuolo: Great. Thanks for the color. And then if I could squeeze in 1 follow-up. You spoke to about $1 billion in potential proceeds from the divestiture opportunities that you now have identified -- can you help us understand a little bit more about the cadence of how that could ultimately be realized, especially in light of some of the FTC scrutiny that we've seen over some of these deals more recently. And then is there any financial detail you can provide around the revenue or EBITDA contribution of those assets? Kevin Hammons: Sure. I think it's probably too early to tell or to say much we don't have any agreements signed at this point, but this is inbound interest that we're evaluating. I would say, generally speaking, all of these deals would be in the 10x plus multiple of EBITDA -- of trailing EBITDA, if they are to come to fruition. Again, we've not made a decision and we've not fully negotiated on any of these deals, but we do have an inbound interest that's very reasonable to think that if we decide to move forward, we could get deals done. That said, deals don't move very quickly. As you are well aware, I would expect the earliest something to be completed would be probably midyear and then the potential for others to be completed late in the year or early next year. Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to Mr. Hingtgen for any closing remarks. Tim Hingtgen : Thank you, MJ, and thanks to all of you for joining our call today. We look forward to providing you with updates on our progress throughout 2024 and to demonstrating that our strategies and initiatives are producing positive momentum and results. As always, if you have additional questions, you can reach us at (615) 465-7000. Thanks again, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning and welcome to the Community Health Systems Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Anton Hie, Vice President, Investor Relations. Please go ahead. Anton Hie: Thank you, Gary. Good morning and welcome to Community Health Systems third quarter 2023 conference call. Joining me on today’s call are: Tim Hingtgen, Chief Executive Officer; and Kevin Hammons, President and Chief Financial Officer. Before we begin, I’d like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not rely solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the SEC. Actual results may differ significantly from those expressed in any forward-looking statements in today’s discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We’ve also posted a supplemental slide presentation on our website. All calculations we will discuss on today’s call exclude gains or losses from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expenses related to the employee termination benefits and other restructuring charges. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thanks, Anton and good morning and thank you for joining our third quarter conference call. Our performance in the third quarter included solid same-store volume gains overall, reinforcing the confidence that our strategic initiatives, targeted market development plans and investments continue to strengthen our competitive position. Year-over-year for the quarter, same-store admissions were up 3.7% and at the highest level since the fourth quarter of 2019 or pre-pandemic. Same-store adjusted admissions increased 4.2% and also reached record levels, demonstrating the strong demand for care in our markets and the favorable impact of our outpatient access point growth investments. We had our strongest ER volumes so far this year in the third quarter, and we had a record quarter for physician practice visits, which is typically a leading indicator for future procedural volumes. Surgeries grew 1.6% year-over-year but sequentially reflected more normal seasonality, including more vacations by physicians and patients. Since the middle of 2022, we have been discussing our near-term priorities or our roadmap for navigating the overall industry and macroeconomic environment. I want to give you an update on these activities as we move towards the end of the year and prepare for 2024. As outlined in our supplemental debt, this organization-wide focus covers four main categories. They are: accelerate growth, strengthen the workforce, control expenses and advance safety and quality. First, we remain optimistic about our growth prospects and the ability to accelerate growth as we invest in our core markets and implement a number of operational initiatives to create more capacity for patient care. Our campus expansion projects in Knoxville, Tennessee and Foley, Alabama are on schedule with the Knoxville project expected to open early next year and the Foley expansion on track to open at the end of 2024. Due to the high occupancy rates in both markets, that our admissions are integral to achieving our market share growth opportunities. Upon their completion, we will have added more than 500 incremental beds across our portfolio since 2018, all initiated to advance growth prospects and high opportunity markets. We are intensely focused on length of stay and capacity optimization work. Our efforts to safely and promptly discharge patients ready to leave the hospital and return home or move into a post-acute care setting resulted in an improved length of stay compared to last year and sequentially. This resulted in strong admission growth in the quarter with a favorable net 1.3% reduction in total patient days. Strengthening our workforce remains another key priority. Our nursing and clinical recruitment and retention strategies continue to perform well, enabling further improvements in contract labor in the third quarter. In terms of our work to insource hospitalists and emergency medicine programs in select CHS hospitals, we have now more than 500 ED and hospitalist medicine providers working under this model. We are pleased with the strategic and financial benefits from this effort in the third quarter. We are confident in our ability to scale this solution as needed, and planning is currently underway to in-source anesthesia services in select markets as well. Finally, a couple of notes about our safety and quality initiatives. Our clinical scorecard designed to better leverage clinical data at a market and company-wide level was launched just over one year ago. This resource has provided great insights into areas where we can further advance and excel in patient safety and quality, leading to very targeted areas of improvement. For example, the majority of our hospitals are now in the top quartile nationally for prevention of certain hospital-acquired infections, and a company-wide initiative to stop sepsis has resulted in a sustainable reduction in mortality due to sepsis. Healthcare providers continue to face headwinds, including reimbursement challenges, inflationary pressures, regulatory hurdles and evolving consumer behaviors, and all of which are areas of dedicated focus for our management team. As we navigate through these industry dynamics, we will continue to exercise control where we can and adaptability when we need to in order to further strengthen our results. With that, Kevin, let me turn the call over to you. Kevin Hammons: Thanks, Tim and good morning, everyone. We are encouraged by the continued return in core demand for healthcare services, the progress from our ongoing investments and further reductions in contract labor as well as the early evidence of success in Project Empower and our physician in-sourcing initiative. Moving on to quarterly financial results. Net operating revenues were $3.1 billion, representing a 2% year-over-year growth on a consolidated basis. On a same-store basis, net revenue increased 5.1% over the third quarter of 2022, driven by a 4.2% growth in adjusted admissions and a 0.9% increase in net revenue per adjusted admission. Commercial mix was flat sequentially at 47.9% of total net revenue, while Medicare Advantage was down 60 basis points from the second quarter. Commercial volume grew faster than the company average from the second quarter as expected. However, growth in medical admits outpaced surgical admits as Tim noted. Adjusted EBITDA was $360 million, representing 11.7% margin. When excluding the $115 million of benefit from provider relief funds from third quarter 2022 results, margin was up more than 200 basis points year-over-year and declined only 30 basis points sequentially as CHS stepped over the typical third quarter seasonal pressures on profitability. We were very pleased to deliver strong labor cost management as strong nurse recruitment and retention helped us outperform expectations and driving down the contract labor expense, which was $54 million, improving sequentially from $72 million and versus our previous expectation for $60 million to $70 million exiting the year. Our average hourly rate for contract labor also improved 10% sequentially. Additionally, overall wage inflation came in slightly better than expected, up approximately 3% year-over-year versus our forecasted 5% for the full year. Medical specialist fees as reported in other OpEx line, increased slightly from the second quarter, which included a gross up of expenses for physicians in-sourced from the former APP contract. When factoring in the net revenue associated with in-sourcing those physicians, we estimate we benefited by approximately $4 million sequentially compared to the subsidy payments previously paid to APP. As Tim noted, the progress with our in-sourcing initiative has been very encouraging and we expect further improvement in the coming quarters as we scale this effort. Moving on to the cash flow statement. Cash flows from operations were $29 million compared with $137 million in the third quarter of 2022. The cash performance was temporarily affected by more than $100 million in various items that should reverse in the fourth quarter. Most notably, billing delays related to clinical system upgrades in two of our markets and our physician in-sourcing initiative as we work to get certain providers credentialed under our network agreements. Importantly, these have been successfully completed and related claims are being submitted. So we expect to begin receiving these payments in the fourth quarter. Capital expenditures for the quarter were $130 million, and for the first nine months were $357 million, on track with our guidance of $450 million to $500 million. We continue to expect significant improvement in free cash flow performance in the fourth quarter as is typical. However, in light of the performance to-date and the current legislative environment, we are updating our guidance for operating cash flows to $400 million to $450 million. Net debt to trailing adjusted EBITDA at the quarter end was 8 times and with $91 million of cash and equivalents on hand, and approximately $680 million of borrowing capacity under our ABL, we remain well positioned from a liquidity standpoint to meet our needs going forward. Additionally, we continue to expect proceeds from the planned divestiture of the Bravera Health assets in Western Florida to be used primarily to pay down debt. We continue to receive inbound interests in certain of our assets, and we will consider the transaction when it makes financial and strategic sense as we recycle capital towards achieving higher returns with lower risk, including debt reduction, capacity and service line expansions and potentially select acquisitions in certain key markets. Project Empower, our enterprise-wide modernization and optimization initiatives kicked off October 1st, and we are very pleased with the early results. As part of our first wave of deployments, we have implemented our new workflows and the Oracle Supply Chain and finance functionality at 15 of our facilities and have stood up our shared services with no disruption in patient care. We are increasingly confident in the business case for Project Empower and believe that the significantly improved visibility and insights will reveal opportunities within CHS’s markets and business lines from which our operators can capitalize upon to drive further shareholder value. We look forward to providing you further updates as we press forward with Project Empower in the coming months and quarters. As we noted in last night’s press release, we are updating the guidance range for 2023. Specifically, we now anticipate net operating revenues of $12.4 billion to $12.5 billion and adjusted EBITDA of $1.45 billion to $1.5 billion. We remain confident in our three to five-year targets in the longer-term opportunities in our markets and our continued volume growth and recovery gives us reason for optimism heading into the fourth quarter. However, we believe this update is prudent with just one quarter remaining in the year. With that, I’ll turn the call back over to the operator to poll for questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question is from Ben Hendrix with RBC. Please go ahead. Ben Hendrix: Thank you very much. I was hoping for some more color on the magnitude of the cash flow guide down versus the EBITDA revision. Can you help us bridge from the prior to current cash flow guidance I think you flagged a number of items there. I was just hoping you could quantify those and help us get to the new range? Thanks. Kevin Hammons: Sure. Thanks, Ben. I appreciate the question. Yeah. So if we think about the new guide for cash flows, it really starts that we’re at the lower end of the EBITDA range. And then there are a couple of items that are really more timing related than anything. But we did expect a cash tax refund, a federal tax refund in the current year. This actually goes back a couple of years that we now know will not come until 2024 that represents about 30% of the reduction. We also became a cash taxpayer predominantly in the second half of this year as a result of the interest deduction limitation going into effect this year, that’s a 163(j) is the IRS code on that. That is also approximately one-third of the guide down. And we do expect that interest limitation deduction to be rolled back. And if so, that would turn into another refund that we would expect to get in the coming year. Another item that is included in guidance is, we made some retirement and deferred compensation payouts this year. This actually has a net zero impact on our overall cash, but the accounting rules require us to include the outflows in operating cash flows. And then there’s a corresponding inflow in investing section, because we had investments on hand that we sold to make these payments. So that was really a net zero cash impact. But to reflect the accounting in cash flow from operations, we included that that was about 20% of the guide reduction. The other couple of items in there, we called out an increase in some governmental litigation reserves during the quarter as an adjustment to EBITDA of about $24 million that the payment of that is expected in the fourth quarter of this year. So we’ve included that. And then as we mentioned, the billing related to the in-sourced physicians has been delayed a little bit as we ramp up, get those physicians credentialed. There’s some cash flow drag, but those bills are going out, as I mentioned, and that we would expect that to turn around either partially in the fourth quarter, maybe flowing into the early part of ‘24 and that’s probably about 5% of the guide down. So, I think that covers substantially all of the adjustments and majority of those are just timing issues. Ben Hendrix: Great. Appreciate that. And with regard to the very last one with the billing for the APP physicians you’re bringing on, can you give us an idea of how much revenue that accounts for? And how much top line exposure you have related to billing. And are you guys asking for subsidies from other providers in that regard? Thanks. Kevin Hammons: Sure. So all of the physicians are practicing in our hospitals. So we are either have completed or in process of getting those physicians credentialed under our agreements with the payers. So there are no subsidies from other providers involved in that. In terms of kind of the magnitude of this for this quarter, for the two months this quarter represented only approximately $20 million of revenue and cost expenses, approximately $25 million. So a net $5 million kind of EBITDA impact related to those physicians that we in-source. So not overly material, but that is approximately a $4 million benefit compared to the subsidies that we were previously paying to APP. Tim Hingtgen: Yeah, Kevin, I’m going to add on to that. And Ben, good morning. As we said in our comments, we’re really pleased with how this transaction has taken shape and our ability to, I think rapidly in-source these providers in the last two months of the quarter, we see a lot of opportunities looking forward. I think some of the key wins in that regard are, we have now an internal group of leaders who are operating that hospital-based component of our finish and practice enterprise, which is uniquely different from our past experience of just running more traditional medical practices. And the team has just done an outstanding job of stemming that up. We are also now adding to that functionality, some resources to help us tackle anesthesia, medical specialist fee clients that we’re experiencing. Again, it won’t be an across-the-board initiative for the company. But having those capabilities, those competencies and those resources, we think, really helps us balance out our approach to managing the medical specialist fee spend. Ben Hendrix: Thank you. Operator: The next question is from Brian Tanquilut with Jefferies. Please go ahead. Brian Tanquilut: Hey, good morning, guys. Tim, maybe I’ll follow-up with that last point that you made. So, as we think about physician outsourcing or physician staffing as a whole, how are you thinking about, number one, the decision to in-source versus outsource, because it sounds like this is turning out to be a modest positive? And then second, what are we seeing in terms of subsidies? And what are your expectations in terms of subsidy payments going forward to third-party outsourcers? And how difficult would it be to, if you decide to bring some of those in as we see some of these pressures, what are those processes and moving parts to like bring all this in-house at some point if that’s a possible option? Thanks. Tim Hingtgen: Good morning, Brian. Yeah, I’ll start that and then head up to Kevin for some of the financial implementations of that type of plan. I mean as we said last quarter, when we were starting to really pursue the in-sourcing opportunity, I mean it’s not our end-all and be-all. We don’t expect to have every single one of our hospital-based contracts serviced by an in-source model. So we have not set our sights on a 100% transition to that type of work. However, again, building it over time, if that’s what happens. I think we’re inclined to say we would be able to do that. We, like the in-source model for the financial purposes that Kevin called out, we think there was a slight EBITDA improvement as a result of our first two months under the in-sourced model. But we also like it from an ability to align those hospital-based providers more closely to our patient safety and clinical initiatives, our throughput initiatives it’s really still early to see how much benefit we can glean from that type of affiliation with in-source providers. But it’s something we’re keeping a close eye on. I think there is tremendous upside down the road. I should point out that for our traditional hospital-based contracted providers, I don’t want to characterize that if we don’t have good relationships and that they’re not partnering with us on those same types of initiatives. Hence, the reason we don’t really believe we have to make this 100% of our approach to our hospital-based physician contracting or spend process. Kevin Hammons: Yeah. And maybe just to add on a few kind of financial metrics around that. Our current medical specialist fees represent approximately 500 basis points of net revenue they did this quarter. That’s about a 100 basis point increase over the prior year. Although we had expected the first quarter, as we previously indicated, we thought the first quarter was our high watermark for the year in the medical specialist fees. They’ve been harder to reduce than we had previously anticipated. They ran relatively flat sequentially, just a small increase sequentially. I would expect the fourth quarter to be pretty much in line with where we are in the third quarter, and so not expecting a material reduction kind of in the near-term as we continue to work on a number of things, as Tim mentioned, and we look to either further in-source, further renegotiate contracts to try to get these down going forward. Brian Tanquilut: That makes sense. And then maybe, Kevin, as I think about your guidance, the implied guidance for Q4 is showing kind of like a 13.7% margin at the midpoint. I know in your slide deck, you still point to kind of like a mid-teens margin target. So, how are you thinking about driving that sequential margin lift and then incremental margin opportunities going forward to get to that mid-teens target? Kevin Hammons: Sure. I think there’s a number of things. So as we’ve mentioned a number of growth initiatives, investments in expanding capacity, as we continue to grow and leverage fixed costs, a much bigger portion of that growth will flow through to the bottom line, which will add to our margin. We expect our rate lift to be a little higher next year. Our Medicare rate, if you think about this year, although the base rate was fairly significant in 2023. A big portion of that was offset with take backs. The majority of those take backs by the government are completed now. So we should have a better Medicare rate lift going into 2024, and we’re seeing similar commercial rate lift kind of in that 4% to 6% in 2024 that we had in 2023. So I think there’s some more runway there on the commercial side as well. And then the work we’re doing on expenses, we continue to manage expenses really well. Our Project Empower as that continues to be rolled out into 2024. And then into 2025, we think there’s – that’s going to lengthen the runway on us being able to capture additional kind of margin improvement in expense reduction. Brian Tanquilut: Awesome. Thank you, guys. Operator: The next question is from A.J. Rice with UBS. Please go ahead. A.J. Rice: Thanks. Hi, everybody. Just on your payer mix trends. I wanted to just ask about two things. I know in your slide deck, you comment on a little bit of an uptick in self-pay you’ve seen off a very low base. Is that really related to re-verifications dynamic? Or is there something else going on there? And then also on the commercial side there, you generally – you’re sort of flat year-to-year in your percentage from commercial or I think, call it, managed care and other. Some of the other companies are pointing out that they’ve got a lift from the public exchange enrollment. Is that – are you seeing that as well in your markets? And does that then say that the rest of the managed care and others somehow off a little bit and anything behind that if you have it? Kevin Hammons: Sure. So I’ll point out a couple of things and Tim, feel free to jump in. Relative to self-pay, it is a very small base, and there’s nothing really there. There was a small adjustment just on collectability that we had good collectability this quarter on some self-pay, but again, a very small amount and nothing really there. We’re not seeing any material increase in self-pay volume. And as it relates to redetermination, we’re not seeing a decline in – a significant decline in Medicaid volumes either. So we don’t believe that that’s having a negative impact on us. Relative to the commercial, we did see kind of year-over-year increase in both commercial business and Medicare business in terms of volume. Some of the commercial rate was offset because of – we did have more outpatient business this year so that it’s more of a mix between inpatient and outpatient that had an effect on the net revenues, but we are seeing a lift in commercial volumes as well – A.J. Rice: Okay – Kevin Hammons: Medicare side, we are seeing continued shift out of Medicare fee-for-service into MA business and that always continues to pressure the revenue, because we collect less on MA compared to traditional fee-for-service. A.J. Rice: Okay. And then my follow-up, you mentioned that you’re running at least in this quarter, the 3% year-to-year trend in underlying labor cost, wage increases, et cetera. I mean that sounds like it’s back to sort of pre-pandemic levels in your mind? Is that something we can carry forward an expectation for next year that you’re in that sort of 3% zone on wage increases? Kevin Hammons: Yeah. We’ve been very fortunate, and I think we’ve managed wages this past two quarters. If you recall, Q1 was closer to 5.5%. Q2 was about 2.8%, Q3, 3%. So we had kind of guided towards about a 5% for the year. We’re currently running averaging all that out, approximately 4% so a little bit below our guide or expectation in terms of wage inflation. Still seeing some pressure in markets around wages. It really differs market-to-market. I would anticipate as we look into 2024, still being a little bit elevated over historical trends and probably, at this point, thinking something in the 4% range is probably more reasonable into 2024 as we obviously will continue to work hard to keep that in check, but also wanting to make sure we’re taking care of our nurse staff and all of our employees for that matter, appropriately. A.J. Rice: Okay. Thanks a lot. Operator: The next question is from Jason Cassorla with Citi. Please go ahead. Jason Cassorla: Great. Thanks. I wanted to ask about Medicaid reimbursement. It just seems that a greater number of states are building out Medicaid supplemental payment programs including the potential one in Mississippi. And I know those program dollars can fluctuate year-to-year in aggregate. But I guess in that context, do you see the Medicaid reimbursement backdrop generally improving? Or how are you thinking about that? Kevin Hammons: That’s a great question. And I think probably you’ve all have seen a number of reports coming out of Mississippi generally, that would obviously be a positive for us. But those programs do have to go through approval by CMS. And at this point, we have – CMS has not approved what has been submitted by Mississippi. But generally, I think you’re right, there are other states like Texas and Florida as well as some others that have over the past few years have adopted the supplemental payment programs, generally very helpful or helpful for the people to state who are covered by their Medicaid and it does make an adjustment to increase reimbursement for the providers who are providing services for the Medicaid patients. So, we would see this as a positive. But it’s too early to tell at this point on exactly what will be approved and what the quantification of that program will be. Jason Cassorla: Okay. Fair enough. And I guess just as a follow-up, I wanted to ask about surgeries in the quarter, up about 1% against overall volume of over 4%. It seems like that book, the trends so far this year on surgery is outpacing overall volumes. I guess are you talking that up to a difficult comp. And I know you noted seasonality in your prepared remarks, are there other factors that drove that surgery growth in the quarter? And then just a follow-on to that, you have this 2% to 3% normalized volume outlook over time. I’m curious how you’re thinking about how surgery growth fits into that paradigm just given your investments in high acuity service lines and the investments you’re making in the outpatient setting, too. Tim Hingtgen: I’ll start with our view on the seasonality impacts in the third quarter. We don’t really see anything other than increased provider and patient vacations that we called out in our opening remarks as being the key driver I think last year, it was a good comp for us. It was a high comp for us. And we made a good surgery performance quarter in the third quarter. So I think it’s really just kind of the timing of people’s vacations. And as we always anticipate, we expect the fourth quarter to be a strong surgery quarter, hopefully, a better commercial mix than that, which is what leads to our confidence in sequential earnings opportunities in the fourth quarter. We’re really pleased, frankly, with our ASC growth strategies, our ambulatory strategies in general for surgery. We had really good growth in our procedural volumes for cardiac cases, for select surgical specialties like colorectal and spine. So just really pleased with what we saw in our overall numbers. It’s just a more challenging comp that we were facing from prior year. Kevin Hammons: Yeah. I think that’s right, Tim. I just want to maybe reiterate, although we saw that decline in surgery sequentially, it was positive over prior year. Second quarter was also a very strong surgical quarter for us. And with the continued sequential improvement in both admissions and adjusted admissions, we still saw continued growth with the only softness being in surgeries that we kind of saw in the third quarter, but we are attributing that to just kind of normal seasonality, and we expect that to pick back up in the fourth quarter. Tim Hingtgen: I think the last comment I’ll make just to kind of, I guess, support our confidence in the surgery growth opportunities across the portfolio. And we are exceeding the pre-COVID baseline. Certainly, I think that bodes well for us and the acuity of our surgical business, the inpatient business is growing as we invest in provide a recruitment in the specialist that drive that. And then the last thing I’ll add is, the new, I guess, I’ll say, input to our surgical growth opportunities, with more capacity, we are seeing record transfer center volumes as well. We are up sequentially and over prior year, I believe, by 7% and 8%. So again, still great demand out there for us as we open up capacity and invest in the right service lines and providers. Operator: The next question is from Stephen Baxter with Wells Fargo. Please go ahead. Stephen Baxter: [Technical difficulty] Operator: Mr. Baxter, we’re having trouble hearing you. Is your phone muted or you have a good connection? Stephen Baxter: Yeah. Sorry about that, I think problem on my end – Operator: Thank you. Stephen Baxter: Hope it resolved. Yeah. So I just wanted to ask a couple of, I think, in a related question, just to make sure I’m tracking correctly. We had the quarter a little bit below, but generally right in line with where our model was. I think you’re pretty close to consensus as well for EBITDA in the quarter. So I would love to just hear a little bit more about understanding the guidance revision at this point and what that reflects? And then just to make sure I’m tracking the seasonality comments correctly, it sounds like as best I can tell, that you’re suggesting you saw something closer to normal seasonality in the third quarter and thought that you might see something a little bit less than that. But I just want to clarify that that’s the case and not that you saw seasonality excess of typical levels in the third quarter? Thank you. Kevin Hammons: Sure. And I’ll start with some comments on our guidance. So our guidance update around EBITDA really just wanted to reflect kind of that where we are year-to-date. We started off the year with a very soft first quarter. Now that we’re through the third quarter, and only have – we caught some of that miss back, I think, in the second quarter, we kind of came in line with the expectations on the third quarter, but did not have outsized performance that really clawed back much of the miss in the first quarter. So the update is really reflective of just our year-to-date results. If you think about what the implied fourth quarter is now from our updated guidance, it’s still – at the midpoint, $407 million of EBITDA, $3.142 billion of net revenue, that would be our highest EBITDA quarter of the year. As we had expected, it’s a 13% margin at the midpoint implied which is the highest margin quarter of the year. So I still think reflects continued growth and reflects again where we are coming out of the third quarter and just an update with only one quarter to go in the year. In terms of seasonality for Q3, I think it’s really just kind of the normal seasonality that we had experienced kind of pre-pandemic in terms of kind of patient behavior and physician behavior around vacations and so forth. What I would just, again, maybe point out is, I think we stepped over some of that with continued growth, particularly in the outpatient side and then with some cost management. So we did not experience maybe the normal pressure on EBITDA sequentially that we had historically from that seasonality, but in terms of kind of volume of business and type of business and patient behavior, it was a much more seasonal quarter than we – more so than we anticipated at the beginning of the year when we thought growth may be a little more straight line throughout the year and recovered from the pandemic. Operator: [Operator Instructions] The next question is from Josh Raskin with Nephron Research. Please go ahead. Josh Raskin: Hi, thanks. Good morning. Just wanted to touch a little bit on sort of same-store revenue and just sort of overall same-store business. So you guys mentioned the weakness in the first quarter. And then in 2Q, it was up at 9% sort of back down to that 5% number here. Is this more of a – do you think we’re kind of through the normal path and that 5% is kind of a number to think about as we go through 2024? And then maybe just some color on what’s created some of the volatility this year? Kevin Hammons: So thanks, Josh. I do think kind of that 5%, as we think about our longer-term, medium-term goals of delivering kind of mid-single-digit net revenue growth, that 5% fits right into that, and that’s where I would expect kind of same-store revenue growth to be kind of as we look – go into next year and that’s what we would target. In terms of some of the volatility, part of that is – was due to the comp. We had significant softness in the second quarter of 2022 kind of as – you can go back to April 2022 and restrictions on masking and so forth were lifted, restrictions on travel were lifted. And that’s when we saw the real kind of exodus in some respects from the healthcare system, people are going about doing other things and not coming into the healthcare systems since they were free to move about and return to more normal behaviors. So we had a little easier comp in the second quarter in terms of that volume. So I think that contributed a little bit to the kind of percentage growth. But as I think about, again, sequentially we continue to grow. So stepping over that in terms of admissions, adjusted admissions into the third quarter, very helpful. The normal seasonality on surgeries, not unexpected now that we’re seeing were kind of getting back to more normal behaviors and the recovery is setting in. Josh Raskin: Got you. That’s helpful. And then just on payer mix. I know you mentioned it to A.J.’s question, but you can sort of talk a little bit, Medicare was down a little bit. So again, is it just sort of moving parts on rate that impacted self-pay and some other stuff that kind of drove Medicare down? Or was there anything in there? Kevin Hammons: The Medicare – the fee-for-service was down, but Medicare Advantage was up year-over-year. So that’s maybe just a shift of that Medicare’s population out of the traditional fee-for-service programs into MA programs. Commercial business was up year-over-year and then kind of Medicaid and self-pay were relatively flat. Josh Raskin: Okay, thanks. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tim Hingtgen for any closing remarks. Tim Hingtgen: Thank you, Gary. I want to close by expressing my appreciation for healthcare workers across CHS and across the nation. I remind it daily about how much we rely on and appreciate those who have devoted themselves to healthcare careers. And I just want to say I’m very proud of our healthcare workforce. As always, if you have additional questions, you can reach us at (615) 465-7000. Thank you, and have a great day. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator: Good morning, everyone, and welcome to the Community Health Systems Second Quarter 2023 Earnings Conference Call. Please note that today's call is being recorded. At this time, I'd like to hand the floor over to Anton Hie, Vice President of Investor Relations. Anton Hie: Thank you, MJ. Good morning, and welcome to Community Health Systems' Second Quarter 2023 Earnings Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; and Kevin Hammons, President and Chief Financial Officer. Before we begin, I must remind everyone that this conference call may contain certain forward statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We have also posted a supplemental slide presentation on our website. All calculations we will discuss on today's call exclude gains or losses from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, expense related to employee termination benefits and other restructuring charges, expense from business transformation costs as well. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen : Thanks, Anton. Good morning, and thank you for joining our second quarter conference call. We were pleased to deliver both year-over-year and sequential improvements in key operating metrics in the second quarter as we expected, with notable progress in the areas of patient volumes, net revenue and adjusted EBITDA. We are seeing increasing demand for our health care services because of investments to expand in key markets, strong physician recruitment success and other volume-generating initiatives we are well positioned to capture more growth as the year continues. Before I get into the specifics of the quarter, I'd like to touch on 3 strategic developments, which should be very positive for our company. First, I want to address recent changes that will continue to sharpen and strengthen our portfolio as we remain focused on markets with the greatest potential to produce meaningful long-term growth. To this end, last week, we announced the planned divestiture of Bravera Health. This health care system includes 3 acute care hospitals about an hour north of Tampa. This is a good market, but divestitures like this one and others such as El Dorado, Arkansas, Seminal Oklahoma and 2 other small health systems in West Virginia enable us to deliberately focus our resources in markets that we aim as most investable and that can produce greater growth and returns over the long term. Proceeds from the Bravera transaction are expected to be approximately $290 million. At the same time that we are divesting certain assets we are making significant investments in markets where we see more attractive growth opportunities. We have added nearly 200 beds in key health systems over the past 18 months, and we continue to add outpatient locations such as ambulatory surgery centers and freestanding emergency departments and communities where we have opportunities to gain further market share. Our new hospital in the Houghton area of Tucson, Arizona just celebrated its 1-year anniversary and is delivering strong operational results and in fact, exceeding its year 1 pro forma. Another de novo hospital that we opened in this market in late 2020 continues to grow and perform very well. Northwest Healthcare now has the largest overall presence to Tucson covering all quadrants and the fastest-growing areas of the region. We expect similar strong results for major Bed Tower expansion projects underway in 2 other high-growth markets, Troy, Alabama and Nashville. On the outpatient side of the business, we recently acquired an ambulatory surgery center in Key West, Florida and opened a third orthopedic focused ASC as part of Butran Health Network. Expanding health system partnerships with highly reputable and skilled surgeons remains a very high priority. We will continue to methodically work our development pipeline and invest for the future where we have the best strategic opportunities. Next, as you likely know, American Physician Partners, or APP, has ceased operations effective July 31, amidst severe financial challenges. APP was contracted for ED and hospital provider services in a number of our markets. As it became likely that APP would not be able to continue operations, our team moved swiftly to transition the employment of more than 500 APP hospital-based providers working in our hospitals to affiliates of our company. We believe this arrangement with APP accomplishes several things. Most importantly, it presents any disruption to patient care in the facilities where they were the contracted provider. It also strengthens the alignment between our hospital-based physicians and clinical care teams delivering quality care and strong safety and patient satisfaction scores. And finally, it mitigates potential future financial risk as we will be in a better position to bring contracts in-house at other facilities where we see opportunity to improve operating performance. While in-sourcing such a large number of programs in approximately 1/4 of our market and all at once was not in our immediate plans, we view this as an attractive opportunity to stand up a scalable in-house solution with long-term benefit for CHS. While our existing capabilities and physician clinic operations and with the addition of local management talent from APP we are very confident that we can operate these programs efficiently, effectively and in strong partnership with the providers who have been a part of this transition. Finally, we are excited to publicly announce Project Empower, a strategic initiative to modernize and further centralize and standardize certain business functions. As part of the program, we will launch our Enterprise Resource Planning or ERP platform later this year. Kevin will go into more detail about how this initiative will optimize a number of business activities and eventually yield meaningful savings to our organization over time. Returning to our second quarter results, I want to highlight a few of our key performance metrics. Same-store admissions increased by 4.8% and adjusted admissions increased 4.9% year-over-year. Same-store surgeries increased 6.2% with strength across a number of specialties, including cardiovascular, colorectal, urology and gynecology. In addition to these year-over-year gains we also experienced solid sequential surgery volume improvement in the second quarter. I mentioned physician recruitment earlier, so I want to highlight that at the midpoint of the year, provider recruitment is up 13.1% compared to last year, which is our -- which was our best recruitment year of the past 5 years. We are also making great progress recruiting nurses. Nurse hiring for the first half of the year is up 5.3% compared to last year in large measure due to the success of our centralized nurse recruitment model. Through tuition reimbursement, nursing school programs and other opportunities for existing employees to become nurses, nearly 400 of our team members have achieved our end status this year and moved into nursing role and nearly 400 more nurses have joined our hospital team via international recruitment programs. We also realized a significant reduction in contract labor during the quarter, which Kevin will describe in greater detail. As we move forward through the second half of the year, we will pursue continuous growth and every opportunity to manage costs. We remain optimistic about all of the potential still ahead. Now Kevin, I'll turn the call over to you. Kevin Hammons : Thank you, Tim, and good morning, everyone. As Tim mentioned, we were very pleased with our financial and operating performance in the second quarter. As expected, results reflected notable sequential improvement as demand remains strong, driving continued solid volume trends and better payer mix and reductions in contract labor helped drive margin expansion. The continued return in core demand for health care services is encouraging, and CHS continues to invest in service lines, access points and talent so that our operators can provide safe and cost-effective care for our communities. Moving on to quarterly financial results. Net operating revenues were $3.1 billion, representing 6.2% year-over-year growth on a consolidated basis. On a same-store basis, net revenue increased 9.2% from the second quarter of 2022. This reflected a 4.9% year-over-year increase in adjusted admissions and a 4.1% increase in net revenue per adjusted admission. Additionally, surgeries were up 6.2% on a year-over-year basis. On a sequential basis, same-store net revenue increased 1.1%, driven by 2% growth in adjusted admissions and a 1.7% increase in surgeries, partially offset by 0.8% decline in net revenue per adjusted admission. As noted, we experienced slight improvement in payer mix relative to the first quarter and continue to expect further improvement through year-end. Adjusted EBITDA was $373 million, representing adjusted EBITDA margin of 12%. Consistent with expectations, pandemic relief funds did not contribute materially to the adjusted EBITDA in the second quarter compared with the $8 million recognized in the prior year period. We were very pleased to deliver strong labor cost management during the quarter with combined salaries, wages and benefits and contract labor expense declining approximately $40 million sequentially. We achieved these results despite the continued strong nurse and provider recruitment activity and increased staffing necessary to meet the strong demand in the quarter, primarily through productivity management, and improved retention and lowering the need for over time and premium pay. Notably, our average hourly wage rate increased only 2.8% compared to the prior year and was down 0.6% sequentially. Contract labor expense showed further progress, down 15% sequentially to $74 million in the second quarter of 2023 and well below the peak of $190 million in the first quarter of 2022. Supply costs were down $3 million sequentially despite the solid growth in surgical volumes reflecting our ongoing supply chain management efforts. Medical specialist fees were also down slightly from the first quarter, but were still up substantially on a year-over-year basis. We expect further reductions in the coming quarters, particularly through the actions we've taken through the agreement with APP. Moving on to the cash flow statement. Cash flows from operations were $86 million compared with $53 million in the second quarter of 2022. Capital expenditures for the quarter were $105 million and for the first half of 2023 were $227 million on track with our guidance of $450 million to $500 million. We continue to expect significant improvement in free cash flow performance with certain state supplemental payments expected to come in along with other working capital improvements. Recall that the fourth quarter has historically been our strongest cash flow period, and we expect this year to be no different. The company's net debt to trailing EBITDA was 7.7x at quarter end, with $118 million of cash and equivalents on hand and $764 million of borrowing capacity available under our ABL, we remain well positioned from a liquidity standpoint to meet our needs going forward. Proceeds from the sale of our facility in El Dorado, Arkansas, that was completed in July and the planned divestiture of the Bravera Health assets in Western Florida will be used primarily to pay down debt, freeing up additional capital for higher return uses in core strategic markets. From time to time, we continue to receive inbound interest in our assets, and we'll consider a transaction when it makes financial and strategic sense. Over the past several quarters, Tim and I have discussed our 4 near-term priorities to position the company for long-term success, accelerating growth, strengthening our workforce, controlling expenses and advancing safety and quality. To that end, we are pleased to announce the launch of our enterprise-wide modernization and optimization initiative, Project Empower, which we believe will advance each of these key areas of focus as well as deliver increased shareholder value. Project Empower encompasses important investments across the operations and financial aspects of CHS, including implementation of an integrated Oracle ERP platform, standing up of a shared business organization and the redesign of key workflows. The program will provide standardization of core processes within finance, supply chain and human capital management, improved transparency across the enterprise to enable more timely decision-making reduced complexity and administrative burden and help CHS better leverage at scale as one of the largest health care systems in the country. The company has committed significant resources to ensure the success of Project Empower, including both internal and external FTEs focused on implementation and change management experts to help team members adjust to their new workflows. Implementation will occur in several waves, beginning in the next several months and rolling out to the entire portfolio through early 2025. This cadence will allow leadership to learn from the process and ensure that subsequent waves go smoothly to minimize the risk of operational and financial disruption. Through better management of our supply chain and our workforce, reduce variability in processes and outcomes and enhanced data to support our decision-making to capitalize on opportunities we anticipate significant cost savings and other financial benefits from Project Empower. Additionally, we believe this significantly improved visibility and insight may reveal opportunities within CHS' markets and business lines from which our operators can capitalize upon to drive further shareholder value. We look forward to providing updates and progress reports on achievement of key milestones as we press forward with Project Empower in the coming months and quarters. With that, I'll turn the call back over to the operator to poll for questions. Operator: [Operator Instructions] Today's first question comes from Brian Tanquilut with Jefferies. Brian Tanquilut : Congrats on a strong quarter. I guess my first question for you guys on the staffing side, and it's a 2-part right nursing. Kevin, I mean how much runway do you think is left to reduce your utilization of contract labor and maybe just overall SWB? And then maybe for Tim, how are you thinking about the physician -- hospital-based physician side? I know there's a lot of disruption there, you called out APP. Any strategies that we should be thinking about to you're contemplating as a way to position for what seems to be a very volatile physician environment in the hospital today? Kevin Hammons: Thanks, Brian. So let me start off with contract labor. We had indicated at the beginning of the year, we expected a 40% to 50% decrease year-over-year in contract labor. And I think we're well on track to meet that with $74 million of contract labor this quarter down from $150 million last year to down just over 50%. I think we'll continue to make progress through the remainder of the year and would expect to exit the year something in the low 60s, $60 million to $65 million is where I would anticipate us exiting the year. Beyond that, I still believe there's some opportunity for us to continue to reduce contract labor probably something at this point, I guess, into the low to mid-50s. I think at that point, it starts to moderate. We are bringing in a higher number of international nurses to fill some of those spots more international nurses than we used pre-pandemic. Of course, they come at a little lower cost. They also have longer contracts, and we hope to make them full-time employees eventually. So I think that becomes a pipeline for us. I don't believe we ever get down to the $30 million a quarter pre-pandemic, which represented about 2.5% of net revenue. Right now, we're approximately 5% of net revenue -- or I'm sorry, of salaries and wages. So it probably goes down slightly from here. Tim Hingtgen: Great. Thanks, Kevin. And Brian, I'll take the medical specialist fee question. And as I said in my opening remarks, the movement with APP was rapid, but it's obviously an expense line item that we've had our eye on for quite some time. We called it out in the first quarter had a significant headwind. And we expected it to moderate in the second quarter, which it did. We would expect that to continue throughout the rest of this year. I'm not being as material of a headwind, but it's slightly elevated over prior year quarters. The strategies to mitigate that. Some of them are just operationally based in terms of highly efficient operations to reduce waste. Those would be length of stay initiatives, surgery throughput initiatives, ED initiatives, and I believe we do a really good job with that. We hope through our Project Empower deployment, we'll even have more insights into how we can optimize care delivery, drive high safety and quality, but also take out some of those costs which obviously, most of them have some physician staffing component embedded into them. The other thing which we're very focused on, as we said, was in-sourcing capabilities for the company. And in the first quarter, we actually added some in-house competencies around anesthesia operations and management. It's not our intent to in-source every single hospital-based contract across the company. But where there's an opportunity for us to do so if we can't find a good mix or a good partnership in a local market across many hospital-based specialties. We certainly want to have those capabilities embedded in-house. On the hospital-based medicine and ED side, with APP maneuver this quarter, we have now about 25% of our contracts in-source. So we're going to learn from that, again, be able to scale that where it makes sense for us. But in general, we hope there are operational efficiencies and our ability to partnership with -- to partner with the hospital-based providers, we can really enhance the care delivery. I do want to point out again, the change out that we had -- rapid change out that we have it's going really well. No disruption to operations to providers and really just a delight to work with. And we have brought on some really high-caliber talent from the APP organization which has allowed us to scale this so quickly. Again, we plan to work through this over the next several quarters and leverage it as a core strength for the organization. Brian Tanquilut : I really appreciate that. I guess my follow-up, Kevin, as I think about the divestitures that you've announced, maybe just for modeling purposes, as we think about 2024, how should we be thinking about the impact of that on revenue and EBITDA? Kevin Hammons: Sure. The El Dorado, Arkansas and other ones were immaterial, the Bravera Health Network we underwrote that at about a 10x EBITDA price. I would kind of use that similar to what we've been selling other hospitals on average, and you can probably use that to to model out '24. We expect it to close in the fourth quarter. So it really won't have a material impact on 2023 as that should be out for the full year '24. Operator: The next question comes from Ben Hendrix with RBC Capital Markets. Unidentified Analyst: This is Mike Grant on for Ben. It looks like payer mix and inpatient mix for the drivers of better revenue per adjusted admission. Could you talk a little bit about the moving pieces here? What drove the inpatient improvement? And then I have a follow-up. Kevin Hammons: Sure. Let me start that. So part of that, I believe, is just some of the recovery coming back from the pandemic. Initially, as patients started to come back, we saw in the fourth quarter, patients were coming back for clinic visits for screenings for diagnostic testing. We believe that's leading to further care downstream. In the first quarter, we experienced much more disruption from the economy, I think even with that recovery and that we're seeing fewer commercial patients in all of our increased level of business in Q1 was from Medicare Advantage patients who did not have an economic barrier to coming back in the system. But we saw the payer mix improve as we expected. We think that will continue to improve throughout the year. The biggest improvement late in the year before co-pays and deduct try setting in. But it's really kind of just some of the downstream impact of recovery that we're seeing some of that business come back into the inpatient side. Tim Hingtgen: Yes. And Mike, I'll add on to that, deliberate in our approach here with the build-out of inpatient capabilities. As we mentioned in our opening remarks, we've added a lot of beds in core markets. We've recruited a lot of doctors to help us further round out specialties in advance our service line capabilities that tends to drive some case mix improvements. And then we overlay on top of that the transfer center, which we did mention this morning but we talk about almost every quarter, that continues to post sequential and year-over-year growth opportunities for us as we add this capacity in those core markets. So we believe those are really key to the game for further advancing in patient acuity and volumes. Unidentified Analyst: Okay. And then my follow-up. Obviously, in the quarter, you had pretty good revenue per adjusted admission. You’re coming up against some easier comps in the back half of the year. How should we think about growth in the second half? Kevin Hammons: I think we’re starting to see some normalization of seasonal patterns as we come back into the back half of this year. We did start to see a strong recovery in volumes in the fourth quarter of last year. So this year, we would have to obviously be stepping over that. I think the comps were much easier really this first quarter and second quarter due to some of the disruption from the pandemic in ‘22. Operator: The next question comes from A.J. Rice with Credit Suisse. A.J. Rice : First, maybe just to ask about your contract with managed care. I guess, 2 aspects to that, in particular, but any update generally would be helpful. But there was some -- there's been some discussion about seeing rates bump up a little bit to help with the labor challenges. I wonder if you're still seeing that as you contract for the rest of this year in '24? And then a subcategory of managed care contracting is the public exchanges. And I know that they've grown rapidly, may grow again in their enrollment with Medicaid reverifications. I wondered, can you just comment on the company's positioning with respect to contracting for public exchanges? Or do you feel like you're well covered in the markets you're in? Any commentary there? Kevin Hammons: Sure, A.J., I'll start that one. So in terms of managed care contracting, we're complete with 23 and you have some contracts that are resetting here or did reset on July 1 for the back half of this year. We're probably approximately 50% complete with 2024 contracts as we're working through those to renegotiate. In '23, we saw about 100 basis point improvement in average rate as we -- as you mentioned and as we push on the payers to help cover some of the increased cost of inflation, increased costs that we're incurring did see a pickup in the rate we're getting. And that seems to be continuing on into '24. So I would expect that as we mentioned for '23 in that 4% to 6% range. I would expect something similar at this point in '24. At least we don't have anything that would tell us otherwise. In terms of the exchanges, you're absolutely right. There's been recent reports out that Texas and Florida have some of the highest exchange enrollment 2 of our biggest states and we are well covered with contracts in those exchanges. A.J. Rice : Okay. And maybe just as a follow-up, you've got, obviously, a good rebound in volumes. It seems like and we're sort of at least normalizing, if not a little better even. And you're seeing some meaningful improvement on the labor front. And now you've got this Project Empower. I wonder if you put all that together, when you think about a goal for margins looking at EBITDA margin, looking out a couple of years or does it make you state that there's x percentage points of potential margin improvement embedded in the system that you can now go after relative to the current run rate? Or Will this help you maintain the current run rate? Any way to think about that? Kevin Hammons: Yes. So we have our medium-term goals out there to get to mid-teen margin run rate. And we certainly are working towards that and believe that these initiatives with like Project Empower, with the recovery of volume and the investments that we're making on the capital side, both in inpatient and outpatient in the tweaks to the markets that we've made will all work towards getting us to those mid-teen margin kind of goals that we have. Operator: The next question is from Jason Cassorla with Citigroup. Jason Cassorla : Great. Just in the second quarter of last year, you flagged that 2 of your markets had a disproportion impact on results. Obviously, the 2Q '23 results proved to be much stronger. But just curious how much of an EBITDA lift on a year-over-year basis was due to the improvements in those 2 markets against a better operating trend backdrop for the rest of your improvement? And then I have a follow-up. Kevin Hammons: Yes. We've had some EBITDA lift from those markets, not outsized and still have a fair amount of work to do in those markets. We have stabilized them. We've taken a number of actions, including consolidating some of the hospitals within those markets, closing some service lines, taking out contract labor because we were spending more on contract labor than we were making and had negative margin as a result. So we've made kind of taking steps to stabilize those markets. It will take us some additional time to continue to grow them, but we are working to that end. Jason Cassorla : Got it. Okay. And then just piggybacking off a commercial contracting question in a way, I guess, are you seeing heightened scrutiny for managed care, just given the strong volume backdrop this year perhaps higher denials, greater intensity on utilization management techniques, pushing observation status. And if so, when do you see that moderating in the future? Or how would you frame that? Kevin Hammons: So we are. I mean I think we saw a little pause by the payers during the pandemic on some of their tactics, if you will, they've slowed down to denial claims and pushing on observations as they had fewer claims to pay. But now that as volumes are coming back, we're certainly seeing a higher number of denials and more pressure from the managed care payers. All that said, we are experiencing better-than-average renegotiated rates with them going forward contracts. So continuing to work with them on things like denials, observations, making sure we're getting paid what we believe is the appropriate amounts and working closely with them. Tim Hingtgen: And Jason, this is Tim. I'll add on to that. We've mentioned in the past, really fortified our utilization review function here at CHS. We've centralized certain components of that, over made some data. We're now investing in more, I'll say, clinical oversight of the UR function for I think, appropriate placement for claims adjudication, denial management. So all those things will be coming into our organization here in the next couple of quarters to continue to improve our front-end games so that we can have the strongest relationship possible with the payers on the back end. Operator: The next question comes from Kevin Fischbeck with Bank of America. Kevin Fischbeck : I wanted to start off on this Project Empower announcement. I guess we're kind of used to you guys talking about consistent cost savings initiatives over the last 5 -- plus years. I don't remember there being like a name like this to what you're doing. So just trying to understand is this of a different scale than what you've done in the past? And then the timing of what you're talking about starting at the end of this year kind of rolling through 2025. When we think about those medium-term margin target, does that mean not much progress on margins next year and then more kind of '25 and '26? Or are there -- is there a reason to believe that it should be somewhat ratable towards that ultimate margin goal? Kevin Hammons: Thanks, Kevin. So a couple of things I'd point to. We have been talking about our strategic margin improvement program that we really formally kicked off in the fourth quarter of 2019, which was putting a lot of discipline around and chasing a number of initiatives over the course of the last several years. Project Empower really takes that maybe to a new level. It is adding a significant investment into the company in terms of adding some technology around installing a new ERP and putting in Oracle of the entire enterprise is going to remove a number of disparate systems and put all of our data into an integrated platform across finance, supply chain and HR. That will significantly improve our ability to manage data at a large scale, give us more comparability across the enterprise versus the disparate systems that we and many others routinely work with. The other thing I would point to is Oracle recently purchased acquired Cerner and were big Cerner shopped with more than half of our hospitals on the Cerner clinical platforms. This has the potential to open up opportunities for integration between those clinical systems and financial systems to further allow us to leverage data in a very new way. This is not just a technology lift though. We're redesigning workflows. We're putting in a shared business operations for a number of these back office functions that will add efficiencies to the process. So really, I think what we're talking and the reason we're talking about it. One, we're organized around this internally around Project Empower. It's something we talk about internally, and we've organized the company around that, sharing that with you guys as investors and analysts. It is kind of a longer-term play, but we do believe that benefits will start to come. We're kicking off actually implementation here over the next couple of months that will take us probably through next year to fully implement. And then there's certainly some runway so you start fully realizing the benefit. But being at our margin improvement program now for a couple of years, this effort is really going to extend that runway and allow us to continue to add margin improvement in ways that we couldn't get at the data today into the future for a number of years. Kevin Fischbeck : And then just thinking about that progression towards that medium-term margin target. Does the timing of this, I mean it's more back-end loaded next couple of years? Or is there -- is it more kind of ratable as you think about the levers you need to pull to get to that mid-teens EBITDA margin? Kevin Hammons: Yes. So this project, I think, is one of many things that we're kind of investing in to get to our mid-teen margins. Certainly, our capital improvements or capital investments that will improve higher acuity services and bring in more business. Those are not dependent on Project Empower. Those should drive margins, the return of volume, leveraging our fixed costs are less dependent on Project Empower. Those can come earlier. Project Empower, I think, again, just lengthens the runway that we can continue to improve margins downstream. So that's kind of how we're looking at it. Operator: The next question is from Stephen Baxter with Wells Fargo. Stephen Baxter : I was hoping you could help us think a little bit about how the American Physician Partners transition is going to impact your P&L. I guess, first, is the revenue contribution from bringing the ER function in-house for these hospitals meaningful? And by comparison, one of your peers talked about consolidating the ER joint venture and suggested it was a breakeven proposition. Is that the right way to think about it for you, too? And then I guess, finally, I guess, could you talk a little bit about why you would expect some of the physician specialist fee pressure to reduce itself over time? It does feel like some of these challenges are are pretty structural. So I'd love to get more insight into what you think the key levers would be over the next couple of years there. Kevin Hammons: Sure. So let me talk about the kind of the P&L impact. So right now, subsidies that we are paying are all running through the other operating expense line, and we've seen those I've been talking about this now for a few quarters, that are continuing to go up. And we're not getting any revenue relative to their professional fees in our revenue numbers. So those increase in medical special fees or subsidies are essentially a pure drag on EBITDA. Going forward, by enforcing these doctors, we will be able to bill for their pro fees. So we do get some revenue. We'll be adding their wages for those that are employed or other operating expense for those doctors that are on $10.99. But the revenue that's generated from their pro fees does largely offset that increased expense. So it is somewhat of a net 0 impact. But then what we're not having to incur is the markup that we're paying a third party for and the subsidy payments when they aren't able to bill, which is -- so we're removing that drag from the EBITDA calculation. Operator: The next question comes from Josh Raskin with Nephron Research. Josh Raskin : I wanted to just get back to a big step down in SWB, both year-over-year and sequentially and understand the contract labor. But just on the base wage rates, it sounds like are you anniversary-ing some of those increases? Should we be thinking about wage increases getting back to more normal historical levels? And then just second question is you kind of reposition further the portfolio of assets and get rid of West Florida, et cetera. Should we expect CapEx -- is there an opportunity for CapEx to step down? Or are you really not investing a ton in some of these noncore markets. So we should think CapEx is just being -- it wasn't really allocated to some of these divested facilities, so maybe not a big step down. Kevin Hammons: Sure. So with regard to the salaries and wages, yes, to your point, about anniversarying some of the higher wage increases is certainly on point, we are anniversarying those larger increases that we had last year. I think last year, second quarter is about 8.5% wage inflation. So we did anniversary that. We are also benefiting from some productivity gains and reducing over time and premium pay as we're adding more full-time nurses and getting rid of some of the contract nurses take some of the pressure off those full-time employees to have to work over time and have premium pay. And so that's been a benefit. The other component of that, and there's probably a number of moving parts here, but it's skill set and mix, using additional LPMs in some of our teen nursing concepts that we've put in place has been beneficial. And a number of our nurse hire and we talked about in the first quarter or new graduates. So bringing in a number of new graduates that obviously come in at a little lower rate than your longer tenured nurses. So a number of those things in terms of mix have impacted that as well. And then on your question on capital, I think you're right. As we work through some of these divestitures, they do take some time to work through. We've talked about for a couple of quarters, some deals that we were in conversations on, we weren't sure if they were -- would come to fruition. When something -- when a hospital or market gets on the radar like that when conversations start to become serious, we're certainly maintaining those hospitals, but not investing a lot of additional growth capital in those -- during those negotiations. So I would not expect us to see a big decline in capital investment. But as we think about which markets we're targeting, we do look and consider kind of the risk of future capital investments in those markets and what the return risk profile looks like. And by divesting some of these, it certainly helps us reallocate what may otherwise have been future capital to other markets where we believe we have a higher growth profile with less risk. Operator: The next question comes from Andrew Mok with UBS. Andrew Mok : First, I just wanted to clarify a few items around the outsourced physician staffing costs. Can you put some numbers around the total dollar cost for these expenses today? And are you expecting the absolute dollar cost to decrease on a same physician basis? Or do you simply expect this to be less of a year-over-year headwind in the second half? Kevin Hammons: We've not quantified the exact dollar amounts at this point. We're still working through kind of all the onboarding and working through that. I would say that it's not going to be overly material for the remainder of 2023. And we'll have probably some more clarity that we can give on 2024 if we believe it becomes more material. Andrew Mok : Great. And then I wanted to follow up on the revenue per adjusted admit. We love to hear how that performed against your own expectations in the quarter, that metric was actually down sequentially even though you called out -- called it out as a soft spot in Q1 and noted that payer mix improved sequentially. So can you help us understand what's going on there with respect to pricing acuity and mix, especially on a sequential basis? Kevin Hammons: Sure. Overall, I think net revenue and EBITDA came in in line with our expectations for second quarter. Volumes continue to be strong for us and recovery from the pandemic. And I think even having adjusted admissions and surgeries up over Q1 was a very strong signal. We do believe that there is further room to improve on payer mix. I think the Medicare age population of our mix was down about 100 basis points. Commercial is up 100 basis points. So a slight improvement, but it is trending in the right direction as that continues to improve further in the back half of the year, will certainly lead towards a higher net revenue per adjusted admission statistic. We also had CMI, case mix index, acuity was about flat sequentially. We believe that can improve a little bit, and we expect with some of our investments to improve as well in the back half of the year as people are coming in for services and surgeries and so forth before their co-pays reset for 2024. Operator: This concludes our question-and-answer session. I'll now turn the call over to Mr. Hingtgen for closing comments. Tim Hingtgen : Thank you, MJ. I want to thank you all for joining us today. Before we conclude, I want to thank our physicians, nurses and other clinicians and support teams for all they do to ensure quality care for their patients and also to our health system leaders and those working in our CHS corporate offices for their many contributions. As always, if you have additional questions, you can reach us at (615) 465-7000. Thank you, and have a great day. Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.

Operator: Good morning, everyone, and welcome to the Community Health Systems First Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please also note that today's call is being recorded. At this time, I'd like to hand the floor over to Shelly Schussele, Senior Director of Investor Relations. Ma'am, please go ahead. Shelly Schussele: Thank you, Jamie. Good morning, and welcome to Community Health Systems' First Quarter 2023 Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer. Before we begin, I would like to remind everyone -- this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We have also posted a supplemental slide presentation on our website. All calculations we will discuss on today's call exclude gain or loss from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expense from governments and other legal matters and related costs, expense related to employee termination benefits and other restructuring charges. With that said, I will turn the call over to Tim Hingtgen, chief Executive Officer. Tim Hingtgen: Thank you, Shelly. Good morning, and welcome to our first quarter conference call. Our first quarter results include solid growth metrics and other promising indicators that demonstrate core demand for health care services is returning and that we are making progress with our initiatives and investments to capture volume. Some other more challenging dynamics such as payer mix changes and increased medical specialist fees affected our earnings in the quarter despite our ability to favorably manage other controllable expenses. Over the past few quarters, we have been sharing updates on our near-term priorities, which include specific tactics and resources designed to accelerate growth, strengthen the workforce, control expenses and advanced safety and quality. During my remarks today, I want to touch on these priorities and the results we are achieving, starting with our determination to accelerate growth. We experienced strong volume gains during the first quarter as consumers increasingly return to health care setting now that COVID-19 has substantially subsided. Key volume metrics improved on a year-over-year basis, and they improved sequentially, continuing positive trends from the fourth quarter. Same-store admissions increased by 4.8%, and adjusted admissions increased 9.4% year-over-year. Same-store surgery showed particular strength, increasing 10.6% with broad-based gains in orthopedics, cardiovascular, GI, urology and gynecology. Growth in these specialties, along with the continued positive impact of our transfer center service resulted in medical and surgical case mix index improvements sequentially and growth in non-COVID acuity year-over-year. Capital investments designed to further develop our strongest markets are positively impacting growth in both inpatient and outpatient services. Recent examples include the full opening of a 112-bed expansion in our Naples, Florida health system as well as the opening of a new ambulatory surgery center and a freestanding ER in our Birmingham, Alabama market. Major bed expansions and facility improvements are underway in other markets such as Foley, Alabama; Warsaw, Indiana, which is part of our Lutheran Health Network and Knoxville, Tennessee. A number of other investments that are designed to fuel growth continue across the portfolio. Provider recruitment remains key to growth and further expansion of service lines in our markets. To that end, we continue to post favorable gains on the heels of a very strong 2022 recruitment year. Strengthening our workforce is a constant priority and we are pleased with continued progress in this area. After its first full year of operation, our centralized nurse recruitment function continues to perform extremely well with strong mid-single-digit gains in the higher end of nurses in the first quarter compared to the fourth quarter of last year. Due to the success of our centralized recruitment resources, we are in the process of expanding the scope to include sourcing and hiring of all clinical positions, not just nursing. Our partnership with Jersey College School of Nursing will expand again when our eighth program opens in our Tennova East Tennessee market later this month. Eventually, through this initiative, we expect to graduate 1,000 new nurses every year. And we remain focused on a variety of programs designed to strengthen retention rates as well. We ended the first quarter with an improvement of approximately 500 basis points and nursing turnover rates on top of the significant gains in 2022. Advancing safety and quality remains one of our most important. Last quarter, we highlighted our work over the past decade to reduce serious safety events noting an impressive 87.9% reduction in our serious safety event rate since the baseline established in 2013. That improvement is now 89% and a testament to the commitment of our medical professionals, caregivers, support teams and health system leaders. I want to take a moment to express my gratitude for what they do every day to ensure safe quality care for their patients. And CHS recently was ranked #1 among the top 30 U.S. health care systems for online reputation, a distinction that is the result of positive online ratings and reviews for our health care providers and services, along with a high level of responsiveness to the voice of the customer. We use those insights to continuously improve and we know a strong online reputation helps cultivate new patient acquisition and loyalty. This is our second year in a row to achieve this top ranking. Through targeted investments in innovative technologies to improve outcomes, we continue to see positive results in clinical quality and customer experience. These programs include virtual sitters for patients at high risk for falls, maternal fetal monitoring technology that enables earlier interventions when needed in labor and delivery and the current rollout of at-home remote patient monitoring for individuals with chronic health conditions. We are also in discussions with other potential innovation partners that offer clinical technologies to further advance patient care and that have the potential to generate returns for our company in the years ahead. In summary, despite the persistent pressures on near-term margins, our team continues to prioritize and position the organization for growth, successfully deliver upon key initiatives to improve operations and advance the long-term competitive position of our health systems. As a result, we expect to make incremental progress both throughout the year and for the longer-term. Kevin, I'll now turn the call over to you. Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim mentioned, we were very pleased with the volume results we achieved in the first quarter and remain optimistic about 2023 and thereafter. Year-over-year, our top line was pressured by the COVID comp and sequentially by payer mix, while increases in some nonlabor expenses impacted our adjusted EBITDA. However, the sequential improvements we have seen in key volume metrics. And what we see as a return in core demand for health care services are encouraging as we move through 2023. Further, we remain focused on improvements in our workforce and expense management to moderate the impact of inflation. Now let me discuss the first quarter results. Net operating revenues came in at $3,108 million on a consolidated basis. On a same-store basis, net revenue was up 1.7% compared to the first quarter of 2022. This was the net result of a 9.4% increase in adjusted admissions and a 7.1% decrease in net revenue per adjusted admission, which, as noted, was a result of higher prevalence of COVID admissions during the first quarter of 2022 and an outsized growth of governmental volume compared to growth in commercial volumes. On a sequential basis, net revenue per adjusted admission decreased by only 60 basis points and was also caused primarily by a shift in payer mix as Medicare managed care adjusted admissions accounted for all of the sequential growth. Adjusted EBITDA was $335 million with an adjusted EBITDA margin of 10.8%. During the first quarter, we recorded an immaterial amount of pandemic relief funds compared to the $47 million recognized in the prior year period. Going forward, we do not expect to receive or recognize any material pandemic relief funds from the government. With regard to expenses, on the labor expense side, combined salaries, wages and benefits and contract labor expense improved on a year-over-year basis by approximately $65 million. On a sequential basis, combined SWB and contract labor increased approximately $13 million. Specifically related to employee costs, we experienced an increase of 5.9% in our average hourly rate for employees on a year-over-year basis. However, total salary and benefit expenses on a same-store basis increased by a lesser amount of 5.4% demonstrating our ability to offset inflation and cost of increased hiring with productivity gains. On contract labor expense, we made significant progress over the prior year reducing the expense by over 54%. Compared to the fourth quarter of '22, our contract labor expense increased slightly from $80 million in the fourth quarter to $85 million in the first quarter. As a reminder, our contract labor was $190 million in the first quarter of 2022. With the additional advances we expect to make with nurse hiring, we anticipate continued progress reducing contract labor throughout the remainder of 2023. On nonlabor-related expenses, while we have been effectively managing these expenses over the last several quarters, during the first quarter of 2023, we experienced a $40 million year-over-year increase in medical specialist fees and a $20 million year-over-year increase in professional liability expense, which were not mitigated by other reductions. These 2 items contributed to an increase of approximately 6.9% in nonlabor expenses over the prior year. Sequentially, medical specialist fees increased $14 million. We continue to execute on our cost reduction initiatives, including supply chain management and our margin improvement program to prudently manage nonlabor-related expenses going forward. Moving to cash flows. Cash flows provided by operations were $5 million for the first quarter of 2023 compared to $101 million for the first quarter of 2022. The timing of certain payments, including incentive compensation, the settlement of certain professional liability claims and accounts payable led to lower cash flows during the quarter. We expect we will recapture these cash flows in future quarters. Turning to CapEx. For the first quarter of 2023, our CapEx was $122 million compared to $97 million in the prior year period. The increase in the first quarter of 2023 was due primarily to the timing of payments related to several growth projects that are in flight. Company's net debt-to-EBITDA is currently 8.3x and due mostly to lower trailing 12-month EBITDA, which still includes periods of disruptive care from the prior year. As we manage through this environment, we remain focused on our longer-term goals of lowering our leverage and increasing our free cash flow. We retained $144 million of cash on the balance sheet at the end of the first quarter, and we have approximately $800 million of borrowing base capacity available under our ABL. As such, we have adequate liquidity to meet our needs going forward. As we assess the opportunities to evolve our portfolio for growth and success, we continue to evaluate interest from outside parties related potential divestitures as well as considering opportunities to expand our portfolio. As these opportunities emerge, we analyze the future growth and earnings profile of specific assets and assess the impact of potential transactions would have on our future EBITDA, financial leverage and free cash flow generation. During the quarter, we received $92 million of cash proceeds from the sale of our last remaining facility in West Virginia, which closed on April 1, 2023. We also signed an agreement to sell our 2 facilities in North Carolina, which remains subject to regulatory approval. In addition, following the end of the quarter, we signed a definitive agreement to sell our facility in El Dorado, Arkansas. We remain engaged in continuing discussions about other potential transactions, which if they come to fruition, could provide opportunities to pay down debt as well as allow opportunities to reinvest resources to areas of our portfolio to further accelerate their long-term growth in earnings. In summary, we remain optimistic about 2023. We are encouraged by the progress we are seeing and the indicators that demonstrate that core demand for health care services is returning. We remain committed to our objectives to position the company for long-term and sustainable success and are focused on executing on opportunities for growth in our markets. Kelly, at this point, I'll turn the call back to you. Shelly Schussele: Thank you, Kevin. Jamie, we're ready to open the call for questions. Operator: [Operator Instructions]. Our first question today comes from Ben Hendrix from RBC Capital Markets. Benjamin Hendrix: I wonder if you could dig into the commercial mix progression we saw sequentially versus what you had in your expectations, kind of what you believe accounts for any of the divergence and how we should think about the pace of recovery to the reaffirmed guidance? Kevin Hammons: Sure. Yes, absolutely. So as we expected -- we expect the first quarter to step backwards a little bit. Certainly, some of that we anticipated some payer mix shift, largely due to some of the economic pressures, inflation and the pressure that has on household incomes. If you think about patients with high co-pays and deductibles that would be most impacted by the pressure on household income. Those are the commercial patients, whereas government patients have lower co-pays and deductibles and MA patients often have 0 co-pay and deductible. So we did expect some pressure there. What we saw sequentially was substantially all of the increase in volume was from MA patients, and we did not expect it to be that -- that much weighted towards the MA plans in the first quarter. Operator: Our next question comes from Brian Tanquilut from Jefferies. Brian Tanquilut: Guys, can you hear me okay? Kevin Hammons: Yes, we can now. Brian Tanquilut: All right, sorry about that. Yes, I guess my question just surrounds around labor, right? I mean obviously, picked up a little bit here, even in contract labor as we see bill rates in a temp staff go down, is that something that we should be thinking about as we think about or contemplate Q2, Q3 trends, just on that specific line item. And maybe taking it a step further. I just -- I know you had a higher-than-expected inflation rate for labor in Q1. What would bring that down over the course of the year? Kevin Hammons: Sure. So I'll try to capture both of those, Brian. Thanks for the question. As it relates to contract labor, a couple of things I'd point out maybe a little bit different than last year not unexpected. So more of the hiring that we're doing, particularly in the first quarter are new grads. Last year, as we began hiring in our nurse recruiting -- centralized nurse recruiting function, which we just anniversaried this past April. We were repatriating many of the nurses who had previously left our facilities to become travel nurses. And so the time period for those nurses to get back up and running was a little bit shorter as opposed to more new graduates or new nurses being hired today that have a little bit longer lead in time. So that may delay us slightly in taking out some of the contract labor. We had great success during the first quarter in terms of nurse hiring. We expect that to continue with our centralized nurse recruiting function and do continue to -- or expect to continue to make progress throughout the year. We also are transitioning more contract labor nurses to international nurses, which also have a little bit longer lead time to get them up and fully integrated into their positions. But as we do that, we'll be able to take out some additional contract labor expense and that will also help mitigate some of that average hourly rate. As it relates to employee costs, we did experience, I mentioned, 5.9% inflation on an average hourly rate basis. We had previously indicated when we put out guidance that our assumption was 5% wage inflation for the year. So we were slightly above that. But as we think about the rate increases that we gave throughout 2022, which I don't think will continue throughout 2023. I think we'll actually be able to bring that wage inflation down in some of the future quarters in the back half of the year, so that the average of 5% for the year is still where we think we'll be. And I think last point I'd just make on that is with the productivity gains, that we had, despite the 5.9% wage inflation, we overpaying the hiring additional hiring and gain productivity so that our actual same-store SWB was only up 5.4% from the prior year. Operator: Our next question comes from A.J. Rice from Crédit Suisse. A.J. Rice: I wanted to just ask a little more on the expense side in 2 ways. The managed care recontracting you're doing at this point, are you seeing any bump in -- to cover some of the inflationary pressures, both labor and otherwise that you're experiencing? And then specifically because you called out the hospital-based physicians, I guess, professional fees. Where specifically is that? Is that ER management, anesthesia or other areas? And what's the prospect for improving that trend over the course of this year? Is there anything -- are you just assuming it's going to stay at this elevated level? Or can you improve that? Kevin Hammons: So let me start off and Tim, feel free to jump in if I miss something. So the medical specialist fees we are seeing some increases related to kind of the inflationary costs as well as the no surprise billing kind of impact from that is some of these physicians may have been terminated by the providers and now they're looking to recoup some of their billable revenue from us and from the providers. And I think that we're seeing that maybe across the industry. Our kind of profile of providers was primarily regional and local providers. So we do have an opportunity to in-source some of those doctors to renegotiate contracts to change out some of these contracts and maybe even some skill mix amongst those doctors. So we do have plans that we can mitigate some of that cost going forward, I do not expect it to stay at the current run rate that we saw in the first quarter. It did start to go up kind of mid-'22. So we saw increases in the third and fourth quarter. So at a minimum, we'll start to anniversary that in the back half of the year, so will not continue to be a year-over-year headwind in the back half of the year, but we do see opportunities to be able to bring some of that cost down on a quarterly run rate basis. Tim Hingtgen: Yes. And I'll just add. This is Tim. I'll go ahead and add a few comments to that. As Kevin said, we think the first quarter would be the peak of the medical specialist fee incremental increases. We've already had some new agreements put in place with alternative vendors at better pricing. There is a skill mix change, adapting hours of service, if you will, on the anesthesia side. which was, I would say, an overweight in terms of the proportional increase in the spend, all those things, I think, should start stabilizing as we head into the future quarters. I would also say that continuing our favorable growth rates increasing the numbers of surgeries and billable procedures for all of our hospital-based provider should also take away some of the fixed subsidies for their staffing and their overhead. So we think all those things in combination make it more manageable as we lead into the next few quarters. Operator: Our next question comes from Kevin Fischbeck from Bank of America. Kevin Fischbeck: Okay. Great. I just want to dig into this mix shift -- fair mix shift a little bit more because it's not clear to me exactly how it explained contributed to the pricing. Can you just maybe disaggregate exactly how much was that versus some of the things you mentioned COVID impacts? And in particular, if this is an MA dynamic. Can you just remind us how -- what the rate differential is between MA and fee-for-service? And if it is MA, then is this going to be a long-term headwind? Why is this not something that would continue to your pressure on rates going forward? Kevin Hammons: Yes. So if I think about kind of year-over-year, about 2/3 of our growth in volume year-over-year related to governmental payers. And of that, probably 2/3 of the governmental growth was Medicare and primarily MA versus Medicaid. So that's kind of the breakout kind of year-over-year on a volume basis. Of course, the other factors our acuity and rate lift, which we got our best rate lift in commercial. So as you think about kind of proportional revenue, it doesn't quite flow with those because of the rate lift we get in commercial. But volume again year-over-year, about 2/3 government, 1/3 of commercial volume increases. Sequentially, all the increases were MA. And then to your question about kind of rate, we're seeing kind of between 85% and 90% payment for MA patients compared to Medicare fee-for-service. Tim Hingtgen: Yes, Kevin, this is Tim. I'll go ahead and add on to that. The commercial mix in the quarter was lighter proportionally to the growth in the governmental as Kevin points out, the first quarter is typically our lowest commercial mix quarter. So I kind of expected that coming into the quarter as people kind of hit their deductibles and co-pays with our stronger procedural -- commercial surgery volume in the fourth quarter kind of putting a little bit of a lag into the first quarter. As we look throughout the quarter, we did see as we normally do some improvements in the mix as we hit March and into April. So again, we expect some of that to normalize. But in terms of the absolute growth in MA volumes, we have to be more disciplined and determined in our approaches to targeting a more, I guess, I'll say, balanced or a better balance commercial mix. We're doing that through access point strategies to our service line development, of OB and NICU and trauma programs, deeper investments in cardiac service lines, which tend to attract, I think, a better mix from an age perspective. And we're also working on some very specific direct-to-employer strategies, including some direct-to-employer contracting models. So looking forward to kind of rolling that out in the quarters ahead as well. Kevin Hammons: And maybe just to add one more point, and thanks for that, Tim. Our expectation, as we mentioned, was first quarter was going to step backwards and would be the lowest quarter of the year. We would grow sequentially kind of throughout the year from an EBITDA standpoint. Part of that is because of the pressure on commercial business that we had anticipated. We do think that, that's magnified by inflation in the economy. But likewise, we think in the back half of the year, as people try to get more of their procedures in before their co-pays and deductibles reset, that's again in the following year. We think that, that recovery in the back half of the year will also be magnified. Operator: Our next question comes from Josh Raskin from Nephron Research. Joshua Raskin: Just want to talk about the guidance, the reiteration there. Even the low end of guidance, the $1.475 billion would be up about 14% year-over-year ex the grant income. 1Q was down 7.5%. So rest of year, up 22% plus. I'm just trying to figure out the drivers of that increase. It doesn't seem like a revenue issue. So it seems as though some of these costs have to dissipate on an absolute basis, not even on a percentage of. So maybe you could just help us first with some of the buckets there. Kevin Hammons: Yes. On a year-over-year basis, we're -- certainly a big piece of that is contract labor. So there's going to be an absolute reduction in contract labor year-over-year that should flow through. And then we do expect the volume that we're seeing in the return of demand for health care services to drive revenue. And then there is some moderation in the -- other cost moderation in SWB that we expect and then continued margin improvement program efforts that we're taking and have been working on for a couple of years, and we still think there's a runway to be able to moderate our other operating expenses below inflation that we can then leverage to more EBITDA. We'll also have the benefit of some of the investment projects that we've worked on over the past couple of years, getting a fuller benefit of those. And as we think about -- we opened up a de novo hospital in June of last year that we'll have a full year of operations. This year, there are a number of things that are driving that growth, Josh. Joshua Raskin: Would you orient us to the lower end of guidance at this point? Is that prudent? Or you still feel comfortable with the midpoint? Kevin Hammons: No. At this point, we still feel comfortable at the midpoint. The between our actual results and consensus is bigger than the mix between our actual results and what we had anticipated for the first quarter. So as we think about where we're at compared to where we expected to be, we're not as far off as consensus would suggest. And so therefore, getting back to the midpoint, we still feel comfortable with. Joshua Raskin: And then last one, if I could sneak it in. Are you thinking about additional asset sale opportunities? Is that more of a priority today? I heard in the preamble that you're still getting inbound interest, but are you prioritizing your asset sales more than you would have in the past? Kevin Hammons: I'm not sure I'd say more than we have in the past given that we went through several years of a very formalized program. And then we did pause for a period during COVID, but we have completed a few smaller transactions recently. We do have the one announced in North Carolina, which is more sizable. And we do have some other interest that we're just currently in talks about. So if those -- as that interest comes in and if those do come to fruition and are at prices that are accretive or allow us to reduce our leverage and/or accretive to our margin profile, our future cash generation, we do take a hard look at those. Operator: Our next question comes from Jason Cassorla from Citi. Jason Cassorla: Great. The surgery growth number in the quarter definitely stood out over -- up over 10%. Can you talk about the drivers there and just help bifurcate between inpatient and outpatient surgery trend? And if that had any impact on mix in the quarter? And then importantly, just the durability and sustainability of those surgery growth trends would be helpful. Kevin Hammons: Yes. So let me start. And then see if I get your question answered. In terms of kind of inpatient versus outpatient, I think we saw approximately 5% inpatient growth and double-digit outpatient growth in surgeries. We're still seeing some of that movement of inpatient to outpatient. I think that's slowing down a little bit. But our outpatient surgery growth certainly outpaced inpatient. But we did see acuity increase on both inpatient and outpatient. Tim Hingtgen: And I'll just add to that, Jason. In terms of where the volumes are coming from, we believe that's part of the investments we've made into not just physical capacity in some of our key markets, but also the recruitment of key specialists. We've talked for the last several quarters about the insights we gained from our transfer center service. I mean we can't say yes to accepting a patient from a non-CHS hospital. It helps us approximate certain demand to add higher acuity specialists to our networks. And we believe that's taking root in many of our tertiary markets in particular. But in any market, we've seen good growth in orthopedic services, again, some through recruitment, some through the return of those, I guess, I'll say, senior age, Medicare-aged patients in particular in the first quarter. We had a very robust orthopedic surgery quarter compared to prior year, but also beating almost every surgical stat to the pre-COVID baseline of 2019. So in general, I think we've built out good systems of care to drive not just sequential improvements in surgeries, but it's the area where we certainly are outshining the 2019 comp because of those deliberate investments. Operator: [Operator Instructions]. Our next question comes from Stephen Baxter from Wells Fargo. Stephen Baxter: I was hoping you could remind us how you think cash flow plays out throughout the year. You're guiding to a pretty big increase in cash flow from ops, but didn't see much in the way of cash flow in the first quarter. just beyond the improving EBITDA performance throughout the year. I guess what else should we keep in mind in terms of working capital dynamics to get to that number? Kevin Hammons: Sure. So yes, certainly, a portion of that is increasing EBITDA. But we did have, just from a timing of payments, respect some professional liability claim settlements in the first quarter and some accounts payable and compensation liabilities that we paid out. It didn't necessarily all run through the income statement because they were previously accrued. That should -- we should kind of recapture those in later quarters in the year. And we actually are anticipating some improvement from a working capital standpoint year-over-year. So that should all lead to improved cash flow from operations by the end of the year. Operator: And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I would like to turn the floor back over to Tim for any closing remarks. Tim Hingtgen: Great. Thanks, Jamie. I want to finish by noting that Nurses Week and Hospital Week will begin this coming weekend, 22,000 nurses work across our organization, and we appreciate every single 1 of them and all nurses everywhere. We also recognized the positive impact that CHS hospitals have in their communities and thank our entire team for what they do every day until people get well and live healthier. Thank you for joining today's call. If you have any additional questions, you can always reach us at 615-465-7000. Operator: Ladies and gentlemen, with that, we'll be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

Operator: Good day, and welcome to the Community Health Systems Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Ms. Shelly Schussele, Senior Director of Investor Relations. Please go ahead, ma'am. Shelly Schussele: Thank you, Chuck. Good morning, and welcome to Community Health Systems fourth quarter 2022 Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer. Before we begin, I would like to remind everyone this conference call may contain certain forward-looking statements including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. We have also posted a supplemental slide presentation on our website. We will refer to those slides during this call. All calculations we will discuss exclude gain or loss from early extinguishment of debt, impairment expense, as well as gains or losses on the sale of businesses, expense from government and other legal matters and related costs, income or expense from the settlement of professional liability claims for which the third-party insurers obligation to ensure the company for the underlying loss has been settled, expense related to employee termination benefits, and other restructuring charges, gain from CoreTrust transaction, a sale of equity interest in Macon Healthcare LLC, and change in estimate for professional claims liability related to divested locations. With that said, I will turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Shelly. Good morning, and welcome to our fourth quarter conference call. Before we begin, I would like to take a moment to express our heartfelt sorrow for the loss of our friend and colleague, Ross Comeaux. Ross served as our Vice President of Investor Relations from 2016 until his passing last month. Many of you knew Ross personally and appreciated his work to build strong relationships with our shareholders and the analysts who cover our company. For those of us who work closely with Ross, this is a tremendous loss. He was a dedicated son, brother, husband, and father. Our deepest sympathy goes out to his entire family and all who called Ross, a friend. Now, turning to our fourth quarter and year-end results. 2022 was challenging and in many ways, a pivotal year for health care providers in terms of our work to rebuild volumes as the pandemics is sided, stabilize our workforce, and offset inflationary pressures. At CHS, we made considerable progress in each of these areas, especially during the second half of the year. Let me start with volume. We finished the fourth quarter with our strongest volume performance of the year and that was true across all key volume categories. Same-store admissions increased by 4.4% on a year-over-year basis, 2.3% sequentially, and at 99% of our 2019 pre-COVID baseline. COVID-related inpatient admissions were 3% of total admissions, compared to 8% in the fourth quarter of last year. Our focus on expanding outpatient access, as well as capturing surgery and procedural cases that have shifted from inpatient to outpatient classification resulted in a same-store adjusted admissions increase of 8.2% year-over-year and exceeded the 2019 baseline. Same-store surgeries increased 4.2% from the prior year. 2.5% sequentially and continue to perform above the 2019 pre-COVID baseline. Same-store ED volumes were very strong in the quarter, increasing 8.7% year-over-year, 3.6% sequentially, and finished at 102% of 2019. In the fourth quarter, same-store net revenue declined 1.3%, due largely to the decreased volume of COVID medical admissions in the prior year quarter. However, our focus on building higher acuity service lines continues as demonstrated by further strengthening of our surgical case mix index. Compared to the 2019 baseline, the surgical CMI is now up 3%, despite the large movement of orthopedic cases that have migrated to outpatient classification. We continue to invest in service line development and provider recruitment to further grow acuity across our markets. Inflationary pressure continues to impact operating expenses and margins, but we made progress reducing contract labor throughout 2022. We have also managed non-labor expenses below inflation. Excluding pandemic relief funds, EBITDA performance was at its highest level in the fourth quarter of the year, in-line with our expectations, as well as historical trends. In addition to the improving operational trends, we extinguished approximately $378 million of notes outstanding during the quarter. We continue to pursue opportunities to lower overall debt and leverage and to improve our capital structure. Kevin will talk about that more in his remarks. Looking ahead, we remain focused on our four priority areas, which we believe remain essential to driving stronger results for our markets and the company. The first is accelerated growth. Strategic capital investments in access points, outpatient services, and inpatient capacity are enabling near-term volume gains and increasing our potential for long-term growth. We have been consistently investing in our portfolio. Over the last five years, we have added more than 640 new licensed beds, as well as 80 surgical and procedure suites to our existing health systems. Across many markets, we continue to expand our geographic footprint and to increase market concentration with new primary care, specialty care, urgent care, freestanding emergency centers, and ambulatory surgery locations. And provider recruitment remains essential to continuous growth. In 2022, we had our best recruitment year of the past five years. Our transfer center received a record number of requests for placement last year, which is an important growth driver for the majority of our health systems. Last year, inbound transfers increased 14.5% over the prior year. As we continue to recruit additional staff and further optimize capacity through our length of stay reduction efforts, we expect even more volume from the transfer center, including incremental higher acuity admissions. Our second area of focus includes specific actions to strengthen our workforce. We made very significant progress reducing contract labor during the year and ended 2022 with strong gains in employee recruitment and retention. Contract labor totaled approximately $80 million in Q4, compared to $140 million in the prior year and $100 million last quarter. Through our company-wide centralized nurse recruitment function, nurse hiring is up 18% for 2022, compared to the prior year. And our retention rates have improved 500 basis points, resulting in a strong net gain in nursing FTEs for the year. Our Jersey College Nursing School relationship expanded with new campuses in Tucson, Arizona and Scranton, Pennsylvania in early January. We now have seven active programs and expect three more to commence in 2023. Our first cohort of students graduated last month in Port Charlotte, Florida, which was a celebratory milestone for those new nurses and for us. When the Jersey College partnership is fully deployed, we expect to graduate approximately 1,000 new nurses each year. Next, our work to control expenses includes our margin improvement program, supply chain initiatives and productivity enhancements. During 2022, we made positive strides, including measures to consolidate service lines in some markets, creating greater efficiencies in those health care systems. For 2023, we remain focused on incremental contract labor reduction and other specific tactics to mitigate the inflationary pressures in this operating environment. Finally, our commitment to advance safety and quality is at the heart of everything we do. There are many measures that demonstrate results in this area, but today, I'll just highlight one. In 2012, CHS hospitals embarked on a journey to create inherently safe health care systems. And now we have a full decade worth of data that shows how much progress we have made. In 2022, we achieved an 87.9% decline in the serious safety event rate from the baseline established 10 years ago. This equates to thousands of patients who experienced better outcomes as a result of this focus. Our safety program is one of the longest running and most successful in the industry. I want to congratulate and thank our clinicians, support teams, leadership, and everyone at CHS who makes safety their top priority every day. Kevin, at this point, let me turn the call over to you. Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim mentioned, we saw meaningful volume recovery and expense management in the fourth quarter and as expected, achieved our highest volume and earnings performance of the year. While lower acuity of inpatient admissions and payer mix changes pressured our top line, the improvements we made in length of stay and contract labor and our management of non-labor expenses below inflation contributed thus having our best EBITDA quarter of the year, excluding pandemic relief funds. Additionally, sequential improvements in same-store net revenue, key volume metrics and EBITDA bode well for us as we begin 2023. In the quarter, we also continued to take advantage of opportunities to improve our capital structure by reducing our debt, while maintaining adequate liquidity. Moving to fourth quarter results. Net operating revenues came in at $3.142 billion on a consolidated basis. On a same-store basis, net revenue was down 1.3%, compared to the fourth quarter of 2021. This was the net result of an 8.2% increase in adjusted admissions and an 8.7% decrease in net revenue per adjusted admission, which as I mentioned, was pressured by lower acuity inpatient admissions and changes in payer mix, primarily attributable to the Delta wave of COVID experienced during the fourth quarter of 2021, during which we saw a proportionately higher percentage of commercially insured COVID patients during that surge. Adjusted EBITDA was $404 million. During the fourth quarter, we recorded $2 million of pandemic relief funds, compared to $46 million recognized in the prior year period. Excluding pandemic relief funds, adjusted EBITDA was 402 million, with an adjusted EBITDA margin of 12.8%. As a reminder, we did not include any pandemic relief funds in our 2022 adjusted EBITDA guidance. And going forward, we do not expect to receive or recognize a significant amount of pandemic relief funds from the government. With regard to expenses, on the labor expense side, combined salaries, wages and benefits and contract labor expense improved on a year-over-year basis by approximately $40 million and improved approximately $13 million sequentially. Specifically related to employee costs, we experienced an increase of 4.5% in our average hourly rate for employees on a year-over-year basis. On a sequential basis, base pay inflation grew at approximately 1.5%. On contract labor expense, we continued our sequential improvement, as well as making significant progress over the prior year. During the fourth quarter of 2022, contract labor was approximately $80 million, compared to $140 million in the prior year quarter. On a sequential basis, in 2022, our contract labor was $190 million in the first quarter, $150 million in the second quarter, $100 million in the third quarter, and $80 million in the fourth quarter. We anticipate continued progress reducing our contract labor throughout 2023, albeit at a slower pace. We have effectively executed several cost reduction initiatives and thus, non-labor expenses continue to trend below inflation. Overall, we experienced a moderate increase of approximately 3% over the prior year, despite a $30 million increase in medical specialist fees, a $40 million increase in malpractice insurance, and $8 million related to Hurricane Ian. All other increases and decreases in non-labor expenses netted to a reduction of approximately $40 million. We've been able to keep the growth of these costs well below inflationary levels due to the commitment and discipline of our employees to execute on our margin improvement program. Turning to cash flows. Cash flows provided by operations were $300 million for 2022, compared to cash used in operations of $131 million for 2021. Excluding the repaid Medicare accelerated payments in 2021, cash flows provided by operations were $950 million for 2021. The timing of certain cash payments prior to year-end and a few expected cash receipts, which did not arrive prior to year-end, impacted our cash flows from operations for the year ended 2022. We expect these cash inflows to now come in during 2023. Also, due to the timing of certain payments in 2022 that normalize next year, we expect our working capital to improve in 2023. Moving on to CapEx. Full-year 2022 CapEx was $415 million, compared to $469 million in the prior year and was in-line with our expectations. As we mentioned on last quarter's call, we effectively adjusted our pace of spending on capital expenditures to reflect the operating environment without materially slowing our growth opportunity. We continue to improve our capital structure through a combination of privately negotiated transactions and open market repurchases. In the fourth quarter, we repurchased $378 million of debt with $171 million of cash, capturing $193 million of discount. As we look to the full-year of 2022, we took advantage of market conditions in the early part of the year, while interest rates were favorable by refinancing and extending $1.5 million of debt maturities, lowering our interest rate from [6.25% to 5.25%] [ph]. And in the second half of the year, we repurchased a total of $645 million of debt for an aggregate cost of $345 million of cash, capturing $300 million of discount. These transactions combined lower our cash interest on an annualized basis by over $58 million. The company's net debt-to-EBITDA is currently 7.9x, due mostly to the lower EBITDA attributed to the current operating environment. As we manage through this environment, we remain focused on our longer-term goals of lowering our leverage and increasing our free cash flow. Although we use more of our cash in order to repurchase debt and we experienced lower free cash flows than we anticipated, we retained $118 million of cash on the balance sheet at the end of the fourth quarter and we still have the availability of substantially all of our ABL with $852 million of borrowing base capacity. As a reminder, we have no debt maturities until 2026. As we previously mentioned, we continue to have interest from outside parties related to potential divestitures, and we are also assessing opportunities to add to our portfolio. As these opportunities emerge, we analyze the future growth and earnings profile of specific assets and assess the impact potential transactions would have on our future financial leverage and free cash flow generation. During the quarter, we received $85 million of cash proceeds for the sale of one facility in West Virginia, which closed on January 1, 2023. And we also signed an agreement to sell our last remaining facility in West Virginia, which we expect to close on March 31, 2023. We remain engaged in continuing discussions about other potential transactions. We believe these transactions, if they come to fruition, will provide opportunities to further pay down debt, as well as allow opportunities to reinvest resources to areas of our portfolio to advance their long-term growth in earnings. Now, I will walk through our full-year 2023 guidance. Net operating revenues are anticipated to be $12.2 billion to $12.6 billion. This represents a 4% to 6% growth in same-store net revenue. Adjusted EBITDA is expected to be $1.475 billion to $1.625 billion. Net loss per share diluted is anticipated to be a $0.65 loss to a $0.05 loss per share based on weighted average diluted shares outstanding of 130 million to 131 million shares. Cash flow from operations are anticipated to be $675 million to $825 million. CapEx is expected to be $450 million to $500 million and cash interest is expected to be $760 million to $780 million. In summary, we are optimistic about 2023. We expect to accelerate our growth initiatives, strengthen our workforce in advanced safety and quality, while leveraging expense management to drive positive financial results and free cash flow. We remain committed to our objectives, which are designed to position the company for long-term and sustainable success and are focused on the opportunities, which lie ahead for us. Shelly, at this point, I'll turn the call back over to you. Shelly Schussele: Thank you, Kevin. At this point, Chuck, we're ready to open the call for questions. Operator: Yes ma’am. [Operator Instructions] And the first question will come from Brian Tanquilut with Jefferies. Please go ahead. Unidentified Analyst: You have [Taji] [ph] on for Brian. I just want to say congrats on the quarter. So, I think I'll go ahead and touch on contract labor. Clearly, you're executing well on this front. Just wanted to know what's driving the sequential improvement? And can you quantify how much more space do you think you have to bring that down this year? Thanks. Kevin Hammons: Sure. Thank you for the question, and I can start that off. And Tim, there's something else I missed. Please feel free to jump in. Early in 2022, we began our centralized recruiting efforts for nursing. And by April, we had all of our hospitals, kind of rolled into that centralized recruiting effort. Doing so has really allowed us to improve and expand our ability to bring in new employed nurses, which ultimately has been the hurdle of being able to take out contract labor. So, as we've made progress, and I believe our nurse recruiting is up 18% year-over-year in 2022, that has allowed us to take out contract labor and reduce those costs, albeit at a significantly lower cost to the company. As we go forward in 2023, certainly, the pace of reduction is going to come down. If you think about fourth quarter – in first quarter historically has been higher quarters for utilization and contract labor, particularly around our markets in Florida, where we have more seasonality, but I would expect this ultimately when things level out to be somewhere in the $50 million to $60 million per quarter on average range for contract labor. So, I think we have some room, although I think it still takes a little time for us to get down there in the current environment. Unidentified Analyst: Thanks. Operator: The next question will come from Josh Raskin with Nephron Research. Please go ahead. Josh Raskin: Hi, thanks. Sort of a related topic, but a little bit bigger. Just the midpoint of 2023 guidance on a year-over-year basis, [indiscernible] grants, EBITDA margin improvement about just under 200 basis points. So, maybe you could help talk to the specific buckets of that improvement be very interested in the SWB line specifically. And then it sounded like you think contract labor may be able to get down to – that could be down 150 million to 200 million just my math. I'm just curious if that's the right ballpark. Kevin Hammons: Yes. I think you're absolutely right. I think contract labor, based on full-year of 2022, we had about $520 million of contract labor in our current run rate, even if we stayed flat in 2023, we would see a $200 million reduction in contract labor. I think we'll make a little more progress in that throughout 2023. So, I would guess it's $200 million to $250 million year-over-year reduction. Now, some of that does come back to us in terms of salaries and wages as we replace some of the contract labor with employees. I would estimate somewhere in the neighborhood of 30% to 35% of that reduction in contract labor comes back to as employee cost. In terms of inflation on SWB, we're estimating for 2023, about a 5% inflation rate on the average hourly rate. So that, combined with some additional employees as we take out contract labor would be how you get to SWB estimate for next year. Josh Raskin: Got you. And then could you just remind us what was the total EBITDA contribution, if it was positive for the facilities that were divested in 2022 and maybe, including the one that closed on [2023]? Kevin Hammons: Yes. Overall, for the facilities that were closed, divested and I would also lump in some of the consolidated services and service line closures probably had a net – a small net negative contribution during 2022. So, those should be accretive going into 2023. Josh Raskin: Okay. So, slightly accretive. Okay. Thank you. Operator: The next question will come from Kevin Fischbeck with Bank of America. Please go ahead. Kevin Fischbeck: Great. Thanks. So, it sounds like you're making a lot of progress. But I guess when you updated your medium-term outlook, you changed the margin target a little bit and the EBITDA leverage numbers [have a turn] [ph] higher now. So, I was wondering if you could kind of maybe breakdown for us exactly what maybe has changed in your view about where things are? I guess I think about things right now that's in the form of volumes, pricing, labor and other costs. Is there one of those four or some of those combination of those four things may be coming in worse than you thought when you provided the original guidance? Any way to think about that? Kevin Hammons: Sure. If I go back a year ago when we initially started putting out those medium-term targets and looked at where we are today, certainly inflation has had a much bigger impact than we had previously anticipated, particularly around labor. So, just being realistic about where we are a year later and having endured, kind of the increases in labor – contract labor, which no one anticipated a year ago to even be where – what we experienced during 2022 let alone where we're still at today. It's still a headwind for us, albeit improving, and we believe it will continue to improve. And in terms of, kind of on the net revenue line, I would say there's continued pressure, particularly from government payers on net revenue and on rate. Kevin Fischbeck: Is there any reason to think that the rate won't eventually catch up? I guess over time, we always thought about it catching up on a lag. Is it just the lag part that you're updating this for or do you kind of feel like it's – there's a mismatch there permanently? Kevin Hammons: Yes. No. I think this is more of the lag that we're just, kind of factoring in to the equation here. And beyond medium-term, we're certainly focused and believe we'll continue to make improvements and ultimately get back to where we had originally anticipated. It's just a matter of timing and the insight we have today as we look out over the next 3 years to 5 years, as things – the closer we get to that, the more insights will give more clarity. But as we sit here today, we just thought it was reasonable to make a small adjustment to those goals. Kevin Fischbeck: Alright, great. Thank you. Operator: The next question will come from Jason Cassorla with Citi. Please go ahead. Jason Cassorla: Great. Thanks. I was just hoping you could unpack the volume outlook within that 4% to 6% same-facility revenue guidance and perhaps in terms of how you're expecting surgical volumes to develop inpatient versus outpatient, the trajectory of volume growth over the course of the year? And then if you're considering any volume headwind from the recent cybersecurity incident at all at this point? Thanks. Kevin Hammons: Sure. Let me start off. So, you're right, we have kind of 4% to 6% net revenue growth. In terms of volume, I would anticipate probably 2% to 3%. So, about half of that net revenue growth is volume, half is rate. And in terms of, kind of where we're at in our recovery, we think we still have opportunities to increase our admissions. We've made significant investments over the last couple of years, and we're still experiencing some recovery from COVID. Our outpatient particularly our clinic visits, we've seen great growth over these last couple of quarters and ultimately, those will translate into more procedures and more surgeries and inpatient missions down the road. Tim, if there's something you might add? Tim Hingtgen: Sure. In terms of the migration of inpatient cases to outpatient, that seems to have leveled off. So, we don't believe that's going to be as large of a headwind. But just to reiterate, for those cases, the broad majority of those cases that didn't ferment patient to outpatient. We believe we've captured them within our existing health care delivery systems in our hospitals or in our ASC environment. So, we feel really good about that contribution going forward into 2023 and beyond with a full pipeline of additional access points, ASCs, what have you, that we are adding to the portfolio. In terms of the near-term growth opportunities, we called out accelerating growth as priority number 1 for Community Health Systems. We believe we've invested really wisely for that in some of our highest growth markets. We have new capacity that has just recently come online or will be coming online throughout the rest of this year. So, adding incremental beds, leveraging our focus on strengthening the workforce, recruiting more staff, so we can open-up every one of those beds should be a strong catalyst for us for incremental volume growth. Jason Cassorla: Okay. And anything on the cybersecurity incident you want to add? Kevin Hammons: Sure. Not a whole lot to add there, but just for clarity, we have a third-party that we had contracted with for secure file transfers, this third-party experience the data breach. And in the process of that, the – a couple of – our file, CHS files were able to be accessed. The breach did not occur the best of our knowledge within our system. There's no – we have no evidence that there was any breach of the CHS systems, and we've not experienced any type of disruption in service nor do we anticipate any disruption in service. Jason Cassorla : Great. Thank you. Operator: Next question will come from Stephen Baxter with Wells Fargo. Please go ahead. Stephen Baxter: Hi, thanks. And our condolences on Ross, it's really sad to hear about that. So, just wanted to ask about some of the drivers of the operating cash flow improvement year-over-year. So, you talked a little bit about this, it looks like you're looking for, I think, a $450 million pickup. Some of that is the EBITDA growth you're looking for and you talked a little bit about the, kind of the one-time items maybe impacting 2022 that are now 2023 collections, love to get a sense of whether you can maybe size some of those for us and talk about any other factors we should be considering in the year-over-year improvement? And it does look like your working capital is already down a decent amount year-over-year in 2022 and you're expecting to make more progress. So, any insight into kind of how much further you think you can manage working capital lower would be great to hear about? Thanks. Kevin Hammons: Sure. So, a couple of items I'd point to. One is the repayment of deferred payroll taxes of $73 million. This was COVID-related benefits that allowed us to defer payroll taxes. Half of it was repaid in 2021 and half of it was repaid in 2022. So that's done that payment will not occur. Again, that deferral started back in 2020. We did decrease our days in AP during 2022. Near the end of the year, we took advantage of some discount opportunities and paid some things early. We'll be able to turn that around in 2023, kind of pick that back up, which will be a positive cash flow item. Similarly, we lost a day in AR during 2022, we would expect to be able to recapture that day. So, those items of working capital I would say, would be positive impacts in 2023. The other thing that I would point out in terms of, kind of positive impact on free cash flow or cash flow from operations, would be our interest payments as we continue to refinance some of our debt and pay down some of our debt. Our cash interest will be significantly lower in 2023 than it was in 2022. In addition, in 2022 as part of the refinancing and debt payoff. We did have to accelerate some of our cash interest payments, which resulted in effectively on a couple of those tranches paying more than 12 months of interest in the year. So, as that goes away and then with the lower interest rate on the piece that we finance and a lower debt balance, we'll have approximately $50 million to $60 million of lower interest – cash interest in 2023. Operator: Our next question will come from Andrew Mok with UBS. Please go ahead. Unidentified Analyst: Hi, this is [Thomas] [ph] on for Andrew. Could you walk us through the trend in inpatient acuity throughout the year? And with your focus on investment in higher acuity service lines, how do you expect acuity to trend in 2023? Thanks. Tim Hingtgen: Sure. Sure, Thomas. This is Tim. I'll kick it off, and Dr. Simon feel free to weigh in. In terms of our acuity progression throughout the year, as we pointed out in our earlier remarks, on lower to – relate to lower medical case mix index. And so, depending on the level of COVID in the prior year quarter, it certainly impacted our year-over-year comps. But as the year went on and as I mentioned, we grew some of our inpatient surgeries saw some of those volumes improve throughout the year. We did see our surgical case mix improve, which yielded a stronger gain by year-end and overall case mix index. On – versus 2019, I don't know if we pointed this out earlier, but we did actually grow our case mix index versus 2019 across both medical and surgical. So, we believe that's evidence of our investments in the service line strategies, the recruitment strategies, and the transfer centers success of bringing higher acuity patients into our health care systems. So, while we saw a dip in last year versus 2021, we're really pleased with what we saw versus 2019. Lynn, anything to add? Lynn Simon: I think the only thing that I would add is, as far as [indiscernible] we're seeing an increase in higher acuity cardiovascular services and then also some neurology. So, we are focusing on some of those high-end procedures, as well as other service lines, putting effort into and we're saying some of the gains from that. Unidentified Analyst: Thank you. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Tim Hingtgen for any closing remarks. Please go ahead, sir. Tim Hingtgen: Thanks, Chuck, and thanks to everyone for spending time with us today. Let me end today by thanking the caregivers and support teams across our organization to provide patients with safe quality health care. They do a remarkable job. I also want to acknowledge our local health system and CHS leadership teams who’s sharing our commitment to achieve the best results possible. Working together, we look forward to reaching our goals and providing value for all of our stakeholders in 2023. As always, if you have additional questions, you can always reach us at 615-465-7000. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Community Health Systems Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ross Comeaux, Vice President of Investors Relations. Please go ahead. Ross Comeaux: Thank you. Good morning, and welcome to Community Health Systems’ third quarter 2022 conference call. Joining me on today’s call are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer; and Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer. Before I turn the call over to Tim, I’d like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as risk factors in our Annual Report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today’s discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations we will discuss also exclude loss or gain from early extinguishment of debt and impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal settlements and related costs, expense related to employee termination benefits and other restructuring charges, and gain on sale of equity interest in Macon Healthcare, LLC. With that said, I’d like to now turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Ross. Good morning everyone, and welcome to our third quarter conference call. During today’s call, I will share highlights of some of the progress being made across our organization, and I’ll discuss why we believe our strategies continue to position the company for long-term growth. Despite current industry dynamics, we are producing incremental and sequential improvements in many key areas. I’ll also cover some of the adjustments we are making in light of inflationary pressures and other factors impacting healthcare operations. But first, I want to acknowledge and express gratitude to our healthcare leaders and teams in Florida, who did a truly remarkable job before during, and after Hurricane Ian. Our presence along the west coast of Florida included eight hospitals and more than 80 outpatient sites of care. Our ShorePoint Health network, which includes affiliated hospitals in Port Charlotte and Punta Gorda were most directly impacted by the hurricane. While our facilities sustained damage, our team maintained operations and continued to care for patients throughout the storm. And in the aftermath, they worked around the clock to ensure emergency, surgical and other services would be available to their community. For several days, ShorePoint Health was functioning as the sole healthcare provider within a 30 mile radius. While ShorePoint provided emergency and acute care services, we experienced significant disruption to elective procedures, which continued into early October. Work is ongoing to restore full operations including affiliated and independent physician practices. One other important note, we are pleased with the progress we made across the capital structure. During the quarter, we took additional steps to improve our capital structure with the successful open-market debt repurchase program extinguishing approximately $267 million of notes outstanding during the quarter. We continue to pursue our opportunities to lower our overall debt and leverage. Kevin will share more details in his remarks. Now, I will turn to our third quarter results. As we shared last quarter and continuing into this quarter, demand for non-COVID healthcare services has returned more slowly and later than most predicted, leading to softer than anticipated volumes during the middle of the year. Moving through the third quarter, we did see volumes, especially surgery and outpatient visits picked up by mid-August coinciding with the end of summer travel, return to school, and more normal schedules. Those improvements continued throughout the rest of the quarter. In the third quarter, same-store admissions were down 2.2% on a year-over-year basis reflecting a lower COVID impact as well as continued migration of certain surgical and cardiac procedures through outpatient status. For comparison, COVID-related inpatient admissions were 5% this quarter compared to 13% in the third quarter of last year. Our focus on expanding outpatient access and volumes as well as capturing procedural cases that shifted from inpatient through outpatient classification resulted in a same-store adjusted admissions increase of 5.2%. Same-store surgeries increased 5.3% and continue to beat the 2019 pre-pandemic baseline. We ended the quarter with surgeries at 101% compared to 2019. Even though we are seeing a shift of some procedures to outpatient, we are also experiencing higher surgical acuity overall as we focus on service line investments. Surgical case mix increased 5% compared to the 2019 baselines across service line categories; we saw the strongest growth in orthopedics, spine, neuro, GI and colorectal procedures. ED volumes are rebounding versus the 2019 baseline too, and in the third quarter at 99%. We continue to invest in ER services and capacity, freestanding emergency departments, EMS partnerships, and ER marketing and outreach programs in our communities. While improving sequentially net revenue in the third quarter declined year-over-year due to both lower admissions and lower acuity of inpatient admissions versus prior year, which again was a COVID search period. Inflationary pressures continue to impact operating expenses and margins. While we remain highly confident in the potential of our overall portfolio, the growth in margin development opportunities in a small number of markets have been hindered in this rising cost environment. We are taking swift and necessary steps to mitigate these headwinds. During the third quarter, we accelerated efforts to adjust operations in these markets by consolidating, or reducing some services or even opting to close facilities. We expect an overall positive impact from these changes as we close the year and even more long-term impact moving into 2023. Last quarter, we discussed four areas of focus for this year and next, and I’d like to provide some updates now. The focused areas are opportunistic growth, strengthening the workforce, incremental expense reduction initiatives, and leveraging CHS centralized resources. Starting with opportunistic growth through prioritized capital investments and service line expansions, we continue to add more capacity in both inpatient and outpatient services. For example, the addition of 112 new beds in our Naples, Florida market are slated for phased opening this quarter and into early 2023, adding capacity and service to all three of our campuses. Our new Northwest Healthcare Houghton facility opened in the Tucson market in June and volumes are ramping up nicely there and should benefit from a favorable seasonal impact in the coming months. We will open a new 120-bed inpatient behavioral health facility, a joint venture with Acadia in the Fort Wayne market in December. And as we’ve mentioned before, we believe JVs and other partnerships can help accelerate our growth strategies in a number of markets. On the outpatient side of the business, we’ve continue to add new primary care and specialty practices, urgent care centers and freestanding EDs in select markets with a good pipeline at future development opportunities. And we added ambulatory surgery centers in the Tucson and Huntsville markets during the quarter. As we continue our focus on ASC growth opportunities. Our balanced growth strategy will remain a central theme as we continue to demonstrate the ability to shift from inpatient to outpatient settings within our systems of care when that is the preferred or most appropriate setting. Our proprietary transfer center is driving admissions with strong year-over-year and sequential growth in accepted patient placements. However, as request for placements have increased due to staffing and capacity constraints, some markets have had to occasionally decline some inbound transfers. We expect incremental progress as our capacity optimization and workforce development initiatives open up more available beds in key markets. As a result, we expect volumes from the transfer center to grow further and to be a continued source of incremental high acuity admissions. Regarding capacity optimization, our emphasis on reducing overall length of stay is also working with the 6% sequential improvement shown in the third quarter. Finally, on the subject of opportunistic growth, provider recruitment enables more access and service line development. It is up 9% year-to-date compared to the prior year and continues to surpass 2019 levels. Moving on to initiatives underway to strengthen our workforce, we are rapidly reducing contract labor. Contract labor declined each month of the third quarter and totaled $100 million in Q3 compared to $150 million last quarter. Our centralized nurse recruitment team is generating solid results, and our retention strategies are also working well. On a year-to-date basis RN hiring is up 12% over last year, and our retention rates have improved 300 basis points. Resulting in a strong net gain in nursing FTE’s overall. Incidentally, as we have hired more RNs and other permanent workers over the past several months, we also incurred higher than normal on-boarding and orientation expenses, especially in the third quarter. Our Jersey College Nursing School relationship is expanding. We just announced new campuses in Tucson, Arizona and Spring, Pennsylvania, and in a matter of days had more than 900 potential students express interest. Our first cohort of approximately 30 students in our ShorePoint market will graduate in January, 2023. When the Jersey College partnership is fully deployed, we expect to graduate approximately 1,000 new nurses every year, and our investments in the Pathways Program, which includes enhanced tuition reimbursement and student loan repayment programs, has been very well received, and that is also having a positive impact on both employee recruitment and retention. Under incremental expense reduction initiatives, I’ve already mentioned the service consolidation and closure activities in a small number of markets, which will reduce expenses and investments where we simply do not foresee long-term return. These were thoughtful and deliberate decisions and we have been careful not to disrupt long-term growth potential while recognizing that in today’s environment, sometimes some operations are not sustainable given these dynamics. Our margin improvement program now in its third year also continues to yield strong results and Kevin will provide more details in his remarks. Finally, we are leveraging our centralized resources to benefit all of our markets. I’ve mentioned several of our programs such as our transfer center, centralized nurse recruitment and physician recruitment programs. Other centralized programs include utilization review and case management. Our patient access centers for physician practice scheduling, ACOs and managed care contracting. These programs continue to inform best practices and they help us to achieve efficiencies across the organization. In closing, we are pleased with many sequential improvements in the third quarter, and believe this progress bodes well for the future. We will continue to intentionally and aggressively adapt our portfolio services and operations to step over inflationary impact and other industry headwinds, which we believe will position us for better results in 2023 and beyond. And we are supporting our markets with enhanced resources to accelerate growth and revenue, which we know is essential to address fixed and higher variable costs and to restore stronger earnings in margin performance. Kevin, at this point, let me turn the call over to you. Kevin Hammons: Thank you, Tim, and good morning everyone. As Tim mentioned, impacts from the top-line, including lower admissions and acuity, along with elevated contract labor and wage inflation continued to affect our EBITDA performance. However, while navigating through these challenges and simultaneously focusing on future growth, we exceeded expectations in outpatient visits leading to strong year-over-year volume growth and adjusted admissions and surgeries. Sequentially we saw improvements in admissions, adjusted admissions and ER visits. We also improved length of stay, reduced contract labor expense, made improvements to our capital structure, maintained strong liquidity and produced positive free cash flow during the quarter. Moving to the third quarter results, net operating revenues came in at $3.025 billion on a consolidated basis. On a same-store basis, net revenue was down 2.3% compared to the third quarter of 2021. This was the net result of a 5.2% increase in adjusted admissions and a 7.1% decrease in net revenue per adjusted admission, which was negatively impacted by the reduction in COVID cases in lower non-patient net revenue. Adjusted EBITDA was $400 million. During the quarter, we recorded $115 million of pandemic relief funds compared to $19 million recognized in the prior year period. Excluding pandemic relief funds, adjusted EBITDA was $285 million with an adjusted EBITDA margin of 9.4%. As a reminder, we have not included any pandemic relief funds in our adjusted EBITDA guidance. Further, we do not expect to receive any meaningful pandemic relief funds going forward. Hurricane Ian resulted in an approximate $10 million hit to the third quarter, and on a sequential basis. Closure costs and incremental healthcare provider orientations accounted for another $20 million of sequential headwinds. With regard to expenses on the labor expense side combined salaries, wages, and benefits and contract labor expense remain elevated on a year-over-year basis. Specifically related to employee costs, we experienced an increase of approximately 5% in our average hourly rate for employees on a year-over-year basis, which was largely offset by a reduction in hours worked from a combination of operational adjustments, lower inpatient days, and conversion of employees to contract labor. On a sequential basis, base pay inflation grew only 1%. However, an additional calendar day incremental costs associated with on-boarding new employees and costs associated with increased position starts, which is typical in the third quarter, led to an overall sequential increase in salaries, wages, and benefits of 4%. On the contract labor expense or our contract labor expense, while still elevated over the prior year, continued to show sequential improvement. During the third quarter of 2022 contract labor was approximately $100 million compared to $60 million in the prior year quarter. This compares to $150 million in the second quarter of 2022 and $190 million in the first quarter of 2022. We anticipate continued progress in reducing contract labor going forward. Non-labor related expenses continue to be well-managed despite inflationary pressures. We experienced a moderate increase of 2.5% over the prior year. This is the first increase in seven quarters, and it is primarily attributable to medical specialist fees, increases in utility costs in the timing of certain provider tax payments, while all other increases and decreases netted to zero. We’ve been able to make able to keep the growth of these costs well below inflationary levels due to the commitment of our employees to execute on our margin improvement program. Turning now to cash flows. Cash flows provided by operations for $291 million in the first nine months of 2022 compared to $400 million in the prior period. Excluding the repaid Medicare accelerated payments made in the first nine months of 2021, cash flows provided by operations were $667 million for the first nine months of 2021. Lower net revenue and higher labor costs contributed to the lower cash flows during the first nine months of this year. That said, it’s worth noting that despite lower year-over-year EBITDA, we still delivered positive free cash flow during the quarter. Moving to CapEx. For the first nine months of 2022, our CapEx was $284 million compared to $334 million in 2021. We effectively adjusted our capital expenditures without materially slowing down our growth opportunities. On the capital structure side, we executed an open market debt repurchase program in the quarter during which we’ve purchased $267 million of debt with $174 million of cash resulting in an approximate gain of $78 million. The company’s net debt-to-EBITDA increased to 7.3 times due mostly to lower EBITDA impacts attributed to the current operating environment. Our free cash flow was positive in the quarter, and as we manage through this environment, we remain focused on our longer term goals of lowering our leverage and increasing our free cash flow. In terms of liquidity, at the end of the third quarter, we have $300 million of cash on the balance sheet and we have no outstanding borrowings under the ABL with $935 million of borrowing based capacity. As a reminder, we have no debt maturities due until 2026. We continue to receive interest related to potential divestitures. As this occurs, we analyze the future growth and earnings profile specific assets and assess the impact potential divestitures would have on our future financial leverage and free cash flow generation. During the quarter, we divested one small facility in Oklahoma. We are engaged in an advanced discussion to about other potential transactions. If these transactions come to fruition, we believe that in addition to paying down debt opportunities also exist to reinvest resources and those can be directed to areas of our portfolio to advance their long-term growth and earnings. Tim highlighted a number of initiatives to deliver growth. Many of these strategies are delivering the desired results now. Some are ramping up or expanding to generate greater returns and others earn the development phase to enhance our revenues and earnings potential. We remain committed to our objectives and focused on our opportunities, which are designed to position the company for long-term and sustainable success. Ross, at this point, I’ll turn the call back to you. Ross Comeaux: Thank you, Kevin. At this point, we’re ready to open up the call for questions. We will limit everyone to one question this morning, but as always, you could reach us at 615-465-7000. Operator: We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Brian Tanquilut with Jefferies. Please go ahead. Taji Phillips: Hi, good morning everyone. This is Taji Phillips on for Brian. Thanks for taking my question. So just thinking through bridging your year-to-date numbers and your EBITDA guidance for 2023, this is assuming if you back out COVID relief funds, projections for Q4 between $400 million and $500 million. So can you just talk about what’s informing that performance for Q4? Also within the context of normal seasonality where Q4 is higher just providing any color on Q4 EBITDA performance would be great. Thanks. Kevin Hammons: Sure. This is Kevin, and I think I can take that. So, as we think about Q4 seasonally Q4 has always been our highest EBITDA quarter of the year, and we would expect that to be the same this year. As we think about, our volume at trends as we came out of what was really, an impacted second quarter and early part of third quarter with some disruption, we did see improvement throughout the third quarter on those volumes. As we mentioned as kids return to school, the end of the summer travel season and returned to some kind of normalcy. We did see volumes pick up in the back half of the quarter and continuing on into the fourth quarter. So, we would expect that to continue throughout the remainder of the quarter. A couple other things I’d point out, we did have sequential reduction in contract labor and that contract labor even throughout the third quarter each month, a decline each month. So, we would expect our fourth quarter results from a contract labor expense to continue to trend in the same direction, albeit probably not reduced as much as the 33% reduction we saw sequentially in Q3, but we would still expect Q4 contract labor to be lower than Q4. The other last item maybe I would point out is, we think about inflation and the potential recession that’s ahead of us, we think that there’s a theory that as most people, try to get healthcare in before the end of the year, before their co-pays and deductibles reset we think the kind of economic environment will actually add to that pressure this year for people to think about getting their healthcare in before the end of the year. So, we think that, again it’s going to look a little more like what we’ve seen in the past with more services performed in 4Q. Operator: Our next question will come from Kevin Fischbeck with Bank of America. Please go ahead. Kevin Fischbeck: All right, great. Thank you. I mean, I guess there’s been a little bit of confusion certainly on our part about what you were saying for Q4. Would you just clarify for everyone exactly what the Q4 guidance range actually is? But then, the real question just about labor costs. I guess everyone seems to be saying that labor is getting better. Everyone seems to be saying it’s getting better slower than they thought. So, I guess, can you give us a sense about how you think about labor trending into 2023, and then what factors in retrospect made it improve more slowly than you thought this year? Thanks. Kevin Hammons: Sure. So our full year guidance, which does not include any pandemic relief funds I think for the fourth quarter would imply something in the $400 million range to get to the low end of our guidance of 1.3 [ph]. So, I think hopefully that that clarifies that for you. In terms of labor, we did see labor inflation in the third quarter, at about 5% on a base pay rate basis. That was a little higher than we had previously expected. Sequentially the base pay increased only about 1%, so we – and if we think about the first couple quarters of the year we were in the 8% to 8.5% year-over-year inflation. So, we are seeing some moderation in that, in labor and we think going into 2023 although it, probably will make remain higher than it has been historically. We do think that there’ll be some continued moderation and we’re probably looking at something in the 3% to 4% labor inflation range for 2023. Operator: Our next question will come from Jason Cassorla with Citi. Please go ahead. Jason Cassorla: Great, thanks. Good morning. Just wanted to ask a couple quick questions on your balance sheet and cash flow. Just first on the balance sheet. You extinguish the $267 million in a quarter, you have no maturities until 2026, but I was curious if there’s more opportunity for similar actions down the line. And then on cash flow, you’ve done just say about $300 million of operating cash flow year-to-date on a $1.06 billion, EBITDA baseline, including cares, but you maintain your cash flow guide that would suggest also a pretty sizeable step up and cash conversion in four quarter. So, I guess anything on your confidence on that conversion in 4Q, and how should we think about the EBITDA to operating cash flow conversion down the line as you continue to grow your EBITDA base? Thanks. Kevin Hammons: Yes, it’s a couple things there. So yes, I mean, we do feel confident in our cash flow for the fourth quarter. I mean historically, along with the fourth quarter being the highest EBITDA quarter of the year. Historically cash flows are the strongest quarter of the year as the fourth quarter. So, we would expect some of the – there’s some one-time payments that, that often come, in the fourth quarter and generally your fourth quarter is your best cash flow quarter of the year. So that kind of coming into the fourth quarter gives us some confidence that we will continue to – or we’ll be able to meet our guidance for that. Operator: [Operator Instructions] Our next question will come from Andrew Mok with UBS. Please go ahead. Unidentified Analyst: Hi, this is Robin on for Andrew. Can you walk us through the sources of the $115 million in pandemic aid, and as some of your peers have indicated, do you think pandemic relief funding has largely ceased? Thanks. Kevin Hammons: Sure. So in the, if you recall, there was a rule grant in a Phase 4 grant that was announced back in December of 2021. And that was the source of what was paid to us this quarter. It had just been delayed and did not get to us until this quarter. So, we recognize it accordingly. And going forward we do not expect there to be any future material pandemic relief fund at grants coming from the government. Operator: Our next question will come from Stephen Baxter with Wells Fargo. Please go ahead. Stephen Baxter: Yes. Hi, thanks. Just a couple of questions here. I guess some companies have helped size the magnitude of COVID support received in 2022. As we think about maybe the moving parts going into next year, I’d be curious if you could update us on what you’re thinking is there, and to be clear, I’m thinking about it excluding things like the $115 million that you received this quarter, so like DRG support, sequestration 340(b) changes, items like that, any sizing you could provide on those as we think about next year? Kevin Hammons: Yes. So look we really haven’t given any guidance, for next year particularly kind of the, the, all the moving parts in there are several including, some probably the largest increase in inpatient rate lift as well. I think there is the way we’re thinking about it at this point, maybe what I would say about that is, we’re thinking about 2023, is we expect kind of consistent with our medium term goals that our same-store net revenue growth into 2023 would be in the mid single-digit range. And that would be a combination of, kind of the net impact of these programs as well as the rate lift that we’re seeing on commercial, from commercial payers, which is also higher than we have historically received in the past we’re probably in the 5% range or, 4% to 6% range on commercial contracts. So all that being said, I would look at it is about a mid single-digit same-store net revenue growth going into next year. Tim Hingtgen: And this is Tim; I’ll jump in just a little additional color around that. And we also believe our focus on driving acuity and service lines, will be a net impact, positive impact for 2023. And I referenced some of the declines in the transfer center due to capacity, and typically those are, some higher acuity admissions we’re able to bring into our locations of care. And I also mentioned the large increase in provider recruitment in 2023 that we on-boarded. Those, a lot of those are procedural specialists. We should see more surgical acuity growth through that as well. So that should really pull forward with some nice uplift in 2023. Operator: Our next question will come from Josh Raskin with Nephron Research. Please go ahead. Josh Raskin: Hi, thanks. Quick one on the divestitures. It sounded like you were in advanced discussions. If you could just flesh out what the potential sizing of that would look like, just on – just the ones that are in advanced discussions there. And then my real question just, if you think about the margins of roughly 11% [ph] this year and ultimately trying to get to that long-term, 16%, could you just refresh, where you think the major buckets of improvement, sort of what line items and obviously a focus on SWB, so let’s contract labor and maybe what that means for volumes. And then I guess the specific question would be how much progress do you think you can make next year? What’s a reasonable assumption for margin improvement in 2023? Kevin Hammons: Yes. So starting with the divestures, I think we’re a little early to size because there’s a couple different deals. And we’re probably a little bit early to size that, but we’ll certainly give more indication, as we continue to progress in those discussions. In terms of some of the other moving parts and improving our margin into next year. So, I kind of mentioned, a mid single-digit revenue increase and some, higher than historical rates lift that should help us certainly get there. It’s a little early. We’ve not yet kind of commented on volume trends for next year. If we think about labor, as I mentioned, kind of in the 3% to 4% range for labor inflation is how we’re thinking about next year. Contract labor is, probably an interesting one and will certainly contribute to the lift in EBITDA and margin next year. If you think about the progress we’ve made already coming down from $240 million in the first half of the year, $100 million in the third quarter and continued reduction that we expect in the fourth quarter. I would look at next year and we believe we’ll see a 40% to 50% production in contract labor compared to 2022. So that should give us some meaningful lift. On the, supply side, it’s a variable cost, but we – with our margin improvement program with the efforts that our supply chain team that has been executing on we think that we can keep that relatively consistent and or offset any inflationary pressures on our supplies as well as on some of the other non-labor expenses where we’ve made great progress over the past couple of years. We still believe that there’s some runway on that to continue to hold prices down. And although we may not have as much success and keep it absolutely flat like we have for a number of quarters. We think we can certainly keep those non-labor expenses increasing at less than inflationary trends. Tim Hingtgen: Josh, this is Tim. Good morning. Just a few things to add. In terms of margin improvement for 2023 we really believe that the fixed cost leverage opportunity exists. We saw what happened obviously with lower revenues on higher costs in the second quarter, and some of that certainly bleeds into the third. And as we pointed out, we’re working through that with our initiatives, making really good sequential progress. So, as we grow the volumes and the revenues, obviously we still expect the higher net revenue conversion rate to lift earnings and margin. The other part of that equation is taking some costs out that we’re not being paid for in terms of length of stay management. We’ve been very, very vigilant in our efforts to control what we can control and that goes into our, length of stay or our case management programs as well. We did see great improvement in the third quarter with our non-COVID length of stay. Actually it’s better than 2019, better than sequential quarters, better than last year at this time. So for what we can control, we’re definitely making improvements and bringing down patient days that in many cases, we’re not being reimbursed for. That has another benefit, as I pointed out in terms of opening up capacity for us to bring in new incremental admissions through the transfer center, through the recruitment and initiative that we have in play to further expand our market share and our patient base in our communities. Operator: Our next question will come from Jason Cassorla with Citi. Please go ahead. Jason Cassorla: Great, thanks for the follow up. I just wanted to ask quickly on that market share argument. Clearly the hospital industry and its entirety is realizing heightened inflationary pressures, but from a competitive perspective, non-for-profits are also dealing with investment income declines, given what’s going on in the equity and bond markets. So, I’m curious if you’re seeing perhaps opportunities to take share in that context and what it could mean on building out capacity or heightened investment in general, just given the overall backdrop? Thanks. Tim Hingtgen: Great. Jason, this is Tim. I’ll kick us off on that one. To answer your question, it varies by market. We have some really, really strong, not-for-profit, non-tax paying competitors, but in other markets we do see that type of opportunity. We kind of label it as being appropriately opportunistic in this environment, kind of leveraging our ability to shift resources and CapEx into markets where we have a really good line of sight on long-term growth. We do see some opportunities to accelerate that. I don’t want to call out any markets specifically today for fear that the competition will know we’ve got our site set on them, but at the end of the day, we do see some opportunities in that regard. We’ve demonstrated, I believe some really good capital controls across the company throughout the course of last couple of years in particular. And as Kevin pointed out, we were able to moderate the spend quite nicely, but we still had a whole host of better expansion projects, service line editions, robotic program initiatives underway that will again, I think bode well for us to really take advantage of this somewhat challenging inflationary operating environment. Kevin Hammons: Yes. And maybe I’d just add to that, and I think you covered it really well, Tim, but is there some demographics in our market are improving, and if we think about our footprint across primarily the southeast and southwest, many of those states being lower tax jurisdictions are benefiting from some of the demographic move as well as some of the economic move, as companies are relocating to lower tax jurisdictions. So all that we believe bodes well for many of the markets we’re in, and we think that not only, can we capture some incremental market share, but we’ll also be capturing our share of a larger market. Operator: Our last question is a follow up from Stephen Baxter with Wells Fargo. Please go ahead. Stephen Baxter: Yes, hi. Thanks for the follow up. Just wanted to ask real quick, it was helpful, the commentary on, some of the swing factors as we move from Q3 to Q4. Can you just remind us, are you expecting to record in the fourth quarter, any dollars related to any out of like period Medicaid payments, things like Florida DPP or Texas QIF, anything of that nature? Just remind us, I guess, how you guys approach accruing for any of those programs, if there’s anything else that we should be considering? Thank you. Kevin Hammons: Sure. We have probably every quarter; some puts and takes on those programs. There’s nothing material that I would call out for the fourth quarter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tim Hingtgen for any closing remarks. Tim Hingtgen: Thanks Matt, and thanks to everyone for spending time with us today. Let me end by thanking our local health system and company leadership teams who’s sharing our commitment to achieve the best results possible and remain optimistic about our company and where we are headed now and into the future. We look forward to updating you on our progress as we move forward and to continue to work diligently to achieve our goals. As always, if you have any additional questions, you can reach us at 615-465-7000. Have a good day. Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator: Good day, and thank you for standing by. Welcome to Community Health Systems Second Quarter 2022 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Mr. Ross Comeaux, Vice President of Investors Relations. Ross Comeaux: Thank you, Matt. Good morning, and welcome to Community Health Systems' Second Quarter 2022 Conference Call. Joining me today are Tim Hingtgen, Chief Executive Officer; Kevin Hammons, President and Chief Financial Officer and Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer. Before I turn the call over to Tim, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as risk factors in our Annual Report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. Also, all calculations we will discuss also exclude loss or gain from early extinguishment of debt and impairment expense as well as gains or losses on the sale of businesses. With that said, I'd like to now turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Great. Thank you, Ross. Good morning everyone, and welcome to our second quarter conference call. The second quarter was challenging in many regards, as we navigated through a particularly complex operating environment, but simply stated, we did not achieve the results we had expected. During this call, we will point to some of the issues affecting our results, along with actions that are underway to improve performance. We will also discuss why we remain confident that our operational priorities and strategic growth initiatives remain the right areas of intense focus to deliver the desired results. Several factors came into play in Q2, resulting in our adjusted EBITDA decline, the most pronounced being lower than forecasted net revenue, continued pressure on the SWB line and contract labor expenses, which improved sequentially and remained well over prior year. And lastly, a disproportionate negative impact from the operating results in two of our markets, which are I will quantify later. In terms of net revenue, the decline was due to lower-than-forecasted volumes in a post-COVID surge quarter based upon past history, and lower net revenue per adjusted admission than anticipated due to the continued site-of-care shifts, payor mix and generally lower acuity of our medical ignitions. Non-patient revenues also decreased year-over-year. Unfortunately, the lower net revenue had a high flow-through to the EBITDA line in the quarter. And conversely, we expect net revenue to improve in the future and we expect this incremental net revenue to drive a high flow-through back to EBITDA. Switching back to the quarter, on a year-over-year, basis same-store admissions were down 3.5%. A main contributor to this decline was a greater migration of higher acuity short-stay surgery cases, that were historically inpatient status, being performed as outpatient status, as evidenced by a much smaller decline in adjusted admissions, which were down 50 basis points and in a same-store surgery decline of 30 basis points. We made targeted investments to increase surgical service lines, capacity and volumes, and we are pleased to see these strategies producing generally positive results. Our surgical volumes are 1% higher than 2019, while surgical case mix index increased 5% versus the pre-COVID baseline. In terms of the pandemic, we provided care for approximately 2,300 COVID admissions or 2% of total admissions, compared to 3% of admissions during the prior year quarter and 12% last quarter. On average, COVID cases during the second quarter were lower acuity and less resource intensive on a year-over-year basis and sequentially. Shifting to labor. We remain focused on our plans to retain our workforce, recruit new clinical employees and reduce contract labor. The number of nursing hires increased by more than 30% compared to the first quarter and our turnover rate declined 20%. These are clearly favorable trends as we work to reduce contract labor and create sufficient permanent staffing for key services and market share gains as healthcare demand strengthens. Contract labor expense declined each month of the second quarter and we finished June with 30% fewer contract labor FTE compared to the end of March. Still contract labor remains at very elevated levels versus prior year without the higher acuity inpatient revenues previously seen in the COVID pandemic, which partially offset its EBITDA impact. Already rates for contract labor are going down and we continue to aggressively execute our recruitment and retention initiatives to build and strengthen a stronger core workforce. Through these efforts, we expect sequential quarterly improvement as the year goes on. Earlier I mentioned that negative operating results in two markets had an outsized impact on the overall company performance in the second quarter. First, let me say that the vast majority of our 48 markets have adapted well given the challenging macro environment. However, on a year-over-year basis these two markets, which have historically had lower than company average EBITDA margins accounted for 20% of the total company EBITDA decline during the second quarter. In a more normal operating environment, the impact of underperforming markets in any given quarter is typically absorbed by stronger growth and performance in other markets. This year even in higher performing growth markets, elevated labor costs have resulted in lower net revenue conversion rate that we have historically delivered. It is important to reiterate that the majority of our markets are making progress and continue to appropriately adjust their operations and execute strategies designed to achieve long-term volume and earnings growth. Now I'd like to cover four areas of immediate and underlying focus for the company. Opportunistic growth, rebuilding our workforce, incremental expense reduction initiatives, and leveraging our CHS centralized resources. First, opportunistic growth. Our management team has undertaken a strategic opportunities assessment to accelerate net revenue and EBITDA growth across several key markets, which include strengthening physician alignment, service line investments, payor strategies, incremental access point expansion and evaluating potential strategic partnerships. We are pursuing newly identified opportunities aggressively. Shifting labor capital and other resources were most advantageous, especially to markets with the highest growth potential. We're optimistic this work can accelerate more growth and earnings improvement. And we continue to invest in additional development opportunities. On the inpatient side during the quarter, we opened Northwest Medical Center Houghton, our fourth hospital in Tucson, Arizona. We broke ground on a $66 million tower addition that will add 56 beds and more ER capacity at Sonova, North, a well-situated campus in our Knoxville, Tennessee system. We announced a $30 million investment at our hospital in Warsaw, Indiana, a part of the Lutheran Health Network. And later this year, we will begin to open even more inpatient beds as part of multiple expansion projects in our Naples Florida market. On the ambulatory side of the business, we continue to expand access points in our markets and we are growing our ambulatory surgery center footprint as more surgical care shifts to the outpatient setting. New ASCs opened in Knoxville and Cleveland Tennessee during the second quarter. We now have 46 ASCs across our portfolio with planned additions before the end of the year and the full pipeline in place for 2023. Second, rebuilding our workforce. As everyone knows, the COVID pandemic created seismic shifts across the industry affecting staff recruitment, compensation and retention. But as I mentioned earlier, we are now seeing sequential improvement that we expect to continue including progress in new hire rates and retention rates. Our centralized nurse recruitment program supports all of our markets and is achieving solid results. And we have enhanced our benefits program to provide more tuition reimbursement and loan repayment options, which has received positive feedback from employees. Our work to provide nursing education opportunities and to develop the next generation of nurses continues through our partnership with Jersey College. Four campuses are fully operational another will open in the third quarter and six more by the end of 2023. Across these programs, we expect to graduate 1,000 new nurses per year. Third, incremental expense reduction initiatives. During the second quarter, non-labor operating expenses were flat to prior year. Our biggest opportunity and focus is further contract labor reduction. In response to the current operating environment, in select markets, we are consolidating some service locations and intentionally reducing capacity and staffing. Of course, we will do this where it makes sense and in ways that balance the labor supply challenges with our focus on growth and expanding market presence in the long term. Fourth, leveraging CHS centralized resources. Our company-wide resource programs are driving improved operational performance. For example, our transfer center achieved a 5% increase in inbound transfers from non-CHS facilities versus prior year quarter and delivered solid gains sequentially as well. Centralized scheduling initiatives, physician and nurse recruitment team, utilization review and capacity optimization resources, accountable care organization, and other centralized programs and expertise continue to support the advancement of operational goals and help enhance competitive position in our markets. I will also note that our managed care contracting team is targeting opportunities to improve rates on agreements coming up for renewal as well as proactively analyzing existing contracts and we see opportunity here. In closing, let me reiterate that we are not satisfied with our overall results in the second quarter. However, we remain steadfast in our commitment to pursue every option and opportunity to improve. And to that end, I want to thank our local health system and company leadership team, who remain optimistic about our future and who's sharing our commitment to achieve the best results possible. With that, Kevin, let me turn the call over to you. Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim mentioned, our second quarter results came in well below our expectations, as lower than anticipated volume and net revenue per adjusted admission impacted the top line. As the quarter progressed, the return of non-COVID-related patient volumes was lower than we anticipated. Other net revenue, consisting of investment losses and the runoff of transition service revenue from prior divestitures, further reduced our EBITDA. And contract labor and wage inflation also impacted our financial performance. Due to the impact of these factors in the current quarter, along with our updated thoughts for the balance of the year, which includes a more gradual return of deferred care and higher than anticipated inflationary pressures, we have revised our full year 2022 guidance, which I will cover later on the call. Moving to the second quarter results. Net operating revenues came in at $2.934 billion on a consolidated basis. On a same-store basis, net revenue was down 2.6% compared to the second quarter of 2021. This was the net result of a 0.5% decrease in adjusted admissions and a 2.1% decrease in net revenue per adjusted admission, which was negatively impacted by lower non-patient net revenue. Adjusted EBITDA was $253 million. During the second quarter, we recorded $8 million of pandemic relief funds with $1 million recognized in the prior year period. Excluding pandemic relief funds, adjusted EBITDA was $245 million with an adjusted EBITDA margin of 8.4%. Volume improved sequentially, but generally remained suppressed as a result of the residual effects of the pandemic while higher operating costs also due to the pandemic remained inflated. Switching now to expenses. On the labor expense side, labor cost and contract labor expense remained elevated on a year-over-year basis. We experienced an approximately 8.5% increase in our average hourly rate for employees on a year-over-year basis. However, sequentially we saw average hourly rates decline 40 basis points and expect labor inflation to remain relatively flat in the back half of the year. Our contract labor expense also increased significantly over the prior year. During the second quarter of 2022, contract labor was approximately $150 million compared to $50 million in the prior year quarter. The current quarter, however, showed sequential improvement, down from $190 million in the first quarter of 2022. Moderation of contract labor is slower than we originally expected, and we now anticipate future progress to continue at a pace that is also slower than we previously expected. We continue to effectively manage our non-labor-related expenses. This would include supply costs as well as vendor related expenses, including insurance, utilities, rent and a number of other fixed costs. Due to benefits from our margin improvement program efforts and focused expense management, we have held absolute dollars relatively consistent over the past six quarters. And we achieved these results while incurring ramp-up costs in opening three new hospitals, a host of new access points and increasing use of software-as-a-service all during a time of record high inflation. Turning now to cash flows. Cash flows provided by operations were $154 million in the first six months of 2022, down from $280 million in the prior period. Excluding the repaid Medicare accelerated payments that were made in the first six months of 2021, cash flows provided by operations were $414 million for the first six months of 2021. Lower EBITDA, higher contract labor costs and the timing of interest payments contributed to the lower cash flows in the first half of the year. Moving to CapEx. For the first six months of 2022, our CapEx was $191 million compared to $212 million in 2021. Due to the lower performance in the second quarter, the company's net debt-to-EBITDA increased to 7.1 times. Although interrupted by the current operating environment, we remain focused on our longer-term goals of lowering our leverage and increasing our free cash flow. In terms of liquidity, we have no outstanding borrowings under the ABL with $894 million of borrowing base capacity available to us. Also at the end of the first quarter, we had $346 million of cash on the balance sheet. As a reminder, we have no debt maturities until 2026. While the company's formalized divestiture program was completed in 2020, we continue to receive interest around other potential divestitures. As we receive this interest we are analyzing the long-term strategic fit of specific assets and we will continue to analyze the impact potential divestitures would have on our future financial leverage and free cash flow generation. Now I will walk you through the updated full year 2022 guidance. Net operating revenues are anticipated to be $12.2 billion to $12.5 billion. Due to the lower net revenue expectation, adjusted EBITDA is now expected to be $1.3 billion to $1.4 billion. Net loss per share is anticipated to be a loss of $2.55 to a loss of $1.65 based on weighted average diluted shares outstanding of 128 million to 129 million shares. Cash flow from operations is now anticipated to be $500 million to $600 million. CapEx has been reduced to $400 million to $450 million to adjust for delays caused by disruptions in the supply chain and to align growth capital with the current labor market. Cash interest is expected to be $820 million to $840 million. As we think about the remainder of the year, we expect adjusted EBITDA to improve sequentially with the fourth quarter of 2022 still being our highest adjusted EBITDA quarter of the year. As Tim highlighted, we have a number of initiatives that are performing quite well. As we work to address the challenges in this current environment we remain committed to executing our strategic initiatives which we believe are positioning the company for future growth and success and which we believe will continue to benefit all of our stakeholders. We do not view 2022 as the new baseline. Rather it is a period of disruption and unusual events. Looking out longer term, we believe the stronger return of deferred care, the execution of our growth and strategic initiatives, our successful expense management and continued focus on cash flow and capital structure management will allow the company to achieve its medium-term financial goals, which includes targets for 16%-plus EBITDA margin, positive annual free cash flow generation and reducing our leverage below five times. Ross, at this point, I'll turn the call back to you. Ross Comeaux: Thank you, Kevin and thank you, Tim. At this point Matt, we're ready to open up the call for questions. We will limit everyone to one question this morning but as always you can reach us at 615-465-7000. Operator: Thank you. We will now begin the question-and-answer session [Operator Instructions] Our first question will come from Jason Cassorla with Citi. Please go ahead. Jason Cassorla: Great. Thanks. Good morning. Thanks for taking my question. So there were two markets out of the 48 total that had a disproportionate impact on results. I guess, first, can you give us a sense of what the typical revenue and EBITDA contribution of those two markets are as a percent of the total company operations just so we have an idea? And then second, does the second quarter's performance for those two lagging markets change how you're thinking about both the underlying demand and your competitive positioning within those markets specifically? Thanks. Kevin Hammons: Got it. Thanks Jason for the question. Let me start at the end of that. And I don't think that the performance in those two markets changed how we think about the broader portfolio. We believe the dynamics were unique to those markets. And as we plan accordingly, we are planning for those dynamics kind of uniquely. In terms of their impact on the broader company, their decline in net revenue and EBITDA represented really about 20% of the decline in EBITDA we had for the quarter. And neither of those markets -- I want to make sure I point out neither of those markets are in our largest five states. Tim Hingtgen : Yes, Jason, this is Tim. And I'll add on to Kevin's comments regarding the positioning of these markets for the long-term. As we said, certainly, we see them as outliers the performance of these markets as outliers. A big portion of that was on the SWB and contract labor side of the equation where the market dynamics really just skyrocketed at levels that do not typically happen in a normal operating environment. So these are some of the markets where we're being very focused on consolidating services across multiple campuses to take out some of the cost the variable labor costs in particular, which we believe was just a large drag on the margin. Also in terms of that monitoring, which services to perhaps exit permanently, but our goal is to position all of our markets in the short-term in particular very well to do a better job of managing the operating expenses just to make sure it matches the revenues that we're generating. Operator: Our next question will come from A.J. Rice with Credit Suisse. Please go ahead. Nick Giovacchini : Hi, everybody. It's Nick Giovacchini on for A.J. today. I appreciate you taking the question. With the volumes down so much, can you kind of give us an idea of how on both the inpatient and outpatient side the volumes exited the quarter? And can you also kind of give us an idea of how you're thinking about how they trend in the back half? Thanks. Kevin Hammons: Sure. We saw -- as we came out of the first quarter in March, we saw a big uptick in volumes as we started the recovery from the surge of COVID that we saw early in the first quarter. That was consistent with what we had seen from previous surges and we saw that continue into April. But it was really in the back half of the quarter that the softness began that return of non-COVID business fell off and didn't continue as we had seen with previous waves where the deferred business continue to come in. So I would say that the back half of the quarter was softer in terms of that in the first half of the quarter. Tim, do you want to add? Tim Hingtgen: Yes. Great. Nick I'll add on to that. I would describe the volumes throughout the quarter in our experience to be relatively choppy. We -- it kind of fits and starts if you will. As I said earlier, a wide array of performance across various geographies, which is not something we've typically seen. We had certain markets that had really grown quite nicely and consistently built back some business, but as I noted in my comments at a lower net revenue conversion rate, which clearly impacted results and maybe more difficult to step over the underperformance of those two markets we called out today. Now I would say, we've also experienced some impact to unification schedules due to some quarantine, due to COVID. Again, it said we're still very high geography. It's hard to quantify what, why and where. But we're working very, very closely to make sure we understand those trends on a daily basis. And as I said, adjust our operating expenses accordingly in a real time of the environment as well. Operator: Our next question will come from Ben Hendrix with RBC. Please go ahead. Ben Hendrix: Thank you very much guys. Just a couple of staffing stats here. Where does your agency labor stand currently as a percent of total nursing hours? And how has that progressed year-over-year and sequentially? And then among on the employed staff side, what's your turnover rate now versus pre-COVID? Thank you. Kevin Hammons: Sure. I'll start that off here. So our contract labor for the quarter represented about 10% of our total labor cost. That compares to 13% in the first quarter. So we did bring it down. Pre-pandemic contract labor represented about 2% of our labor costs. So we're still at very elevated percentage of our total cost is contract labor. Tim Hingtgen: Yes Ben this is Tim. I'll add on to that. In terms of turnover as I mentioned we are showing a sequential improvement in our retention rate and in our hire rates than we measure everything here daily by a net RN gain, so that we're cognizant of the two distinctive variables in that equation. So we're very pleased with the progress we're making. Honestly with the COVID impact, the staff quarantine with the hiring and the orientation that we bring -- when we bring in orient that takes anywhere from four to 12 weeks depending on the nurses experience. We have likely not seen the full benefit of the hiring that I just referenced in the second quarter. It will come through in the third quarter as those new caregivers take on permanent assignments and we're able to release more of the contract labor. In terms of the retention rate or the nursing turnover rate still elevated to pre-pandemic levels, but we've cut it about half from the peak at the beginning or at the end of last year when we saw more staff leaving for travel assignments and frankly for burnout purposes. I mentioned on the last call that we were really focused on repatriating nurses who left in 2021 and frankly throughout 2022. We've had some success with that. I don't think we're done with that work yet. I think once children get back in school, we may be able to bring some of those people back into the workforce again. So we're really focused on keeping those relationships tight with our care team members who may have left the organization previously in the pandemic. Operator: Our next question will come from Brian Tanquilut with Jefferies. Please go ahead. Taji Phillips: Hi, good morning. This is Taji Phillips on for Brian. So my question today is actually about leverage. Can you provide some detail on the status of your covenants and maybe discuss your outlook on cash generation in the near-term? And altogether, how does that factor into your approach to deleveraging? Thanks. Kevin Hammons: Sure. So we are covenant light. So we do not have any covenants to speak of and no concerns around that at this point. We do expect to generate positive free cash flow in the back half of the year. And for the full year, we expect to be able to be back to free cash flow neutral. So again it's a much better position than we had been for several years historically. We've made a lot of progress in that area and believe that we can continue then to grow that free cash flow into future periods. That certainly does then give us some comfort along with the recovery and execution of a number of the growth initiatives that we've been talking about this morning that will allow us to get back to our medium term targets of being below five times levered here within four years. We reiterated those medium-term targets and still feel very comfortable that we can get those. Operator: Our next question will come from Kevin Fischbeck with Bank of America. Please go ahead. Kevin Fischbeck: Hi, great. Thanks. I guess, obviously, good to see that you're still looking at that medium term targets on margin. But obviously given the magnitude of the decline in margin this year, would love to get a little bit of color if you could kind of help bridge us from here to there? The decline was very rapid. Would you expect a rapid increase or will we be expecting a meaningful improvement on that trajectory in the next year or two, and then more modest, or is it kind of a slow steady rebuild over the next four years? It's just interesting to me, I guess, if you also within that answer kind of comment on the improvement in labor that you're expecting against the improvement in volume that you're expecting. It seems to be difficult to show improvement on both at the same time. I feel like there's a push and pull there. So any color on that? Thanks. Kevin Hammons: Sure. So as I mentioned this year was somewhat unique and we don't believe that 2022 is really a new baseline. The decline in revenue had a very high flow-through to EBITDA. And likewise we expect that as revenue returns it's going to have a very high flow-through to EBITDA on the plus side. We think that there's a fair amount of deferred business still out there. We consider where we were pre-pandemic in 2019. We've made a lot of progress. We've added a number of service lines and access points. We've taken market share in a number of our markets. And we believe that as that deferred care comes back into the system and that gets large in our markets we are going to capture that and we will get again a high flow-through into EBITDA. We're staffing and want to be prepared to accept that volume when it returns. And we've made some investments in a number of these growth areas and we'll continue to do so, albeit, we may take some targeted looks at certain service lines in some markets and make some other decisions. But generally speaking, we're preparing ourselves to do that. On the expense side a number of things. Contract labor we believe will moderate as traveling nurses will come back into more of an employee arrangement. That will continue to take pressure off contract labor line. And we are continuing to see improvement in that, albeit, at a slower pace than we had expected. And there's some macroeconomic factors probably in that causing that slowdown, but it is still trending in the right direction. And then on other expenses which is a percent or maybe as a percent of net revenue is not the right measure. But if you look at our other operating expenses per adjusted admission based on our volume I think maybe a better measurement the way to look at it. We have managed those expenses quite well. We've managed to keep our non-labor expenses flat over a number of quarters despite a number of admissions as I've mentioned. We think there's more opportunity and runway for us to continue to manage those expenses well and step over some continued inflation. So we think we can get leverage on our margin as -- again as revenues return, we think we can still get leverage on our expense line and continue to grow margins. Operator: Our next question will come from Josh Raskin with Nephron Research. Please go ahead. Josh Raskin: Thanks. Good morning. I was wondering, if you could give us a little bit more color on the monthly progression of EBITDA through the quarter, not necessarily monthly EBITDA numbers, but just sort of, directionally how that was improving? And then would June put you on a trajectory to attain the second half guidance, or are you still assuming some meaningful improvement for there? And then just lastly, back on the intermediate term margins -- where do you need to get occupancy to in order to attain those margins? Just look at occupancy down almost 600 basis points sequentially in the quarter. And how much that has to come back in order to achieve margins given your fixed cost leverage? Kevin Hammons: Sure. Let me start off. You know, EBITDA for the second quarter, kind of, throughout the quarter was a little bit choppy and up and down kind of throughout the quarter. We do feel good about where we are exiting the quarter and our opportunities in front of us in Q3 and Q4 to achieve these results. Now we did bring guidance down from our previous expectations largely due to some uncertainty around what the economic impacts may have on patient behavior, which we don't have clear insight into, but seeing where we were in light of where we did exit 2Q and knowing that -- for instance, we had a 75 basis point raise in interest rates yesterday. The announcement of second quarter GDP decline today. We don't know what the broader impacts will be on patient behavior in a recessionary period, probably for the first time when patients have higher copay and deductible. That being said, we think our initiatives and we're positioned well that, some of this care will be coming back. Ultimately, it will come back and we're going to be positioned to capture it. Tim Hingtgen: Hi, Josh, it's Tim. I'll answer the occupancy question or at least touch on the occupancy question. A couple of points on this one. Obviously, we're always looking to better utilize our fixed capacity, our fixed operations. And we know whatever incremental case or volume that comes in we do a better job of covering that fixed cost. I do want to point out that, throughout the quarter variable labor spend, variable labor staffing was very well managed. But I think we've found out on this new higher cost structure on that variable labor, the negative impact on flow through net revenue conversion to EBITDA. That's where it really hampered our ability to drive through the earnings in the quarter. But in terms of occupancy rates, the reason we have a difficult time just saying we want to be at 55% by this period. We have some markets that are at 100% and we're adding more beds. I mentioned the Naples market we'll be opening up over 100 beds over the next couple of quarters out of that market, because they run at high occupancy rates. And we have other markets that just have a larger physical footprint, where it dilutes the overall occupancy performance in our strongest market. But what I would also share with you, even though occupancy percentage is publicly reported, it's a little bit more difficult to assess the full use of our fixed capacity with such site of care shifts. As we mentioned, we had a large movement of inpatient surgery to outpatient classification in the quarter. It's a continuing trend and that's something that's unique to us. But those patients, by and large, are still occupying our fixed inpatient beds. They're just not capturing in that occupancy calculation, so just to clarify that. In terms of that site of care movement, those types of things, we're plenty happy to have that in an ASC setting, which we're expanding rapidly as well. The vast majority of our most competitive markets do have an ambulatory surgery asset located within them. So we certainly are positioned well in that regard. But we also have no problems with that care taking place within our hospital setting to help us drive that better fixed cost leverage throughout the margin profile for that market. Operator: Our next question will come from Stephen Baxter with Wells Fargo. Please, go ahead. Stephen Baxter: Yes. Hi. Thanks. I wanted to ask about the contract labor outlook. I appreciate the comments that it's maybe declining a little bit more slowly than you would have hoped for. Just trying to understand how that fits into the context of maybe some slower return of demand here. I would have thought, if that were the case, maybe the contract labor would kind of be the first thing to go to match up with that lower revenue. And then just with your hiring up so much, I was a little bit surprised to hear you say -- I think I heard you said, the hourly rate wage decreased a little bit from first quarter to second quarter. How should we be thinking about that? And as hiring picks up, should we be thinking about maybe some sequential increases to those numbers? Thank you. Kevin Hammons: Sure. On the contract labor, we were at $190 million in the first quarter of contract labor, $150 million in the second quarter. We had previously indicated, we expected to exit the year at approximately $70 million for the fourth quarter. I would say, our updated guidance considers us now exiting the year closer to $100 million in the fourth quarter of contract labor. And so, it's sequentially kind of lowering from where we are now to get into that $100 million in the fourth quarter. In terms of our expectation on the labor cost, we had initially projected our labor inflation to be about 4% for the year. And I think, we're close to being on track for that. We've seen about 8.5% growth in this last quarter, similar 7% to 8% in the first quarter. But we've anniversary or believe we're going to anniversary most of those increases that were put in place in the third and fourth quarter of last year, which is why we're seeing sequentially no further growth. And we think that will continue on into the back half of the year. And so we should -- we're not expecting much labor -- sequential labor inflation in the back half of the year. And then for the year those will average up to about 4%. Operator: Our next question will come from Andrew Mok with UBS. Please go ahead. Unidentified Analyst: Hi. This is Robin on for Andrew. Average length of stay was down 10% sequentially. Can you help us understand the drivers of that, specifically how did that trend between COVID and non-COVID volumes? Thanks. Tim Hingtgen: Sure. I'll take that one off Robin. Thanks. In terms of length of stay improvement, we've mentioned previously in prior quarter and at a few investor conferences are focused on improving our capacity optimization. We've stood up a centralized utilization review program, standard case management protocols have been rolling out throughout the first half of the year. So I believe we're getting a really solid traction on those initiatives. And as you pointed out, it frees up certainly some critical capacity helps us take out some of those variable expenses on staffing, if we're more efficient with how we're operating on the length of stay. In terms of the breakdown between COVID and non-COVID, we obviously saw a nice decline in the COVID length of stay because the acuity was so much lower for the most recent admissions versus what we saw previously, fewer critical care fewer vented patients what have you. But we saw relatively the same improvement across both COVID and non-COVID care. We saw some easing of placement of patients into post-acute settings that were upon us in the first quarter. So I think that really helped us again drive better placement but even on discharge to home every indicator we look at we by and large set and some good progress because of our focused efforts and initiatives. Operator: We'll now turn the conference over to Mr. Hingtgen for any closing comments. Tim Hingtgen: Thanks, Matt, and thanks everyone for spending time with us today. Though the second quarter was challenging, we remain focused on the opportunities we have across our portfolio to improve results and to achieve long-term stability and growth that benefit all of our stakeholders. I would like to once again thank all of our caregivers and leadership team for their ongoing commitment to help people get well and live healthier and to ensuring that we continue to provide high-quality health care services in the markets we serve. We look forward to updating you on our progress as we move forward and to continue to work diligently to achieve our results. As always, if you have additional questions, you can reach us at (615) 465-7000. Thank you and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and thank you for standing by. Welcome to Community Health Systems First Quarter 2022 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Mr. Ross Comeaux, Vice President of Investors Relations. Ross Comeaux: Thank you, Jay. Good morning, and welcome to Community Health Systems' First Quarter 2022 Conference Call. Joining me today are Tim Hingtgen, Chief Executive Officer; Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer; and Kevin Hammons, President and Chief Financial Officer. Before I turn the call over to Tim, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as risk factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations we will discuss also exclude loss or gain from early extinguishment of debt and impairment expense as well as gains or losses on the sale of businesses. With that said, I'd like to turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Ross. Good morning, everyone, and welcome to our first quarter conference call. The COVID-19 pandemic and specifically a surge in cases due to the Omicron variant impacted our results in the first quarter. We provided care for approximately 13,000 inpatient COVID admissions, 12% of our total admissions in the quarter. The surge was most acute in January when our hospitals cared for approximately 9,000 inpatient COVID cases or about one-quarter of total admissions for that month. While the acuity level of the Omicron variant was below the Delta wave, a highly contagious nature of Omicron affected our workforce with more staff members and health care providers requiring time off due to exposure or illness. The need for contract labor increased for our hospitals. At the same time, other health care systems also needed labor support, driving up the cost of temporary staffing. And even though we intently managed capacity, longer length of stay was unavoidable for some patients and in some markets. It took longer to discharge patients to various post-acute services such as skilled nursing facilities and home health because those organizations were dealing with their own labor challenges. All of this negatively impacted elective volumes, net revenue and EBITDA during the first two months of the year. March was a much stronger month for the company as COVID admissions declined and non-COVID demand accelerated for both inpatient and outpatient care and across most service lines. As a result, we finished the quarter with much stronger net revenue and meaningful improvements in adjusted EBITDA. COVID cases currently remain low, and we have carried forward March's improved volume trend into the second quarter. With the exception of contract labor, expenses were well managed. Contract labor expense increased sequentially versus the prior quarter and the contract labor was higher than we anticipated. And unlike prior COVID waves, where we saw contract labor expense moderate relatively quickly, the expense remained elevated throughout the first quarter. Contract labor was necessary as we upheld our commitment to provide essential health care services in the communities we serve and to remain available for the patients who rely on us. Even with the difficult labor environment, we also believe that, it was critically important to maintain momentum from recent capacity expansions and high acuity service line investments, because they remain key to CHS's long-term strategic growth and success. Currently, our contract labor usage and rates are moving lower and contract labor expense has continued to decline. We are very focused on executing upon opportunities to further reduce contract labor expense moving forward. Specifically, we have recently completed the full rollout of our centralized nurse recruitment function with a specialized team of more than 60 clinical recruiters driving this work. This company-led service utilizes digital marketing tactics and coordinated processes to expedite the recruitment process. We are also focused on repatriating nurses who had left for travel or other opportunities. As a result of these tactics, our nurse hiring rate is up 10% compared to the prior year. To further increase the number of qualified hiring candidates, all of our hospitals have relationships with nursing colleges in their markets, and we are focused on deepening those partnerships. We are also sponsoring a new generation of nurses through our partnership with Jersey College, which enables nursing students to integrate into our health care facilities during their respective training programs. We have commenced a number of cohorts already across four distinct campuses, and we're seeing very strong applicant pools for each new class of students. After a full rollout of 10 campuses is complete in 2023 we expect to graduate approximately 1,000 nurses annually through the Jersey College partnerships. This week we are excited to announce a significant investment into new and enhanced benefits for existing employees which are designed to help team members eliminate student loan debt faster, pursue additional professional education and advance their careers within our organization. We expect this investment will further improve employee retention and satisfaction and support their career advancement for years to come. We also believe this enhanced benefit program will support recruitment efforts as well. Shifting now to our markets. We remain optimistic about the growth potential of our portfolio. We operate in 48 distinct markets, with more than 1,000 sites of care and we are intently focused on building comprehensive health care delivery systems, offering the right blend of both inpatient and outpatient services. During the first quarter, we added two new ASCs, one freestanding emergency department and new behavioral health beds to the mix. Our health care systems are in areas with attractive population and economic growth. Looking at recent 2021 US census data, approximately 30% of our hospitals are in or adjacent to the 60 fastest-growing counties with more than 100,000 residents. These areas include our hospitals across Florida, including the western portion of the state in the Panhandle and parts of Alabama, including Huntsville and Foley, across Northwest Arkansas and parts of Texas such as Cedar Park in the Aftermarket and like Grand Mary and in other markets as well. We continue to invest in growth projects, which include building higher acuity service lines and a new bed and procedural suite and expanding our ambulatory surgery, freestanding ED and urgent care and walk-in care footprint. Our development pipeline is robust and our capital investment plan remains in flight. Physician recruitment remains a cornerstone of our growth strategy. We are adding primary care and specialist providers, aligned to the unique needs and growth opportunities of each health care system. During the first quarter, on a same-store basis, we increased the number of newly signed physicians 11% over prior year and by more than 30% versus our 2019 pre-pandemic baseline. As we move forward, we expect health care demand in our markets to grow. And we are well positioned to serve more patients and capture more market share across the portfolio. While the first quarter did not meet our expectations due to a number of the challenges I mentioned earlier, we remain focused on achieving our medium-term and long-term goals. In March and April, we have seen a number of key metrics incrementally improve, including net revenue and volume, along with reductions in various expense categories, including contract labor and premium pay. We expect these improved operational trends to continue, as we capture health care demand, leverage recent investments and appropriately manage our costs. Finally, before turning the call over to Kevin, I want to thank the employees, physicians and our hospital leadership teams for rising to the challenge during the Omicron surge and for always making quality patient care their top priority. Kevin, I'll now turn the call over to you to cover a number of financial topics including our updated guidance. Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim highlighted, our first quarter results were negatively impacted by COVID. As the surge receded and COVID cases declined, operational and financial results improved and we finished the quarter with positive momentum. Our investment in labor, although, coming in at a higher cost, allowed us to make further progress around our strategic initiatives and strategic margin improvement program, which we believe will continue to benefit the company into the future. Switching back to the first quarter, net operating revenues came in at $3.111 billion on a consolidated basis. On a same-store basis, net revenue was up 3.8% compared to the first quarter of 2021. This was the net result of a 3.2% increase in adjusted admissions and a 0.5% increase in net revenue per adjusted admission. Adjusted EBITDA was $409 million. During the first quarter, we recorded approximately $47 million of pandemic relief funds, with approximately $82 million recognized in the prior year period. Excluding pandemic relief funds, adjusted EBITDA was $362 million, with an adjusted EBITDA margin of 11.6%. Switching now to expenses. I'm going to highlight two expense buckets, the first of which is non-labor expenses and the second is labor expenses. In terms of non-labor related expenses, this category includes supply costs as well as vendor-related expenses, such as insurance utilities and a host of other purchase services and fixed costs. On a year-over-year basis these non-labor expenses were well-managed, as the cost declined approximately 120 basis points year-over-year as a percent of net revenue. As a result of our margin improvement program and good expense discipline, we have very effectively managed non-labor expenses throughout the pandemic period, holding absolute dollar spend flat, offsetting growth, both from inflation and expansion. On the flip side, however, labor costs increased both sequentially and year-over-year, primarily due to higher contract labor usage and rates. During prior COVID waves, we had seen contract labor usage and rates decline relatively quickly following a COVID surge. However, following the Delta wave in the fourth quarter and the Omicron peak in January, contract labor usage and rates remained elevated throughout the remainder of the first quarter. In terms of contract labor, during the first quarter of 2022, our contract labor expense was approximately $190 million. This was up year-over-year from when it was approximately $70 million in the first quarter of 2021 and also higher sequentially from when it was approximately $140 million in the fourth quarter of 2021. It's worth noting that our contract labor costs had declined sequentially during the second and third quarters of 2021, but have now increased during the past two quarters. Although we anticipate contract labor to remain elevated and to cause some near-term headwinds on our progress, our contract labor usage and rates are declining in April and we expect this to continue to decline throughout the remainder of the year due to lower COVID case counts coupled with a number of the internal initiatives that Tim walked through earlier. Turning to cash flow. Cash flows provided by operations were $101 million in the first quarter of 2022, unchanged from the prior period. Excluding repaid Medicare accelerated payments made in the first quarter of 2021, cash flows provided by operations were $119 million for the first quarter of 2021. The comparison versus the prior year includes the impact of Medicare accelerated payments just mentioned as well as working capital changes. As a reminder, all outstanding Medicare accelerated payments were repaid at the end of 2021 and we are now receiving 100% of Medicare fee-for-service reimbursement. Moving to CapEx. For the first quarter of 2022, our CapEx was $97 million compared to $105 million in 2021. In terms of liquidity, we have no outstanding borrowings under the ABL with $897 million of borrowing base capacity. Also at the end of the first quarter, we had $460 million of cash on the balance sheet. During the past two years we've made significant improvements to our balance sheet as we have reduced our annual cash interest by approximately $230 million and lowered our leverage by two turns and we now have no debt maturity due until 2026. At the end of the first quarter, the company's net debt to EBITDA was 6.2 times and we remain focused on further lowering our leverage and increasing our free cash flow during the next several years. Now, I'll walk you through our updated full year 2022 guidance. Net operating revenues are anticipated to be $12.6 billion to $13.1 billion. Adjusted EBITDA is expected to be $1.775 billion to $1.925 billion, which is $50 million lower than our prior range. Net income per share is anticipated to be $0.75 to $1.30 based on weighted average diluted shares outstanding of 133 million to 134 million shares. Cash flows from operations is now anticipated to be $900 million to $1.50 billion. CapEx is expected to be $500 million to $600 million and cash interest is expected to be $820 million to $840 million. In summary, despite progress in a number of areas, our first quarter financial performance did not meet our expectations. However, we exited the first quarter with strong momentum and we expect to deliver improved financial and operational performance moving forward. s we think about the remainder of the year we expect adjusted EBITDA to improve sequentially during the balance of the year with the fourth quarter of 2022 being our highest adjusted EBITDA quarter of the year. Ross, at this point, I'll return the call back to you. Ross Comeaux: Thank you, Kevin and thank you, Tim. At this point, Jay, we're ready to open up the call for questions. We will limit everyone to one question this morning. But as always you can reach us at 615-465-7000. Operator: Thank you. [Operator Instructions] Our first question comes from the line of A.J. Rice of Credit Suisse. Your line is open Unidentified Analyst: Good morning everybody. It's Nick on for A.J. today. Thanks for taking the question. It looks like surgery growth was pretty strong in the quarter even with Omicron impacting the early part of it. Can you talk about the dynamics you saw there in terms of inpatient and outpatient surgical growth? And how much of that outpatient growth were procedures that have moved from more of an inpatient to an outpatient setting? Thanks. Tim Hingtgen: Right. Nick, this is Tim. I'll go ahead and start this off. Yes, we were very pleased with our ability to grow surgeries both sequentially and on our baseline 2019 comp now at 100% in 2019. So, the investments in service lines and acuity the capacity expansions the targeted physician recruitment is definitely generating the results that we had expected. In terms of the service line that really showed the most promise throughout the first quarter, it continues to be the orthopedic service line including spine procedures. We had some growth in neurosurgery. We also had good growth in just basic general surgery cases coming back into the system. In terms of the general dynamics related to the migration from inpatient, outpatient, consistent with our peers in the industry, we are seeing more and more cases move to the ambulatory care setting, which is creating some pressures on our admissions numbers. But in general, the overall orthopedic service lines are growing at a really nice rate for us as we invested in and projected. Other service lines in terms of migration to lower acuity settings would be some of the lower acuity spine procedures, shoulder procedures, et cetera. So again all that is in flight. Now to make sure that we're positioned well for that migration as we've been reporting to you we are investing in a broad number of ambulatory surgery partnerships. The majority of them de novo or majority in consolidating but even a small number of minority interest in some markets where we can find that fit and make that work for us. We remain very focused on building out the continuum of care on both the ambulatory and the inpatient side of the business. Operator: Thank you. Next question comes from the line of Ben Hendrix of RBC Capital. Your line is open. Ben Hendrix: Hey, guys. Thank you very much. One quick question on kind of the margin progression through the quarter kind of based on your Slide 8. It seems like that would imply kind of 7.5% margin context through January and February and then kind of a strong 18.5% or so in March. There may be some timing skew in there but just kind of wanted to get an idea of where you're thinking kind of that the baseline margin is heading into the second quarter, given that kind of that 18.6% in March versus your intermediate and longer-term targets? Just kind of trying to size up where you are with regard to those targets. Thanks. Kevin Hammons: Sure. Thanks, Ben. This is Kevin and I will take that one. The purpose of this slide a couple of things that we wanted to point out. One to be clear that COVID is not a margin driver for the business. And as you can see during the peak months of COVID we were not creating a lot of EBITDA. The other thing we wanted to point out is we did get traction and we are gaining momentum as we exit the quarter. Now in a normal March, March is typically the highest EBITDA quarter in margin of the first – or month of the first quarter being that there are more patient days and more business days during the month of March. And if you think about fixed cost being somewhat spread evenly month-to-month, you do have more revenue in the month of March. That being said, we expect to get our margin back in line with what we had kind of projected and what our guidance is and in line with where we had exited the year in 2021. Operator: Thank you. Next question comes from the line of Brian Tanquilut of Jefferies. Your line is open. Jack Slevin: Hey, good morning, guys. It's Jack Slevin on for Brian. Appreciate all the color and quantification on contract labor and sort of how you're thinking about progression throughout the year. I guess when we look at the move in the 2022 guidance, right revenue – maintaining the revenue guide and pulling down EBITDA a little bit. As we think about those medium-term targets, how are you feeling about the out years beyond 2022? Does it seem like there's any structural change on contract labor that could extend further, or are we still feeling good about the medium-term targets? Kevin Hammons: We still feel very good about the medium-term targets and believe that we're going to achieve those. We – as I mentioned earlier, we did have some very good momentum and achieved a lot of our initiatives during the first quarter all that being offset by the higher labor costs. But we did make good progress not only on some top line initiatives, we're gaining momentum on some of our capital investments that we've made. We've improved our reputation, our patient experience all the things that we made an investment with this labor cost to do that we achieved. We also had very good non-labor expense management. All those things as we get past this current labor headwind, we believe will set us up well to achieve those near-term within two years and medium-term targets that we have out there. Operator: Thank you. Next question comes from the line of Kevin Fischbeck of Bank of America. Your line is open. Kevin Fischbeck: Hey, great. Thanks. Maybe just to kind of follow up on that question. I think that the big question in hospitals generally but obviously, you guys are giving longer-term guidance is about the margin sustainability. So I would love to any more color you could provide there? I guess in particular, given the pressure on labor so far this year and that it's unexpectedly coming in higher. Why shouldn't we be expecting longer-term labor pressure and margin compression versus kind of still being on that same track that you expect it to be at a quarter or two ago when labor wasn't quite the same as it is this year? Kevin Hammons: Yes. Kevin, a couple of things. I'll start off and Tim feel free to jump in. As we continue to kind of focus as we said our balanced approach of organic growth in our markets, capital investments in our markets and margin improvement program, we believe in the longer term, we'll be able to step over some of these labor issues and the increased rates that we're seeing both in employed labor and contract labor. We certainly expect contract labor situation to moderate. And we're already seeing some relief I think I would say on the employed labor or at least getting to the point where sequentially, we did not see labor inflation. Rates remained relatively flat sequentially. So although we saw last year some higher labor inflation on employees, we're not seeing that continue into the earlier parts of this year. We think there's a lot of room and runway on our margin improvement program to continue to gain efficiencies, continue to make progress on some of our supply chain initiatives that will help drive down costs. And as I pointed out with our non-labor related expenses, we actually reduced that by 120 basis points year-over-year during the quarter. So we did get good traction and we think all of that leads to our confidence in our ability to hit our longer term goals. Tim Hingtgen: Yes. Kevin I'll jump in. This is Tim. I agree with everything Kevin said and a few other notes I'd add. Understanding that the labor pressures may take a little bit longer to moderate than we had expected there are other things in our control just in the operations. And one of them being the length of stay management, our focus on capacity optimization being able to drive down the length of stay appropriately back to its historical levels, assuming there'll be some easing in the post-acute care sector as well as they resolve their staffing challenges. That frees up our beds for inbound traffic. We did have increased declines or patients we weren't able to accept through our transfer center in the first quarter because we were running at higher capacity even with the contract labor. So we do need to stay focused on reducing that length of stay something we call capacity optimization. In terms of our mid- and long-term prospects for the labor pool, the nursing labor pool, I mentioned the centralized nursing recruitment team that now supports 100% of our hospitals. We have much better insights and resources available to recruit nurses into our health care delivery systems. And as I said, we're seeing some good progress with hires. On a net hire basis we're also seeing improvements and the net hires are based upon a calculation of hires less terminations or resignations. So we've seen that moderate as well. So there's some improvement sequentially and over prior year in terms of the net hires that we're seeing to help us move through some of the vacancy rates that we're experiencing right now. The other thing I'll mention is the investment we announced this week into our employees for the furtherment of their education and to help them pay down their student debt. We think that does create a sizable investment into our workforce that should improve retention and also will help us to hopefully recruit more employees and repatriate those that may have left us for a travel assignment. So we're very focused on direct outreach to those individuals who may have left our health care systems. And then the last thing I'll say is we are seeing some improvements in the international nursing pipeline, seeing increased orders being filled and being able to onboard new international nurses, which is another component that's helping us rebuild a really solid and stable internal workforce. Operator: Thank you. Next question comes from the line of Josh Raskin of Nephron Research. Your line is open. Josh Raskin: Hi, thanks. Just to clarify on the labor expense and I apologize for staying here. But your overall margins in the quarter excluding grant income were down 210 basis points and you said non-labor costs improved by 120. So is it just simply labor as a percentage of revenue in all the buckets was up 350 basis points year-over-year? And then how much of that is base labor versus contract labor? Kevin Hammons: Yeah, that math is right, I believe Josh. I don't have -- I won't do math here on the phone for you. But I think as we've said and I think we've given the components where you can do that our contract labor expense was $190 million in the quarter compared to $70 million in the prior year. And that's included in other operating expenses. So we had a $120 million increase just in contract labor expense year-over-year and that was $50 million increase sequentially from the fourth quarter. Operator: Thank you. Next question comes from the line of Jason Cassorla from Citi. Your line is open. Jason Cassorla: Great. Thanks. I wanted to ask about payer mix in the quarter. Maybe can you help frame how payer mix develop between COVID patients and non-COVID or core patients on a year-over-year basis? And how you expect core payer mix to trend for the rest of 2022 including assumptions around the impact of the resumption of Medicaid redeterminations? And then if I could just squeeze one more in here. You didn't change CapEx guidance but I guess in context of this labor environment, does it change how you're thinking about the pacing or timing of future capital deployment priorities just specific to service line build-out or investment equipment at this juncture? Thanks. Kevin Hammons: Yeah. On the payer mix question, so on non-COVID business we did not see any material change in payer mix. But on COVID-related business during the first quarter, we did see a much higher percentage of Medicaid and self-pay patients, representing themselves as COVID cases. Kind of going back, there's been a lot of movement in COVID cases among payer mix in the early waves that was primarily Medicare that was affecting an older population. Then during Delta, we saw the average age of the COVID admissions come down and we saw a higher commercial business in COVID. And then with Omicron, we saw higher Medicaid and self-pay. Kind of going forward, I think again, since we're not seeing a big change in payer mix related to non-COVID business, we would kind of anticipate that to stay relatively the same moving forward. In terms of your question around CapEx, we did not change the CapEx guidance, but we are focused on continuing to make sure that we generate positive free cash flow. So we'll continue to manage both, our cash flow from operations as well as our CapEx and the kind of interconnection between those two. As it relates to labor, we certainly don't want to get out ahead of ourselves in spending on initiatives if we can't staff them. So, we're certainly cognizant of that and we'll be working closely not only with our recruiters in managing our staffing levels, but to make sure that we're opening these initiatives and some of our larger projects when we are able to staff them so that we get the highest return possible. Operator: Thank you. Our last question comes from the line of Stephen Baxter of Wells Fargo. Your line is open. Stephen Baxter: Yeah. Hi, thanks. I was hoping you could talk a little bit about the non-labor expenses in a bit more detail, maybe what's the specificity around what some of the drivers are there? Obviously, it's been a huge driver for the company even if the size of the company has slowed down a little bit over the past few years. I just wanted to get a sense of what the remaining key opportunities you have in front of you are? And then, it does feel like something on the non-labor expense side potentially is getting better in the balance of the year maybe than what you thought, if you're thinking that you can basically hold the rest of the year from an EBITDA perspective despite the expectation of contract labor. Just would love to understand the dynamics better. Thank you. Kevin Hammons: Sure. As we work, and we've mentioned our margin improvement program a number of quarters now largely focused in the supply and purchase service areas. We've continued to make some improvements in our national contracting over a number of supply areas including commodities that we're purchasing and continue to get traction as we renegotiate contracts consolidate vendors and so forth. Similarly, on the purchase service side, we've made improvements in how we are purchasing some of these services being able to consolidate among vendors to get better pricing. We also had a reduction in some of our insurance costs. As we think about -- and as we talked about improvements in quality over the past several years, our quality program had gone back a number of years. That is all benefiting us in terms of malpractice and professional liability and we're starting to see some of that run through. There's a pretty long lead time on a number of these claims but certainly expecting or seeing that benefit now run through our insurance expense and seeing declines in insurance expense. We've also -- as we have cleaned up a number of our litigation cases that you can see as you read through our public reporting, we do not have any large litigation claims out there right now. We're seeing reduction in legal expenses. So all of that, as we add together we've also made -- had some reduction in rent and lease costs over the current period. So, all of that leading to improvement in these non-labor expenses. Going forward, again, further focus -- as we are focused in a number of those areas as well as others we will continue to get traction, specifically around supplies a number of our contracts for multiyear contracts so we're not able to attack all of those in any single year. So, as more of those contracts anniversary, we'll have further opportunities to negotiate pricing going forward. Operator: Thank you. We'll now turn the call over to Mr. Hingtgen for closing comments. Tim Hingtgen: Great. Thanks Jay, and thanks everyone for spending time with us today. While the first quarter presented a number of inherent challenges, we remain focused on the opportunities that lie ahead. We are confident in our portfolio, convinced that our strategies will produce strong results and we look forward to delivering long-term and sustainable success. Across our organization, we are fulfilling our purpose and helping people get well and live healthier, thanks to more than 66,000 people who have chosen to make that their top priority every day. We look forward to updating you on our progress as we move forward and work diligently to achieve all of our goals. As always, if you have any additional questions you can reach us at 615-465-7000. Thank you and have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.

Operator: Good day. And thank you for standing by. Welcome to Community Health Systems Fourth Quarter and Year End 2021 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Mr. Ross Comeaux, Vice President of Investor Relations. Ross Comeaux: Thank you, Jay. Good morning, and welcome to Community Health Systems fourth quarter and year end 2021 conference call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer, Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer; and Kevin Hammons, President and Chief Financial Officer. Before I turn the call over to Tim, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report, on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations we will discuss also exclude loss or gain from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expenses from government and other legal settlements and related costs, income and expense from the settlement of professional liability claims for which the third-party insurers obligation to ensure the company for the underlying loss has been settled, expenses from settlement and legal expenses related to cases covered by the CVR, expenses related to employee termination benefits and other restructuring charges, change in tax valuation allowance, and gain on sale of equity interest in Macon Healthcare LLC. With that said, I'd like to turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Ross. Good morning, everyone. And welcome to our fourth quarter and year-end conference call. 2021 was another strong year for CHS. We advanced key clinical and operational initiatives and made strategic investments that position the company for future growth. Leaders across the organization executed their plans to achieve strong operational and financial performance, and we finished 2021 with a solid fourth quarter. We certainly confronted the same challenges as others in the health care industry, as COVID-19 negatively impacted patient volumes and various expense categories. But once again, our teams demonstrated their ongoing commitment and resourcefulness, adeptly managing through the evolving and at times, unpredictable environment. I remain deeply grateful for all of our caregivers, the exceptional work of our healthcare teams, including nurses, physicians, therapists and others, has been essential to the delivery of high quality patient care. We are proud of the service we provide in our communities and the critical need of our healthcare systems fulfill in cities across the country. COVID remained widespread in the second half of 2021. First, the Delta variant peaked in the third quarter, and as those cases slowly dissipated during the fourth quarter, the Omicron variant spread across many of our markets, eventually peaking in January. During the fourth quarter, we provided care for approximately 8,000 inpatient COVID admissions or 8% of our total admissions, which was lower than the 13% of total admissions experienced in the third quarter and similar to our experience in the first quarter of 2021. Non-COVID health care demand during the fourth quarter was higher than prior quarters despite elevated COVID-19 cases. Looking at the fourth quarter on a same-store and year-over-year basis, net revenue increased 6.7%. Same-store admissions decreased 3.9%, while adjusted admissions were up 1.7%. Surgeries increased 5.7% and ER visits were up 11.8%. Comparing our fourth quarter volumes to the pre-pandemic fourth quarter of 2019, same-store admissions were at 93%, while surgeries showed strengthening, finishing at 98%. While non-COVID related volumes continue to trail pre-pandemic baselines for the industry, we expect to meet deferred demand as it returns to the health care setting over the next several quarters. On a consolidated basis, adjusted EBITDA was $540 million in the fourth quarter. Excluding pandemic relief funds, adjusted EBITDA was $494 million, up 7% year-over-year, and adjusted EBITDA margin of 15.3% was up 50 basis points compared to the prior year. As a reminder, we raised the midpoint of our adjusted EBITDA guidance three times last year, and we ended up slightly above the high end of our updated full year guidance. And it's worth noting that cash flow from operations was also strong and came in above our previously increased guidance range. Our strong financial performance was made possible by targeted operational initiatives and strategic investments that also advance patient care, enhance competitive position, and that will drive incremental EBITDA growth and generate additional free cash flow going forward. And over the past couple of years, we have transformed and strengthened the company. Today, we operate across 48 specific markets in 16 states. Our markets are primarily suburban and medium-sized metropolitan areas, mostly across the Sun Belt and locations with good economic and population growth. We've expanded our markets well beyond traditional hospital operations and now operate more than 1,000 health care sites across the continuum of care. In addition to our 83 hospitals, the portfolio consists of 42 ambulatory surgery centers, 17 freestanding emergency departments, 60 urgent care and walk-in clinics, and more than 600 physician practice locations. Scalable initiatives across the enterprise are designed to achieve clinical advancements, operational improvements and growth. Beginning with growth, we invested $469 million of capital into our markets in 2021, using a balanced investment approach that increases inpatient capacity while also expanding access and outpatient services. We have recently added new hospital beds in surgical and procedural suites in key markets, including Birmingham and Huntsville, Alabama, Knoxville, Tennessee, and Austin, Texas, among others. New hospitals have been opened in Fort Wayne and La Porte, Indiana, and in Tucson, Arizona, where another new hospital, our fourth hospital in the Tucson market, is planned to open in the first half of this year. On the outpatient side, we opened three new ambulatory surgery centers and three new freestanding emergency departments in 2021. And strategic joint venture partnerships are expanding our services in the areas of behavioral health, rehabilitation services, and long-term acute care. A good example of our balanced investment approach can be seen in our Naples, Florida market. Since 2019, we've increased bed capacity by 38% by expanding our two existing hospital campuses. And in January, we opened a new campus on the north side of the city. At the same time, we've expanded outpatient access with two new medical office buildings totaling over 130,000 square feet, and we've aggressively recruited physicians in this community. The market's focus on service line development has produced organic growth in nearly every specialty with notable advances in cardiac services, digestive health and urology. We have increased market share and will grow further with an additional 80 licensed beds on track to be added before the end of this year. Other growth initiatives include our ACOs, provider outreach programs and our transfer center, which is now supporting 55 of our hospitals and continues to function well above original expectations, producing volumes from inbound transfers from both CHS and non-CHS affiliated sites of care. Primary care growth is an important focus and is supported by a centralized physician recruitment team that was able to recruit 14% more physicians to our markets in 2021 versus 2019, our pre-pandemic comparison. Our patient access centers, which offer centralized scheduling for primary care providers, help patients receive appointments faster and increase provider productivity. Online scheduling for primary care increased more than 90% in 2021 compared to 2020, as consumers increasingly expect this level of convenience. And it's worth noting that our fourth quarter same-store primary care business were up 13% versus the prior year, which bodes well for future patient volumes. We have many focused areas for continuous operational improvement, and I will highlight a few today. The pandemic has meaningfully increased wage rates and demand for nursing contract labor in many markets. We expect contract labor to normalize as COVID cases decline and we are accelerating strategies to help us attract, support and retain our valued employees. We have expanded our centralized nurse recruitment program, and that effort is yielding very good results. We also are sponsoring a new generation of nurses through our partnership with Jersey College with four hospital-based nursing school programs operational and live so far and three more starting in 2022. The pandemic requires a higher level of capacity management focus. So we have several programs underway to optimize capacity, by managing throughput and length of stay, which not only helps keep needed beds available, but can also improve patient satisfaction. And our strategic margin improvement program completed its second full year in 2021, driving meaningful savings through the organization. This work continues to permanently reduce costs across the corporate offices and shared service centers and decrease non-patient-facing hospital expenses. In 2022, we have planned for further expense reduction in areas, including supply chain, vendor-related costs, rent and other expense categories. Finally, today, I want to mention our investments in innovation and partnerships, artificial intelligence, and other technologies that can improve patient safety and clinical outcomes. Last week, we announced a strategic partnership with Cadence to deploy remote patient monitoring and virtual care solutions to support patients managing hypertension, heart failure, diabetes and pulmonary disease. Working directly with our network of primary care physicians, we anticipate this partnership will create benefits that include higher patient engagement and managing chronic health issues, better outcome and a reduction in preventable hospitalization. At CHS, our shared purpose is to help people get well and live healthier, and initiatives like this one, make that possible. We enter 2022 optimistic about the opportunities ahead and determined to achieve our goals for this year and beyond. Kevin will now provide some additional thoughts in the quarter, and he will walk you through our 2022 guidance and provide an update to our medium-term targets. Kevin? Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim highlighted, we finished the year strong with a solid fourth quarter. During the full year, we delivered strong financial performance, made considerable strategic progress across the organization and strengthened the balance sheet through the extension of debt maturities, the pay down of debt and the reduction of annual cash interest. As we look forward, we are well positioned to drive incremental growth over the next several years. Switching back to the fourth quarter. Net operating revenues came in at $3.233 billion on a consolidated basis. On a same-store basis, net revenue was up 6.7% compared to the fourth quarter of 2020. This was a net result of a 1.7% increase in adjusted admissions and a 4.9% increase in net revenue per adjusted admission. Adjusted EBITDA was $540 million. During the fourth quarter, we recorded approximately $46 million of pandemic relief funds with approximately $153 million recognized in the prior year period. Excluding pandemic relief funds, adjusted EBITDA was $494 million, with an adjusted EBITDA margin of 15.3%. In terms of expenses, we have seen a decrease in salaries and benefits, as both productivity improvements and the shift from employment to contract labor, has offset the inflationary impact on labor. Accordingly, we have experienced a significant increase in contract labor, which is reflected in our other operating expenses. The net effect of this transition from employment to contract labor was approximately 200 basis points of net revenue during the fourth quarter and 100 basis points of net revenue for the full year. Helping to offset this headwind on earnings has been the success of our margin improvement program, which helped deliver significant reductions in expenses across both supply and purchase services. Moving forward, we expect the margin improvement program to continue to deliver meaningful savings in 2022 and beyond. Turning to cash flow. Cash flows used in operations were $131 million for 2021. This compares to cash flows provided by operations of $2.2 billion during 2020. Excluding repaid Medicare accelerated payments, cash flows provided by operations were $950 million for 2021. Cash flow from operations was strong during the year, coming in above our initial guidance as well as guidance that we had updated following third quarter earnings. The comparison versus prior year has several moving parts, as the $2.2 billion in cash flow from operations during 2020 included $1.1 billion of accelerated Medicare payments and approximately $700 million of provider relief fund. That entire $1.1 billion of Medicare accelerated payments was repaid during 2021 with $814 million of that being repaid in the fourth quarter. Moving to CapEx. For the full year of 2021, our CapEx was $469 million compared to $440 million in 2020. Our CapEx was up 7% in 2021 despite operating fewer hospitals than a year ago. In 2022, we plan to invest a higher dollar amount of capital across our existing markets, as evidenced by the increase in our CapEx guidance, as we see a number of high return opportunities that we expect will deliver incremental EBITDA, EBITDA margin and free cash flow. In terms of liquidity, we continue to have no outstanding borrowings under the ABL with $897 million of borrowing base capacity. Also, at the end of the fourth quarter, we had $507 million of cash on the balance sheet. As we mentioned in the cash flow discussion, the company repaid $814 million of Medicare accelerated payments in the fourth quarter. And as a result, all Medicare accelerated payments have been repaid, and we are now receiving 100% of Medicare fee-for-service reimbursement. We continue to improve our balance sheet and capital structure and made significant improvements during the year. During the most recent quarter, we extended the ABL from 2023 to 2026 and most recently, in January of 2022, we extended $1.5 billion of debt from 2025 to 2030. Since the first quarter of 2020, we've now reduced our annual cash interest by approximately $230 million and lowered our leverage by over two turns. At the end of 2021, the company's net debt to EBITDA was 5.9 times. Going forward, we are focused on further lowering our leverage into the future. Now I will walk through our full year 2022 guidance. Net operating revenues is anticipated to be $12.6 billion to $13.1 billion, and adjusted EBITDA is expected to be $1.825 billion to $1.975 billion. Net income per share is anticipated to be $1 to $1.50 per share based on weighted average diluted shares outstanding of 133 million to 134 million shares. Cash flow from operations is anticipated to be $950 million to $1.1 billion. CapEx is expected to be $500 million to $600 million and cash interest is expected to be $820 million to $840 million. In summary, we expect 2022 to be another strong year, as we further leverage our growth initiatives, invest incremental capital in high-return projects and drive additional positive free cash flow. In terms of the quarterly cadence of adjusted EBITDA, we expect 2022 to be directionally similar to 2021, excluding the pandemic relief funds. Coming into 2022, we've seen the peak of COVID hospitalization to occur in January, and we've also experienced the peak of positive infections among our hospital staff in January, which further constrained capacity and resulted in higher utilization of contract labor. As such, we expect the first quarter of 2022 to be our lowest adjusted EBITDA quarter of the year, and similar dollar range to the first quarter of 2021. With declining cases of COVID and the utilization and rate of contract labor moderating, we anticipate improvement in the second quarter and throughout the remaining quarters with the fourth quarter of 2022 being the highest adjusted EBITDA quarter of the year. Finally, we would like to also provide an update on how we are thinking about the company beyond 2022. At the beginning of 2021, we introduced the medium-term financial goals, which was a 2 to 4 year plan. This included achieving 15% plus adjusted EBITDA margins, delivering positive free cash flow annually and reducing our financial leverage below 6 times. In the past year, we've made significant progress on each of these goals. As we move forward, we expect to continue to grow EBITDA and EBITDA margin, grow annual free cash flow generation and continue to lower our financial leverage. As such, we have pulled those previous goals forward to the near term and have introduced new medium-term targets, which are goals we plan to achieve over the next 2 to 4 years, which include growing net revenue by mid single digits, achieving 16% plus adjusted EBITDA margins, continuing to deliver positive free cash flow annually, and reducing our financial leverage below 5 times. We look forward to delivering additional progress across all these metrics into the future. Ross, at this point, I'll return the call back to you. Ross Comeaux: Thank you, Kevin, and thank you, Tim. At this point, Jay, we're ready to open up the call for questions. We will limit everyone to one question this morning, but as always, you can reach us at 615-465-7000. Operator: Thank you. [Operator Instructions] Our first question comes from the line of Brian Tanquilut of Jefferies. Your line is open. Brian Tanquilut: Hey, good morning, guys. Congrats on a good quarter. I guess my question is, as I think, Kevin, about the other operating expense line, obviously, it's up year-over-year as you called out, increased use of temp staffing. But if I back out what we think the temp staff contribution is it looks like that line has gone down quite a bit. So how should we be thinking about kind of the expense components that go into that? And even also like what you can share with us in terms of how you think your staffing trends would improve. And then maybe segue that also into the 100 basis point improvement in your medium-term guidance, kind of like what has driven that? And what gives you confidence in driving that kind of margin expansion over the next 2 to 4 years? Kevin Hammons: Sure. Thanks, Brian. No, a couple of things have really led to our ability to control some of those other operating expenses and achieve savings. So we've been talking about our margin improvement program now for a number of quarters, something we launched back late 2019, continue to get traction on. Some of the categories that we're getting savings and it's a number of different areas. But across software licensing, purchase services, insurance, any number of initiatives that we're targeting, probably not the single one that's individually material, but it's just how we're going about kind of doing our business and tightening up our practices, and able to go out and get some savings. We also had some benefit as we've completed our divestiture program over time. And even this past quarter, as we think about compared to year-over-year, there was some benefit as we have divested some of the lower performing hospitals. Going forward, in terms of reaching our new EBITDA margin goals, a number of things. One, we believe there's continued opportunity under our margin improvement program. But also we have a real balanced approach, both organic growth, because of the markets we're in, we believe are growing demographically. They're growing economically and we believe we're going to not only pick up our share of that growth, but also continue to grow market share in those markets. We're making capital investments that over the past even 2 years throughout the pandemic, we haven't received the full benefit of the capital investments we've been making. Let alone, we're getting even more aggressive. And as we've mentioned, adding more dollars into some opportunistic capital investments going forward. So we believe all of those things really combined will allow us to achieve those margin goals, in doing so and leveraging our fixed cost in those markets as well. Operator: Thank you. Next question comes from the line of Josh Raskin of Nephron Research. Your line is open. Josh Raskin: Thanks. Good morning. My question is around the market strategy. Tim you brought this up on the call this morning. So Community seems to have migrated towards slightly larger markets over the last several years. I guess in light of the labor force shifts and what appears to be less migration to large urban areas, and I don't know if that's work-from-home or other factors, but how are you thinking about the markets that you operate in? Is there any thought on more rural versus more urban? Tim Hingtgen: Good morning, Josh. This is Tim. I'll start this one off. In terms of the portfolio, you are correct. We've been very methodical in terms of how we were shifting to, I think, more mid-sized metropolitan markets, smaller suburban market, things along those lines. We still have some core assets in some of what would be defined rural markets. But in general, really focused on building out those health care delivery systems with similar sized access points across all of the portfolio. In terms of how we're looking at this going forward, obviously, we positioned ourselves in a place where we think there will be good growth down the road. We are seeing population gains projected in these markets, whether it accelerates materially due to migration from larger cities into the suburban markets is still to be seen. We have anecdotal information. We have good growth rates and things along those lines that we're seeing in the near term. But we think that bodes very well for us. In terms of both just population to be served, but also increasing the core group of health care talent that we need to operationalize our markets. We also touched upon our balanced growth objective of being focused on developing inpatient capacity, expanding service lines and acuity, while being very mindful of the migration of certain care, lower acuity care to the ambulatory setting. And our growth in those types of markets make that very, very feasible. Again, getting access points into those new neighborhoods, those growing parts of communities, we believe, really, again, drives a lot of go-forward opportunity for the company. Operator: Thank you. Next question comes from the line of Kevin Fischbeck of Bank of America. Your line is open. Kevin Fischbeck: Great, thanks. Maybe a two part question on the guidance. First, it seems just to be a lot of, I guess, confusion or uncertainty around margin sustainability and uncertainty about how much, whether it's the COVID relief fund, public health emergency is adding to earnings this year. Maybe you can give us a little bit of color or direction as to how you think about the 2022 baseline into 2023? Can you grow margins in 2023 if all these things expire as they are supposed to in log today, how much of a drag is that you have to overcome? And then second, just it isn't clear what you were saying about cash flow in your guidance, because you're going to be doing about $0.5 billion of cash flow, but you're medium, long-term numbers just positive cash flow. Is there something we should be thinking about a reset there? Are you thinking about the movement towards paying cash taxes or accelerating your CapEx that the free cash flow should be meaningfully different than what you're doing in 2022 over the next 2 to 4 years? Kevin Hammons: Sure. So thanks, Kevin. Let me start that off and try to catch all the components of that question. So as we think about kind of 2022 and the baseline of our guidance going forward, yes, we do believe we can continue to grow margin past 2022. I do think we have, coming into 2022, still a little bit of a headwind on margin, because of contract labor. So as we kind of go forward beyond 2022, certainly in the latter part - mid to latter part of 2022, we expect that contract labor headwind to start to subside, and going forward, we think we'll get past that. So that should give us some opportunity we're continuing, as we talked about, kind of not only organic growth in our markets, we're focusing much of our capital expenditures in our revenue growth initiatives on higher acuity service lines. So we believe there is opportunity there as we continue to be in a position to increase our capital spending to chase more of those opportunities. And as I just maybe previously mentioned, much of what we've invested over the past couple of years, because of pandemic, we haven't realized the full benefit of. So as we get out to 2022 and beyond, we believe we will continue to be able to leverage that. And as we grow within our existing markets, our fixed cost will remain relatively the same. And so the incremental revenue that we're able to generate should flow through to higher margins going forward. Operator: Thank you. Next question comes from the line of Ben Hendrix of RBC Capital Markets. Your line is open. Ben Hendrix: Could provide a little bit more color about your length of stay and your programs to optimize capacity. Specifically, how much of your length of stay, elevated length stay's related directly to treatment of COVID patients versus your ability discharge to post-acute amid labor headwinds? And I guess, what leverage do you have to address that? Tim Hingtgen: Great. Ben, this is Tim. I'll go ahead and kick us off, and Kevin, of course, feel free to chime in. In terms of our capacity optimization or length of stay focus, it has several facets to the program. I think we've done a good job historically at managing length of stay. COVID has, I think, has shown us a few more headwinds than we're used to, particularly as it relates to the ability to place COVID or non-COVID cases when ready for discharge into post-acute care settings or home health. So on that one is a little bit more structural, not it's easy for us to address in the near term until COVID cases more definitively subside and we stabilize some of the workforce in the post-acute care setting. But in terms of the hospital environment itself, we really are focusing on discharge to home as our primary lever, putting out more refined reporting in terms of how we manage the discharge to home patients, patients who are ready, being more efficient, making sure that we, again, deliver optimal quality care and then get them into their home setting as quickly as possible. And we've seen some great success in that regard. So a lot of it is about prioritizing kind of what type of patients we put our focus on. We've also introduced new analytics and reports to support a centralized UR function, utilization review function. And that is, again, pretty new in terms of the data and the way we're sharing that with our hospital and regional operators. We're really digging into opportunities by market in terms of observation, patient management, making sure that we have authorizations in place in the front end, coordinating all that work with the payors. And again, think them early success in that initiative. In terms of where the real length of stay challenges are, I'd say, again, COVID has certainly driven up the length of stay in total. But in general, those macro elements of the discharge out of the hospital setting has probably been the bigger, more structural headwind that we have to overcome. Lynn, anything to add? Lynn Simon: No, those are all the sort of things I think most people are dealing with, and we've seen some acuity increase, which will feed into some of that length of stay, but again, lots of opportunities, as Tim mentioned. Kevin Hammons: Yes, and maybe the only other thing I would add, Tim, is we have made some capital investments in some joint ventures with some partners in post-acute care space with rehab, with long-term acute care. And all of those kind of combined, I think, will help us really treat patients across the continuum of care and help at that length of stay. Tim Hingtgen: Ben, I think for us, again, capacity optimization is a high priority because we ran really full throughout the fourth quarter, and we missed, I think, some admission opportunities and the ability to fulfill our purpose in general. So again, this is very important to us as is human capital investments and advancements to stabilize our workforce. And again, that's where we see some really great opportunities for the organization in 2022 and beyond. Operator: Thank you. Next question comes from the line of Jason Cassorla of Citi. Your line is open. Jason Cassorla: Great, good morning. Thanks for taking my question. So just from a volume perspective, the surgery number was certainly impressive in the quarter. But if I back out the COVID admits in the quarter, it looks like COVID admits were running at maybe 85% of pre-pandemic baseline. So just at a higher level, can you help frame how you're thinking about underlying demand in your markets? I know you said that you believe there's some pent-up volume that you expect to come back. But maybe at this point, do you believe that there is some level of volume that just won't return back to the hospital? And then maybe how does that - any dynamic around that help you inform yourselves in terms of how you're thinking about the future capital deployment priorities of the company? Thanks. Kevin Hammons: Sure. Compared to 2019, our admissions - adjusted admissions, we believe are probably down in the mid single digit range, and surgeries are probably low single digit range compared to pre-pandemic levels. So we have certainly made some more progress on surgeries. Going forward, do we expect some of the volume not to return? And how do we think about it. As we sit here today, we believe there's still a significant amount of deferred demand out there that we will be getting back and will be coming back kind of throughout '22 and as COVID subsides that deferred demand will come back. Will there be some demand that ultimately structurally doesn't come back? Potentially, but we think that's low acuity. And we may be capturing that in some of our other access points like our freestanding EDs, urgent care centers, walk-in clinics. So some of the low acuity emergency room business probably ultimately doesn't come back. But we will capture that in a lower cost of care setting, which will ultimately be accretive to EBITDA. Tim, anything you want to add? Tim Hingtgen: Yes, just a few things. Thanks for the question, Jason. And in terms of our admissions, it's certainly an indicator we track very closely, but we have to put it into perspective with some of the changes in healthcare delivery, particularly on the short space surgery cases. So in addition to the lower case comps of COVID in Q4 '21 versus Q4 '20, which kind of - I guess it raises the admission deficit for the organization. We also had a rather sizable shift of short-stay orthopedic cases that were on the inpatient only list historically that have migrated to outpatient surgery classification. And those patients are still occupying the bed for their 1- to 2-day stay. So as I said in my previous comment, we ran very high capacity in occupancy in our hospitals in the fourth quarter. And again, all by design, we kind of know the status of those patients, working very methodically to case manage them appropriately. But when we look at those two big shifts right there, again, we had some increases in observation cases year-over-year, some lower acuity business came back in, and we're really satisfied with the progress of our growth initiatives working to our advantage. Again, we have great insights into where our business is at and what our opportunities are by our internal measures, but also through our transfer center data. We had strong transfer center performance in the fourth quarter. But we know there was still more care that we could have brought in as we focus on length of stay management, as we focus on optimizing our staffing and as we focus on expanding capacity of our inpatient beds. Operator: Thank you. And our last question will be from Andrew Mok of UBS. Your line is open. Andrew Mok: Hi, good morning. Hoping you could give us a sense for how contract labor is trending so far into Q1. You mentioned in your prepared remarks that you expect contract labor to normalize. Can you elaborate on that with regards to contract labor usage and rates? It seems like some of the labor mix shift towards temporary labor may be semi-permanent in nature. So just wondering if you've seen any improvement in contract labor materialize at this point? Thanks. Kevin Hammons: So as I mentioned, we have seen kind of the peak of COVID into January, before we've started to see any moderation both in terms of COVID patient admissions as well as COVID, the impact on our employee, staff. And so certainly, there's been more backfill of staff in January with contract labor for people being out sick and unable to work because of being COVID positive. But we do expect that we're on the downside of that now, and we'll continue to moderate kind of throughout the remainder of the quarter. In terms of rate, we're seeing a contract labor rates at about 300% to 400% of what employee rates are. And so that's pretty similar to what we saw kind of coming out of the third quarter. Tim Hingtgen: Andrew, this is Tim. I'll tack on to that just real quickly. I don't think we're experiencing anything different or materially different than our peers or what we're reading in the industry in terms of some of the phenomena of contract labor growth. We are more optimistic that it is not a permanent structural change, on that as the COVID cases decline, we go back to more of a normal operating environment. What we're doing as an organization is really focusing on human capital advancement, building a strong record workforce. We have near term, mid-term and long-term solutions. I believe we talked about them in previous calls, a little bit today. But in the near term, our centralized nurse recruitment function has been very successful. We'll have that fully rolled out across all of our hospitals in the next couple of months. We have about 61 of our hospitals on the service right now and again, seeing really positive results. So really hiring has not been our biggest challenge. We just have to certainly work hard on retention. And again, not having people feel that contract labor going to a travel agency is the best career choice for them. There's other intrinsic value to being part of the core health care team besides just the rate of pay and those things that we're focusing on our retention and bonus programs, advancing our educational opportunities for our - for all of our employees, not just nursing. And then really putting more energy into caring for the caregiver and some of the emotional support that is still critical as we've weathered the last several waves of COVID. We've also piloted some care model redesign to make it, again, I guess, I'll say, easier to be a nurse, not that it's ever an easy job, but to get more supportive resources to the nursing team, so that they can focus on the higher-value services to their patients, driving the best outcomes possible. And the last thing I'll say to try to maybe mitigate this in the mid to near term would be an increase in international nurse recruitment. I think everyone in the industry is looking at this, but we've got a really good line on expanding our international nurse employment options with some of the [indiscernible] opening up over the last several weeks. So as those are the things that we're doing to really address this and make sure we manage, again, our workforce in the best way possible. Operator: Thank you. We'll now turn the call over to Mr. Hingtgen for closing comments. Tim Hingtgen: Thanks, Jay. And thanks, everyone, for spending the time with us today. In closing, I would like to mention again just how grateful we are to all of our employees across the organization. Physicians, providers, regional presidents and hospital leadership team continue to demonstrate our true purpose of helping people get well and live healthier by providing safe, high-quality care for their communities. I also want to thank our company's leadership team for their important role in supporting our markets and for their continued focus on successful execution. We were pleased with our performance in 2021, and we look forward to updating you on our progress as we move through 2022. Once again, if you have any questions, you can always reach us at 615-465-7000. Have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.

Operator: Good day, and thank you for standing by. Welcome to Community Health Systems Third Quarter 2021 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Mr. Ross Comeaux, Vice President of Investors Relations. Ross Comeaux: Thank you, Jay. Good morning, and welcome to Community Health Systems' Third Quarter 2021 Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer; and Kevin Hammons, President and Chief Financial Officer. Before I turn the call over to Tim, I would like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations we will discuss also exclude loss or gain from early extinguishment of debt impairment expense as well as gains or losses on the sale of businesses; expenses from government and other legal settlements and related costs, expenses from settlement and legal expenses related to cases covered by the CVR expenses related to employee termination benefits and other restructuring charges, change in tax valuation allowance and gain on sale of investments and unconsolidated affiliates. With that said, I'd like to turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Rob. Good morning, everyone, and welcome to our third quarter conference call. We are very pleased with our third quarter operational and financial performance, especially as our health care teams provided care for a large number of patients with COVID-19. Despite this challenging environment, we continue to advance key growth strategies and other important operational improvements. During the third quarter, the Delta variance spread through many of our markets across the Sun Belt space. As a result, we provided care for approximately 15,000 inpatient COVID admissions or 13% of our total admissions, which was our highest quarterly case count to date. This compared to more than 3,000 inpatient COVID cases during the second quarter and 9,500 during the first quarter. And it is also worth noting that non-COVID health care demand was higher in the third quarter than in our prior quarters with elevated COVID-19 cases. Since the onset of the pandemic, the importance of our health care team and the critical role they play in the communities we serve has certainly been reinforced. I am impressed with their professionalism and compassion and remain grateful for their commitment to providing safe, high-quality patient care. Looking at the third quarter, we produced strong results despite the COVID surge. On a same-store and year-over-year basis, net revenue increased 7.1%. Same-store admissions increased 2.8% and adjusted admissions were up 4.7%. Surgeries increased 1.5%, while ER visits were up 24.2%. As a reminder, during the third quarter of 2020, we drove solid volume recovery as industry volumes were returning. So we were pleased with this year-over-year volume performance. Looking at our third quarter volumes compared to the pre-pandemic third quarter of 2019, same-store admissions decreased 3%, while surgeries declined 4%. ER visits further improved and were up 1% versus 2019 due in large part to our freestanding ED expansion strategy as well as elevated levels of COVID visits and testing. Despite the COVID surge in the third quarter being our largest to date, non-COVID demand was higher than the last significant surge in the first quarter of this year. As a result, we delivered stronger volumes across all key metrics compared to the first quarter. That said, deferred care and related procedures have been impacted throughout the pandemic, and we expect health care demand to return over the next several quarters. And our recent investment, which I will cover in more detail shortly, will help meet growing demand for health care services in the months and years ahead, and drive market share gains across our portfolio. Moving now to EBITDA during the third quarter. On a consolidated basis, adjusted EBITDA was $482 million. Excluding pandemic relief funds, adjusted EBITDA was $463 million, which was up 7% year-over-year, with an adjusted EBITDA margin of 14.8%. Compared to the third quarter of 2019 and excluding release pandemic relief fund, adjusted EBITDA increased 19%, and our adjusted EBITDA margin was up 280 basis points despite operating 19 fewer hospitals, which further validates our underlying confidence in the renewed core portfolio. In terms of expense management, for more than 1.5 years now, the pandemic has created a continuously changing operating environment, requiring flexibility on a daily basis. This was certainly the case again during this quarter. Our hospital leadership teams and providers have adeptly managed the ebbs and flows, utilizing best practices, leveraging organizational resources and operating with agility all while prioritizing safety for their patients and care teams. They continue to effectively manage their resources and control expenses. Similar to prior waves of COVID, we experienced increased costs related to staffing, pharmaceuticals and other supplies, such as PPE and COVID testing. And while the entire country is ready for the impacts of COVID-19 to subside, we remain confident in our ability to manage the dual-track operation strategy for as long as the pandemic continues. Our portfolio is strong, and it is situated across parts of the country with attractive population trends and favorable economic conditions, which provide a solid foundation for growth over the next several years. To broadly advance these growth opportunities, we have previously highlighted investments in incremental bed capacity new outpatient access points, higher acuity service lines, physician recruitment, our transfer center service, Telehealth technologies and in care coordination and patient experience. These investments are working. They have greatly improved our competitive position and are creating opportunities for incremental market share gains into the future. Now I would like to share with you some of our recent growth-oriented investments. They include the JV opportunities, we announced last quarter with partnerships across rehab, long-term acute care and behavioral health, the opening of new ASCs in the Knoxville, Tennessee and Tucson, Arizona markets. The recent completion of an OB and neonatal intensive care expansion at Grandview Medical Center in Birmingham, Alabama, where we have now added more than 70 beds over the past 3 years. The November opening of a new hospital in Downtown Fort Wayne, as part of Lutheran Health Network, the upcoming opening of our 17th freestanding ED near Bentonville, Arkansas, which is part of our Northwest Arkansas network, and a de novo hospital campus, the fourth in Tucson, Arizona, which is scheduled to open in early 2022. We are also excited about the recently announced expansion of the physician's regional health care system in Naples, Florida. This includes the construction of 100 new beds at our 2 existing hospital campuses in that market and the early 2022 addition of a third hospital campus in North Naples, which will specialize primarily in orthopedic surgery and rehabilitation. Beyond these projects, we have a growing pipeline of both inpatient and outpatient investment opportunities, which we expect to further develop and strengthen our core markets even more. We have been pleased with our progress this year, and in our overall execution in the midst of a challenging operating environment. Due to our strong performance, we are raising our adjusted EBITDA guidance again this quarter. And looking forward, we remain extremely optimistic about our portfolio and markets as well as the opportunities ahead of us to drive long-term incremental EBITDA and cash flow growth. At this point, I will turn the call over to Kevin for additional details on the quarter and to provide more thoughts on our future outlook. Kevin? Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim highlighted, it was another strong quarter for the company. as we delivered solid financial performance and further advanced a number of our strategic initiatives. Through the recent transformation we've undertaken to reposition the company, we introduced strategies to drive net revenue growth and improve efficiency throughout the organization as well as to strengthen our balance sheet. We completed our divestiture program, which allowed for debt paydown and additional focus in our core markets. We made improvements to the capital structure, extending maturities and reducing annual cash interest. And we've made operational improvements, which have improved our margins. We are pleased with all of this recent progress and excited about the opportunities in front of us. Switching back to the third quarter performance. Net operating revenues came in at $3.115 billion on a consolidated basis. On a same-store basis, net revenue was up 7.1% from the prior year. This was the net result of a 4.7% increase in adjusted admissions and a 2.3% increase in net revenue per adjusted admission, which faced a difficult comp from the prior year. Excluding nonpatient revenue, which was lower year-over-year, net patient revenue per adjusted admission was up 3% compared to the prior year. Adjusted EBITDA was $482 million. During the third quarter, we recorded approximately $19 million of pandemic relief funds with no relief funds recognized in the prior year period. Excluding those pandemic relief funds, adjusted EBITDA was $463 million, with an adjusted EBITDA margin of 14.8%. In terms of expenses, supply cost increased in the third quarter, a result of higher pharmaceutical and other costs associated with caring for additional COVID patients. Contract labor expenses increased in the third quarter similar to prior COVID waves during which COVID case counts were elevated. As a reminder, our contract labor expense is recorded in the other operating expense line. It's worth noting that our strategic margin improvement program has remained on plan during the year. The formalized program continues to drive efficiency across the organization. and the execution helped to offset cost pressure across all 3 expense lines during the quarter. We expect this plan will drive incremental savings over the next several years. Turning to cash flow. Cash flows provided by operations were $400 million for the first 9 months of 2021. This compares to cash flows from operations of $2.1 billion during the first 9 months of 2020. The comparison versus the prior year is difficult as the $2.1 billion in cash flow from operations during the first 9 months of 2020 included $1.159 billion of accelerated Medicare payments received and $715 million of pandemic relief funds received. Declining net revenue during the first 3 quarters of 2020 resulted in declining accounts receivable which was, therefore, a benefit to working capital cash flows last year. Conversely, with strong net revenue growth in the current year, we have a net working capital drag as accounts receivables have increased. We expect this net working capital headwind to ease in future quarters. Excluding repaid Medicare payments, cash flows provided by operations were $667 million for the first 9 months of 2020. Moving to CapEx. For the first 9 months of 2021, our CapEx was $334 million compared to $317 million in the prior period. Our CapEx was up 5% in the first 9 months of this year despite operating fewer hospitals than a year ago. Our core markets have benefited from the rollout of our strategic initiatives, along with high return capital to fuel additional growth. And as Tim mentioned, we have a strong pipeline of opportunities that we expect will drive incremental EBITDA as well as increased cash flow performance going forward. In terms of liquidity, we continue to have no outstanding borrowings and approximately $728 million of borrowing base capacity under the ABL with the ability for that to increase up to $1 billion. Also at the end of the quarter, we had $1.3 billion of cash on the balance sheet. As of September 30, 2021, the company had $814 million of Medicare accelerated payments remaining to be repaid, which were recorded as a current liability on the balance sheet. Rather than repay these remaining Medicare Accelerated payments over the next several quarters through the regularly scheduled recruitment process by CMS, the company has elected to repay the remaining outstanding balance of Medicare accelerated payments to CMS with cash on hand, which it has now completed during the month of October. Moving forward, the company will begin receiving the full amount of cash reimbursement on future Medicare claims. Due to our strong performance during the quarter, we have raised our guidance. The updated full year 2021 guidance for net revenues is now anticipated to be $12.150 billion to $12.350 billion. And adjusted EBITDA is anticipated to be $1.780 billion to $1.820 billion as we've increased our full year range. As a reminder, our 2021 adjusted EBITDA guidance does not include any previously recorded pandemic relief funds or any pandemic relief funds that may be recorded in the future. Cash flow from operations is anticipated to be $800 million to $900 million, an increase of $75 million at the midpoint. Our cash flow from operations guidance excludes the repayment of Medicare accelerated payments that have occurred throughout the year. CapEx is now expected to be $450 million to $500 million, and net income per share is anticipated to be $1 to $1.20 based on a weighted average diluted shares outstanding of 129 million to 131 million shares. Lastly, at the beginning of this year, we introduced our medium-term financial goals, which included achieving 15% plus adjusted EBITDA margins, delivering positive free cash flow annually and reducing financial leverage below 6x. Looking at the past 3 quarters, we've made significant progress on these goals as we've expanded our EBITDA margin, driven strong positive free cash flow year-to-date and further reduced our leverage, which is 5.9x as of September 30. We look forward to delivering additional progress across all these metrics as we move forward. Ross, at this point, I will return the call back to you. Ross Comeaux: Thank you, Kevin, and thank you, Tim. Jay, at this point, we're ready to open up the call for questions. We'll limit everyone to one question this morning. But as always, you can reach it 615-465-7000. Operator: [Operator Instructions]. Our first question comes from the line of Brian Tanquilut of Jefferies. Brian Tanquilut: Congrats on a good quarter. Ross Comeaux: Thanks, Brian. Brian Tanquilut: So I guess my question is, obviously, everyone is worried about the cost side of things and whether it's labor and supplies and whatnot. But it's clear that you guys managed the cost side well even with increased utilization of temp labor. So as I look at things and the turnaround that you've done over the last few quarters, maybe if you can share with us what exactly are the initiatives that you're doing or that you've set up to implement as it relates to driving revenues and admission trends? And also on the other side, just the cost and margin enhancement moves that you've outlined, what are those things more concretely? And where do we stand in terms of like what innings are we in, in terms of realizing those benefits? Kevin Hammons: Sure. Thanks, Brian. There's probably a number of things we can cover there. So let me start, and I'll certainly let Tim jump in. On the expense side, we've talked about our margin improvement program. First, I'd start by saying we did see certainly some drag on labor cost, particularly contract labor. But much of that we see has been directly related to the elevated COVID cost. Certainly, as nurses have left and there's been a higher utilization of travel nurses as well as the rate that we're paying those nurses has been directly related. We saw that in earlier waves, and then we see some moderation of that as code cases go down. So as we look forward and expect coded cases to go down, we certainly expect some moderation of those costs. related to our margin improvement program, we have numerous initiatives across the organization. Many of them are not patient-facing directly initiatives, but many in the supply chain area, where we have been negotiating contracts on a national basis for both supplies as well as purchase services taking advantage of our scale and leverage, which has allowed us to reduce cost. We have a number of initiatives in terms of how we are processing certain types of claims and which has allowed us to just become more efficient in terms of some other initiatives we have going on related maybe more directly to labor we have certainly invested in many of our - of how we support our nurse staffing. We have moved a lot of our recruitment into a centralized recruiting function which we have a lot of experience with from a physician recruiting function, which we centralized years ago. We're doing something similar with nursing. And we believe that, that's much more efficient, particularly in today's environment where we can attract from outside maybe the geographic region. So those are the things that initially come to mind, Tim, I'm sure there's some things I missed. Tim Hingtgen: Yes, sure. Thanks, Brian, for the question. And I think Kevin a nice job covering kind of the OpEx and the strategic margin improvement program as key drivers for margin going forward. I'd like to talk about the top line, as you know, and our very focused growth objective. First of all, we certainly believe we're in a stronger portfolio and stronger markets as we outlined today on our prepared remarks. I'm really pleased with our investments taking brew, showing kind of the growth and the earnings gains that we're putting up year-over-year and even compared to 2019. So good organic growth in that portfolio is still something we're investing in. We have very thoughtful strategic planning processes. We've talked a lot about our transfer center. We really look forward to further optimizing that in the quarters and years to come. We get such great insights into what's happening in our markets based upon our daily activities in the transfer center, which has teed us up nicely for where we should be spending our capital next for capacity expansion, adding new service lines, recruiting new providers to further advance market share. The other avenue is related to some of our de novo projects. We've covered with you our new hospital projects, our growing freestanding ED portfolio, the joint ventures we have and are investing in, in terms of post-acute care and behavioral health. All of those things, we're confident will drive strong long-term opportunities in the portfolio. We've also talked about the importance of having a balanced growth philosophy. We're investing in our inpatient side of the business and the ambulatory side. I think we see that pulling through as a matter of fact, in the third quarter, we had 8% of net revenue growth in both inpatient and outpatient side of the business despite the COVID surge. So the allocation side of the business really is growing very, very nicely. So I hope that's helpful and speaks to our confidence in what we're doing to really drive long-term value here. Operator: Next question comes from the line of Frank Morgan of RBC Capital. Frank Morgan: I was hoping you could maybe break out in that other ops line. How much of that actually is attributable to the agency labor usage and then maybe talk a little bit about how that was during the quarter, at the end of the quarter, maybe where it is today. And then it also just maybe some general commentary on the non-COVID nice volumes that you have. Maybe a little color specifically between in and outpatient how that ended the quarter and then where that is today? Kevin Hammons: Sure. So we haven't specifically given an amount of what that contract labor is. It fluctuates significantly quarter-to-quarter because it kind of bounces around between the labor and contract labor. So - but what I would say is it's - it has increased pretty significantly sequentially over the second quarter and is above where it was in the first quarter. But we were really able to offset that if you look at the other operating expense comparatively year-over-year dollar amount is almost flat. So all of that increase that we had in that line item related to labor, we were able to offset with other savings in various categories, whether it is purchase services or other efficiencies that we gained largely due to these initiatives that we had - have put in place our operating initiatives or our margin improvement program. Tim Hingtgen: Yes, Frank, this is Tim. And in terms of our non-COVID volumes in the quarter, as we pointed out, had really strong staff across all of the key indicators, improving upon our first quarter performance, the last big wave of COVID. And we saw that generally across the board. The one thing we did see is some crowding out of some inpatient surgeries in the quarter as we made way for more inpatient COVID care. We also deferred some elective orthopedic cases, which we expect to pick up in upcoming quarters as a result, just trying to preserve that capacity. Outpatient surgery was strong for the quarter. We had sequentially improved outpatient surgeries throughout the year, beating both 2020 comp and 2019's comps. So really pleased with our investments in recruiting the right specialists to our markets and building out our primary care networks of care, making sure that we're, again, really driving that market share growth on both the inpatient and outpatient side of our market. Operator: Next question comes from the line of Josh Raskin of Nephron Research. Marco Criscuolo: This is actually Marco on for Josh. Thanks for taking the question. I was just wondering if you've seen any demographic data points suggesting that volumes could be migrating out of cities and into more suburban markets like the ones you operate in. And I would also appreciate any thoughts just more generally on what you're seeing in terms of market share changes within your footprint? Tim Hingtgen: Thanks, Marco. This is Tim. I'll start off the answer to that question. In terms of specific data, I can't point you to one store. We do have plenty of anecdotal data and reading articles similar to I'm sure you're reading in terms of perhaps some urban flight into the suburban markets. So we believe we're positioned well. Our assets, as you know, let's take in Northwest Indiana, outside of Chicago, on the size of the Tucson market, the size of Birmingham, Fort Wayne, Naples, all these communities, I think, are well positioned for that demographic shift. Even prior to that demographic shift, we were pleased with the growth prospects in those markets, and we believe any of that migration would only be a value add. Kevin Hammons: Yes. I'd just point out, even going back to the 2020 census has certainly pointed to states that we're in like Arizona, Texas Alabama, Florida, our larger states have certainly been picking up population from other parts of the country. And then more recently, even as Tim mentioned, anecdotally. But if you look at a lot of what's being reported around real estate, you can see that markets that we're in seem to be certainly growing, and we know that there's more of a - both a demographic move towards some of the Sunbelt states, some of the lower tax jurisdictions is largely due for economic growth as well. Operator: Next question comes from the line of Andrew Mok of UBS. Andrew Mok: Good morning. Can you speak to some of the volume trends into October and you provide some context for how non-COVID utilization is rebounding following the latest decline in COVID cases? Tim Hingtgen: Andrew, this is Tim. I'll start us off here. In terms of our COVID, I guess, I'll say trajectory, we did see admissions peak in the midpoint of the quarter, near the end of August, actually the patient days really did not start tapering off until the latter part of September. We still are experiencing elevated levels of COVID beyond our - I guess, I'll say, our low points in previous surges. So we're still seeing pretty, I guess, elevated levels of COVID volume in our hospitals. As I said in my remarks, the care teams have just done a phenomenal job of managing us on a day-to-day basis, I'll say, multi-times-a-day basis, making sure that we're taking great care of those patients. But in terms of the rebound of the non-COVID care, as we pointed out, we really held on to a good portion of that business relatively well throughout the quarter. I believe the consumer and the providers comfort level with their safety in our care settings with vaccination does lead to less of the deferral of the elective care that we had seen in previous surges. But with that being said, again, the deferred care that we're looking out for are those cases that we've delayed just to preserve our inpatient capacity for COVID cases. Our teams work regularly with the surgeons, our outreach program directors to make sure that we're bringing those cases back in as soon as the patients are ready to do so. And so from that vantage point, we do feel confident that, that business will work its way back into our systems in this quarter into the first half of next year. Operator: Question comes from the line of Kevin Fischbeck of Bank of America. . Kevin Fischbeck: Just wanted to maybe go to the margin discussion. I think you guys have shown some pretty good improvement in margins recently. There's a lot of moving pieces in the margin number this year between sequestration and COVID costs and everything else, contract labor, et cetera. Do you guys - what do you think the core margin is? I guess if we were trying to normalize everything, if we're trying to think about where you guys are on a core basis relative to that margin target that you've outlined. Is the actual reported number a pretty good estimate for where you're actually operating today? Or are there any kind of major adjustments we should be making and when we think about what - where the normalized margin is today? Kevin Hammons: Thanks, Kevin. I would say that we believe that where we're operating the margin that we're reporting today is a good barometer of where we are from an operations standpoint. We put out at the beginning of the year, kind of our medium-term targets to be above 15% margin in that kind of 2- to 4-year time frame. I would say that the way we're looking at it, we're ahead of schedule. We've made some great progress on our way there. We certainly have accelerated a number of our initiatives. And so we do believe we're ahead of schedule of getting to where we think we'll - we want to be and we'll get. We're certainly, as we sit here today, I believe that over the next few quarters. We'll continue to make progress, continue to grow margins. As you can see from our guidance, we expect to be in the high 14% for the full year, which would indicate or imply fourth quarter at the midpoint, slightly above 15%. And I would say that our expectation is we'll continue to grow into 2022. Operator: We will now turn the call over to Mr. Hingtgen for closing remarks. Tim Hingtgen: Thanks, Jay, and thanks, everyone, for spending time with us today. In closing, I would like to mention again how grateful we are to all of our employees across the organization, our physicians, providers, regional presidents and hospital leadership teams who continue to demonstrate our true purpose of helping people get well and live healthier. I also want to thank our company's leadership team for their important role in supporting our markets and for their continued focus on successful execution. We are pleased with our strong year-to-date performance, and we look forward to updating you on the rest of the year in a few months. Once again, if you have any questions, you can always reach us at 615-465-7000. Have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.

Operator: Good day, and thank you for standing by. Welcome to the Community Health Systems Second Quarter 2021 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Mr. Ross Comeaux, Vice President of Investor Relations. Ross Comeaux: Thank you, Jay. Good morning, and welcome to Community Health Systems Second Quarter 2021 Conference Call. Joining me on today's call are Tim Hingtgen, Chief Executive Officer; Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer; and Kevin Hammons, President and Chief Financial Officer. Before I turn the call over to Tim, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which are described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from these expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to the live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations we will discuss also exclude loss from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expenses from government and other legal settlements and related costs, expenses from settlement and legal expenses related to cases covered by the CVR, expenses related to employee termination benefits and other restructuring charges, change -- and change in tax valuation allowance. With that said, I'd like to turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Ross. Good morning, everyone, and welcome to our second quarter 2021 conference call. We are pleased with our second quarter results, especially as we continue to see volume recovering, net revenue growth and margin improvement. During the first half of 2021, we further advanced growth-oriented strategic initiatives that continue to strengthen the company. Before we walk through the details, we would like to thank all of our providers, nurses and caregivers and our employee and leadership teams, who continue to provide safe, high-quality care in the communities we are so fortunate to serve. And this has been great to see firsthand. With more people vaccinated and because COVID case counts have declined in the second quarter, many of our executive leaders were able to spend time visiting our markets over the past several weeks. We have had the opportunity to tour capital projects that have come online, witness operational improvements and, of course, to hear heartwarming stories of patient care and positive outcomes. There is a tremendous sense of pride across our organization, especially as we reflect on the essential services and value provided to our communities while we've worked together to fight the COVID pandemic. We are currently seeing an uptick of COVID cases in some markets, but we remain confident in our dual-track operating model and the ability of our teams to safely and effectively manage COVID surges, while also meeting the increasing demand for our services and to meet the health care needs of non-COVID patients. Now switching back to the second quarter. Positive COVID-19 case counts were lower than the first quarter, following the peak numbers we experienced in January. In the first quarter, we provided care for approximately 9,500 inpatient COVID admissions. In the second quarter, our inpatient COVID admissions were approximately 3,000, which represented about 3% of our total admissions. And as COVID cases declined during the second quarter, we experienced a solid rebound in non-COVID volumes driven by our efforts to attract new patients and to reengage and retain patients who have previously used our health care systems. For the second quarter, on a same-store basis, net revenue increased 30.2% year-over-year driven by the easier comp, which was the result of the government restrictions on elective procedures that impacted net revenue last year. For the full quarter, year-over-year, same-store admissions increased 17%, while adjusted admissions were up 28.5%. Surgeries increased 43.7%, and ER visits were up 39.2%. In terms of our patient volumes, all volume growth rates meaningfully improved sequentially compared to prepandemic levels. And looking at our second quarter results compared to the same period in 2019, we are pleased with the improvements we've delivered over that benchmark period. Compared to 2019, same-store surgeries were slightly higher, increasing approximately 1%. Admissions and adjusted admissions were down approximately 4% and 2%, respectively. ER visits have strengthened throughout the quarter, but continued to lag other volume metrics compared to prepandemic run rates, now down 6%. On a consolidated basis, second quarter adjusted EBITDA came in at $453 million with adjusted EBITDA margin of 15.1%. Compared to the second quarter of 2019, consolidated adjusted EBITDA increased to $453 million from $402 million, an increase of 12.7% even though the company-operated 23 fewer hospitals this quarter. And it's worth noting that we expanded our EBITDA margins by 290 basis points during that time frame. The transformation we began a few years ago is continuing to drive the expected growth and development opportunities across the portfolio and with very good momentum. We have strengthened our organization in a wide variety of ways, positioning the company for incremental same-store growth going forward. To highlight some of these initiatives, we introduced the company's strategic imperatives and have made notable improvements across each area of focus. Those being safety and quality, operational excellence, connected care and competitive position. Net revenue initiatives such as the transfer center, investments into higher acuity and patient services, ongoing outpatient access point development and our ACOs are generating growth. The strategic margin improvement program is adding value across the enterprise. And our current portfolio of hospitals positions us in stronger markets, primarily across the southeast, south and southwest areas of the country, where there is population growth and economic expansion. Over the past few years, we have continued to deploy capital in our core markets to drive long-term inpatient and outpatient growth with recent investments, including bed and service line expansions in markets, including Birmingham, Naples, Huntsville and Knoxville; the opening of our 15th freestanding ED in Gulf Shores, Alabama, which is part of the fast-growing Baldwin County market; the recent opening of 2 new hospitals in Arizona and Indiana; and we have 2 more hospitals nearing completion, one in Downtown Fort Wayne that is scheduled to open in the fourth quarter of this year and another de novo hospital in Tucson, Arizona that we plan to open in the first quarter of 2022. We are also excited about recently announced partnerships and joint ventures that will expand access to post-acute and behavioral health services. During the quarter, we opened Knoxville rehabilitation hospital in our Tennova East market in partnership with Kindred. We also announced a de novo JV project with Select Medical in Tucson, which includes acquiring a 47-bed long-term acute care hospital. And we will break ground next week on a behavioral health facility in Fort Wayne as part of a joint venture with Acadia Healthcare. And we continue to invest in joint venture ambulatory surgery center partnerships in key markets, with the de novo center opening in our Tennova East Tennessee market in just a few weeks. We will continue to invest in our considerable pipeline of inpatient and outpatient opportunities over the next several quarters, which will further strengthen our core markets for the long term. Since the start of the year, we have demonstrated progress in terms of net revenue growth, expense management, EBITDA growth, EBITDA margin expansion as well as our capital structure. We're certainly pleased with this progress and the momentum it provides as we execute our strategies and capitalize on all of the opportunities that we see over the next several years. In the medium term, we continue to target 15%-plus adjusted EBITDA margin, positive annual free cash flow generation and reducing our leverage below 6x, which we believe will add value for all of the company's stakeholders. Kevin? Kevin Hammons: Thank you, Tim, and good morning, everyone. As Tim highlighted, it was another strong quarter for the company, during which we delivered solid financial performance and made progress across multiple fronts. During the second quarter, we delivered a strong volume recovery, good expense management, positive free cash flow, further capital structure improvement and additional progress across our strategic initiatives. We also adjusted our full year guidance to reflect the company's strong start to the year and our outlook for the back half of the year. Looking at the second quarter performance, net operating revenues came in at $3.007 billion on a consolidated basis. On a same-store basis, net revenue was up 30.2% from the prior year due largely to the prior year impact of COVID-19. This was the net result of a 28.5% increase in adjusted admissions and a 1.3% increase in net revenue per adjusted admission, which faced a difficult comp from the prior year. Excluding nonpatient revenue, which was lower year-over-year, net patient revenue per adjusted admission was up 3.3% compared to the prior year. During the second quarter, we drove a strong sequential recovery in non-COVID-related patient demand. And we delivered improved volume performance on a sequential and year-over-year basis. Adjusted EBITDA was $453 million. Comparing to the prepandemic baseline period of the second quarter of 2019, this represents a 12.7% growth in adjusted EBITDA despite having 23 fewer hospitals. Excluding Provider Relief Funds, this also represents a sequential 9.4% improvement over the first quarter of this year. During the second quarter, we recorded approximately $1 million of pandemic relief funds. If you recall, in the second quarter of 2020, we recognized $448 million of pandemic relief funds, which represented substantially all of our prior year adjusted EBITDA. The pandemic relief funds have helped to offset a portion of lost net revenue and incremental expense related to the COVID-19 pandemic. During the past 6 quarters, we've experienced a number of waves of COVID, which have impacted our volumes and operating expenses. Our hospital leadership teams continue to adjust extremely well to this evolving operating environment. And we expect to continue to utilize our dual-track strategy in the back half of the year as we care for both non-COVID-related health care demand as well as additional COVID-19 patients. It's also worth noting that our strategic margin improvement program has remained on plan. The program has helped to drive savings the past few quarters. And we expect the plan will reduce operating costs in the back half of this year and over the next several years. Switching to cash flow. Cash flows provided by operations were $280 million for the first 6 months of 2021. This compares to cash flows from operations of $1.7 billion during the first 6 months of 2020. Excluding the received and repaid Medicare accelerated payments, cash flows provided by operations were $414 million for the first 6 months of 2021 compared to $552 million in the prior period. Looking at the year-over-year decrease, excluding the Medicare advance payments, the change was primarily due to changes in net working capital, which also included the pandemic relief fund grants. Declining net revenue in the first half of 2020 was a benefit to working capital last year as accounts receivable declined, while strong net revenue growth during the first half of this year has resulted in a net increase to accounts receivable and, therefore, a slight net working capital drag to start the year. Moving to CapEx. The first 6 months of 2021, our CapEx was $212 million compared to $192 million in the prior period. Our CapEx was up 10% in the first half of 2021, again, despite operating 13 fewer hospitals than a year ago. Going forward, over the next several years, we believe our current portfolio of markets is well positioned to benefit from continued economic and demographic growth. In addition to recent capital investments, we plan to continue investing in a strong pipeline of development opportunities in our existing markets to further strengthen our portfolio. In terms of liquidity, at the end of the second quarter, the company had $1.25 billion of cash on the balance sheet, which was essentially unchanged sequentially compared to the first quarter. During the second quarter, $116 million of previously received Medicare accelerated payments were returned to CMS as part of CMS' planned recoupment that started in April. As of June 30, 2021, the company has $947 million of Medicare accelerated payments remaining to be repaid. These are recorded as a liability on the balance sheet. Also as it relates to liquidity, we continue to have no outstanding borrowings and approximately $762 million of borrowing base capacity under the ABL with the ability for that to increase up to $1 billion. Turning now to the capital structure. We've continued to make meaningful progress. On Slide 12 of our supplemental slide presentation, we've included our debt maturity profile at the end of 2019 compared to the end of the second quarter of 2021. During the past few quarters, we've significantly extended debt maturities, paid down debt and lowered annual cash interest. Most recently, in the second quarter, we extended $1.4 billion second-lien notes from 2024 to 2030, while lowering our interest rate 200 basis points. This transaction further lowered annual cash interest, and now our next debt maturity is not due until 2025. Through 2020 and the first half of 2021, we lowered our debt by over $1.3 billion, reduced our leverage ratio by over 2 turns down to 6x compared to over 8x at this point last year and lowered annual cash interest by approximately $210 million. Now I would like to walk through a few updates to our full year 2021 guidance. Net operating revenues are now anticipated to be $11.9 billion to $12.3 billion as we narrowed our full year range, but maintained the midpoint. Adjusted EBITDA is anticipated to be $1.7 billion to $1.8 billion as we raised the low end of guidance for the second consecutive quarter. As a reminder, our 2021 adjusted EBITDA guidance does not include any previously recorded pandemic relief funds or any pandemic relief funds that may be recognized in the future. Cash flow from operations is anticipated to be $700 million to $850 million, which is an increase of $100 million from our original guidance. And net income per share is anticipated to be $0.60 to $0.80 based on weighted average diluted shares outstanding of 129 million to 130 million. Overall, we delivered another strong quarter as our second quarter performance came in above our internal expectations. As we think about the balance of the year, we expect our EBITDA performance to have similar seasonality to prior years with some seasonal softening in the third quarter, followed by a good finish to the year in the fourth quarter. Ross, I'll now return the call back to you. Ross Comeaux : Thank you, Kevin, and thank you, Tim. At this point, Jay, we're ready to open up the call for questions. [Operator Instructions] But as always, you can reach us anytime at (615) 465-7000. Operator: [Operator Instructions] Our first question comes from the line of Brian Tanquilut of Jefferies. Brian Tanquilut: Congrats on the quarter. I guess my question for you, for both, I guess, for Kevin primarily. As I think about the guidance, I appreciate your comment on seasonality, but you put up a 15% margin number in the quarter, and it sounds like you're seeing the recovery, you feel confident in your ability to drive growth and you beat the number in Q2 pretty well. How are you thinking about that? I mean is that just conservatism? I guess as I look at both the back half guidance and your medium-term guidance as well, maybe if you can touch on just some of the cost factors as well that we should be thinking about. Kevin Hammons: Sure, Brian, and thank you very much. So let me touch on a couple of things there. So first, as we, I guess, think about in the beginning of the year, we kind of expected and did our guidance, expecting a recovery from COVID that kind of extended throughout the year. And as we sit here today, we have a little more insight. Of course, that recovery occurred a little bit quicker in the second quarter than we anticipated. And we have a little more insight into the third quarter. And we see some things, again, returning to a little more normal seasonality as people are getting back active again, school be starting up and so forth. In terms of kind of net revenue, we think kind of our net revenue per adjusted admission will look somewhat similar in the back half of the year to where we exited the second quarter. And then in terms of kind of cost improvements and our margin improvement program, that, as I mentioned, is on plan. And we believe that there's still some opportunities with margin improvement and cost savings opportunities and initiatives that we're working on to deliver further cost improvements in the back half of the year as well as into next year and beyond. So as we're looking at that, all things equal, we're pretty comfortable with where we're at in that guidance range. And then the big unknown and certainly included in that guidance are a number of scenarios around what may happen with COVID case counts. Tim Hingtgen: Yes, Brian, this is Tim. I'll add on just real quick. I think Kevin summed it up very nicely. I'll add on some of our investments back into the business kind of going back to that seasonality we've talked about historically, but we have about 30% more employee doctors coming into the portfolio in the third quarter. So there'll certainly be some investment into that as we ramp those practices up, but that's all for the long-term growth and development of the entire portfolio along our service line strategies and our primary care development strategy. So again, that's factored into our guidance as well, but we believe it's a good thing for the long-term prospects of the business. Operator: Our next question comes from the line of Frank Morgan of RBC Capital Markets. Frank Morgan: I guess I'll stay on that same subject. So I guess before I go back to the cost side, when you -- appreciate the color around the utilization across your service segments versus the prepandemic levels across the -- or for the quarter in its entirety. But could you give us any color on really how you exited the quarter relative to some of those 2019 prepandemic levels of utilization, whether it's admissions or ER, surgeries, those kind of things? And I guess just for a clarification, I guess, what I'm hearing you say is that the reason the seasonality here is probably going to be more driven by the cost side than the volume side. Is that correct? Kevin Hammons: Sure. Let me kick that off, and then Tim may weigh in here as well. And thanks, Frank, for the question. I guess starting off here, I would say that the second quarter, we started off with a little higher COVID case counts. And those came down throughout the quarter, and the non-COVID cases increased throughout the second quarter. So as we exited the quarter, we were probably fairly even or a little bit above that 2019 base period exiting the quarter. Tim Hingtgen: I agree, Kevin. Thanks for that. In terms of the volume progression, we certainly did see throughout the course of the previous waves of the pandemic when inpatient COVID cases subsided, we were able to bring back the elective or non-COVID care back. And we saw that trend continue into the second quarter, frankly, with a really strong bounce in the months of May and throughout June and heading into July. So we're pretty optimistic in terms of our ability to manage surges at COVID, maintain our access for our non-COVID patients through that dual-track strategy we referenced, working to demonstrate that our priority is obviously to be there when our communities need us. But we've become more proficient at managing elective care to the point that we would hope that governments wouldn't feel the need to restrict our ability to do so. We'll kind of be the arbitrator if we can of where we put our resources to make sure we take care of both COVID and non-COVID care. Kevin Hammons: And then maybe to finally circle back on the last part of your question in terms of the third quarter, I think seasonality, what we typically see is a little bit lower volume in the third quarter and then picking up in the fourth quarter and through the end of the year. And that's kind of what we're expecting to see in terms of the return to maybe a more normal seasonality or seasonal softening in the third quarter. But we believe we'll still have a good, strong expense management throughout the remainder of the year. Operator: Our next question comes from the line of Josh Raskin of Nephron Research. Josh Raskin: Just quick clarification on those Medicare repayments. I heard the $947 million remaining. Is that $125 million or so a quarter going forward until it's repaid? Or I guess what's the number quarterly? Kevin Hammons: Yes, that's about right. I think we were estimating $400 million to $450 million this year with the remainder paid back in 2022. Operator: Our next question comes from the line of A.J. Rice of Crédit Suisse. A.J. Rice: Might just take a minute to ask you about the labor dynamics. We're hearing a lot about that across the provider world. What are you seeing in terms of turnover rates, use of contract labor? And how about just thinking about wage increases over the next year or so for your permanent employees, do you have an early read? Is that going to step up? Or is that sort of consistent with where it's been? Kevin Hammons: Sure. Thanks, A.J. This is Kevin. Let me start this one off. We are seeing a little bit of higher inflation costs with respect to our labor. This does kind of vary market by market, and it's been a little bit above maybe what we've experienced in previous years. But at the same time, we are seeing some easing on both the rate and utilization of contract labor. That came down pretty significantly from the first quarter to the second quarter sequentially. We're also seeing some improvement in our employed labor retention. So we saw improvement in retention sequentially as well. So net-net, I think we believe we'll be able to kind of manage through this through the current environment without any material impact on margin through the back half of the year. Tim Hingtgen: A.J., this is Tim. I'll just add on to what Kevin mentioned. In terms of our management of labor, throughout the quarter, as Kevin said, sequentially improved from the first quarter tied to some of that decrease in COVID case counts, reduction of contract labor expenses and improved retention and hiring of our core staff. We plan to continue, obviously, with that going forward into the future with some very specific initiatives here at CHS. First of all, we've had some centralized RN recruitment success in a few of our markets that we piloted in 2019 and 2020. We're now scaling that across the organization. By the end of this month, we'll have about half of our hospitals up on a centralized nursing recruiting support function and by the end of the year, about 90% of our hospitals. And what that entails is really leveraging the digital marketing and sourcing of nurses from a corporate standpoint, similar to what we do for physician recruitment, handing over qualified candidates to the local HR teams and having them complete the hiring process and then on the back end, working with some very specific preceptorship and orientation programs. The other thing that we're doing to support the supply side of nursing, in particular and I believe we mentioned this in our first quarter earnings call, but we've initiated a relationship with Jersey College. We now have 2 fully functioning nursing programs in our market that are fully staffed and have a full enrollment of new nursing students. We have 2 more programs launching by the end of the first quarter of 2022. And by the end of 2023, about half of our hospitals will be supported by our own affiliated nursing program. The other benefit of this is not just on the supply side, but as these candidates, these students are going through the nursing program, they are getting experience in our hospitals in supportive care functions as certified nursing assistants, patient care technicians or what have you, which we believe, again, gives them an early entry into our health care system so that when they're completed with their program, pass their test, they're already ingrained into our health care delivery systems and will come on full time as nurses. Operator: Next question comes from the line of Ralph Giacobbe of Citi. Ralph Giacobbe: Just I guess wondering with COVID cases up recently with Delta variant, I was hoping you can give us a sense of what you're seeing in your markets in terms of magnitude of that lift of COVID specifically and whether you're seeing any corresponding slowdown in non-COVID volume in surgery. And then just to clarify, is the volume seasonality in the third quarter your expectation? Or are you already sort of seeing some of that of late, whether it's sort of in core or related to COVID? Tim Hingtgen: Ralph, I'll start this off and then hand it over to Dr. Simon for some more color around our current COVID experience. In terms of the current surges impact on elective business, we've obviously been monitoring that very closely. And we have not seen a material impact. And it goes back to our, I guess, experience with managing the previous waves of COVID, that dual-track strategy. Our staff is really well equipped in terms of how to manage COVID care safely and distinctly from the elective care. And our physicians and caregivers, again, very grateful for their commitment to this, but believe they've really made our communities and our patients still safe. So we have not seen wide drops in elective care. So in terms of the actual pandemic, I'll turn it over to Dr. Simon. Lynn Simon: Thanks, Tim. So the current surge that we're seeing is we're seeing an increase in cases, but still running at a lower rate than we were seeing last July. So not quite up to those levels. I think people have much more confidence now in managing the protocols and how these patients are treated. We continue to have our corporate command center running. And then we continually reach out to our teams and make sure that they have the support that they need as we see these COVID cases increase. Operator: Next question comes from the line of Steven Valiquette from Barclays. Steven Valiquette: Great. So a lot of key topics have been touched on already in relation to the acuity mix margin trends for the remainder of '21. And it's a little early to talk about '22, but I guess I'm just curious that given all the puts and takes in your upcoming pivot from this year to next year, if we do ignore the $83 million of government stimulus relief that you received this year, is there any preliminary view on whether you would expect EBITDA to grow next year from the '21 base, just given your growth initiatives. Just curious, any directional thoughts around that at this early stage? Kevin Hammons: Sure. It's probably a little early, and we haven't given out any guidance on 2022 yet. But I would say a couple of things relative to that point. One, that we're -- now that we're done with our divestiture program, and I think we've said we've turned 100% of our attention towards growth. We're making a number of investments in both inpatient and outpatient areas and a number of service line enhancements to really grow our net revenues. And if you look at our medium-term goals that we've put out, and I think it's on Page 15 of our slide deck, our goal is to grow net revenue to increase our margin above 15% and to reduce our leverage below 6x medium term being over the next 2 to 4 years. But if you think about kind of the trajectory to get there, hopefully, you can use that to kind of give some idea about the direction of 2022. Operator: Next question comes from the line of Kevin Fischbeck of Bank of America. Kevin Fischbeck: Great. I wanted to asked about the volume expectation in the back half of the year. I think if I heard you right, you said that you expected the rate to largely be similar to the first half of the year. I guess we might expect that as volume continues to normalize, it would be lower acuity volume and that it seems like government volume has been more depressed. So that would be the volume that comes back. So I guess, I just want to, I guess, first, touch on that dynamic. And then secondly, how are you thinking about, if you agree with that comment, the ability to kind of maintain the grow margins if you're bringing in low acuity government volume, which historically is a lower volume -- lower margin volume source? Kevin Hammons: Sure. And I'll be happy to start that off. So there's a lot to unpack there. And there's certainly been a lot of noise in the prior periods as we have -- are coming out and seeing declines in COVID cases. But if you look at our net revenue per adjusted admission compared to 2019, we're up about 10% over the 2-year period. And I think that if you think about maybe normal rate lift and a little bit of acuity lift off that, we're pretty comfortable that we can kind of maintain that level of net revenue per adjusted admission going into the back half. Certainly, you're right, there's probably some lower acuity service that isn't back yet. However, there's still some higher acuity services. And we've been, over the past couple of years, making investments in higher acuity service lines and making other improvements and adding services that we think will offset some of that, what might be some downward pressure as we continue to grow. Tim Hingtgen: Yes, Kevin, this is Tim. I'll just add on to what Kevin said. In terms of our prospects for growing net revenue, we really have had a very balanced approach to how we want to build out the business, expand our markets. And that balanced approach being investments in the ambulatory care settings, our access point strategies. Our freestanding EDs, as we mentioned, continue to expand. We have another one that will be opening up yet this year. We have our pipeline that has additional ones in place. And while some of those visits may be lower acuity, it is an expansion of some of our higher acuity service lines on the orthopedic and cardiac service line. So it's all meant to really help us further bolster that inpatient side of the business. In some of the core markets where we're adding beds, we still see tremendous opportunity to expand and augment service lines, growing more of that inpatient business, taking more of the inpatient market share. So again, we see that balanced approach is serving us quite well, making sure we're positioned well to where care is migrating on the ambulatory side but still being able to drive the higher acuity inpatient services. Operator: And last question comes from the line of Josh Raskin of Nephron Research. Josh Raskin: Yes. I appreciate the follow-up. The real question I had was just the changes that you're seeing, I know we just talked about sort of COVID and Delta, but I'm curious on the treatment and cost per patient and sort of impact on operations. So are you seeing differences in the treatment of the Delta variant patients relative to others? Are there differences in length of stay, difference in cost to treat? I'm assuming you don't have PPE issues and other impacts on the rest of the facility, but I'd be curious on the inpatient cost per patient. Tim Hingtgen: Sure, Josh. This is Tim. I'll kick it off with more of the operational side and have Kevin weigh in on the cost side. But in terms of the operations side, your theory is correct. We're not having the same pressures on PPE. As we pointed out, in the second quarter, we saw a drop in contract labor. We are bringing in more contract labor. So you may see some increase in that spend as we support our caregivers, our full-time and part-time caregivers, with more nursing resources to manage the surge and maintain that dual-track of elective non-COVID business coming into the hospitals. In terms of any other expenses in terms of drugs or lab, those are relatively stable to what we saw in the previous waves. Kevin Hammons: Yes. So I would say it's a little early, but right now, what we're experiencing is not any significant difference in the cost of treatment for the current wave of COVID patients compared to previous waves. Lynn Simon: Yes, and this is Lynn. I'll just add. With this wave, like everyone is talking about, seeing a little younger patient and probably less ventilated patients. So that's a trend at least now that obviously is subject to change, but that's what we've been seeing recently. Operator: We will now turn the call over to Mr. Hingtgen for closing comments. Tim Hingtgen: Thank you, Jay, and thanks to all of you for spending time with us today. In closing, I want to once again thank our physicians, caregivers, employees and hospital leadership teams, who consistently demonstrate their true purpose and commitment and service to their communities each and every day. I also want to thank our regional presidents and the company's entire leadership team for their continued strong support of our markets. We are pleased with our strong first half of the year. And we look forward to updating you on our progress throughout the rest of 2021. Once again, if you have any questions, you can always reach us at (615) 465-7000. Have a great day. Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.

Operator: Good day and thank you for standing by. Welcome to Community Health Systems' First Quarter 2021 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Ross Comeaux, Vice President of Investor Relations. Thank you. Please go ahead. Ross Comeaux: Thank you, Mike. Good morning, and welcome to Community Health Systems' first quarter 2021 conference call. Joining me on the call today are Tim Hingtgen, Chief Executive Officer; Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer; and Kevin Hammons, President and Chief Financial Officer. Before I turn the call over to Tim, I'd like to remind everyone that this conference call may contain certain forward-looking statements, including all statements that do not relate solely to historical or current facts. These forward-looking statements are subject to a number of known and unknown risks, which is described in headings such as Risk Factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and Exchange Commission. As a consequence, actual results may differ significantly from those expressed in any forward-looking statements in today's discussion. We do not intend to update any of these forward-looking statements. Yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted EPS. For those of you listening to live broadcast of this conference call, a supplemental slide presentation has been posted to our website. We will refer to those slides during this earnings call. All calculations we will discuss also exclude: gain or loss from early extinguishment of debt, impairment expense as well as gains or losses on the sale of businesses, expense from government and other legal settlements and related costs, expense from settlement and legal expenses related to cases covered by the CVR and change in tax valuation allowance. With that said, I'd like to turn the call over to Tim Hingtgen, Chief Executive Officer. Tim Hingtgen: Thank you, Ross. Good morning, everyone, and welcome to our first quarter 2021 conference call. We achieved strong operational and financial results in the first quarter during what was a milestone period for the health care industry as we mark the 1-year anniversary of the onset of the COVID pandemic. A year into this experience, we are still managing through extraordinary circumstances and adapting to constant change. During the first part of the quarter, especially in January, COVID surges continued to impact volume in many of our markets. In February and certainly by March, COVID cases subsided and other volumes began to notably improve. We provided care for approximately 9,500 inpatient COVID admissions in the first quarter. This compares to approximately 8,000 COVID admissions during the third quarter and another 14,000 COVID admissions during the fourth quarter of 2020. We finished the first quarter with good operational momentum progress in many strategic initiatives, which I will discuss in a minute, and a sense of optimism that if vaccination rates increase and COVID cases decline, we will continue to move to a more normal operating environment. In the first quarter on the top line, same-store net revenue growth increased 9.8%. On a year-over-year basis, net revenue growth was driven by higher acuity and an easier comp. Due to COVID-related government restrictions on elective procedures that started in March of 2020, which impacted volumes and net revenues last year. This quarter, admissions and surgeries were negatively impacted by the high COVID case counts that we experienced in January as well as severe snowstorms that hit much of the south in the middle of February. During the month of March, we were very pleased with our strong volume recovery, further closing the gap to our pre pandemic run rates. We believe the rollout of the COVID vaccine also impacted demand during the quarter, while some patients waited for their turn to receive the vaccine prior to returning for elective scheduled health care services. Throughout the pandemic period, we have been actively encouraging patients who have been reluctant to seek health care to return for any needed checkups, screening, postpone procedures and other deferred care. For the full quarter, year-over-year, same-store admissions were down 4.9%. Adjusted admissions were down 7.2% and surgeries were essentially flat. ER visits continue to lag other volume metrics with same-store ER visits down 17%. Our expense management initiatives remain on track and effective with more progress demonstrated during the first quarter. Adjusted EBITDA was $495 million, which increased 60% compared to the prior year. Adjusted EBITDA margin of 16.4% improved 620 basis points year-over-year. During the quarter, $82 million of pandemic release funds were recognized. If we exclude the pandemic relief funds from the quarter's results, adjusted EBITDA was $413 million with an adjusted EBITDA margin of 13.7%. Since comparative results are affected when looking at the first quarter of 2020 because of the government restrictions on elective procedures that took effect then, more helpful perspective can be found in a comparison to the first quarter of 2019. Excluding pandemic relief funds, first quarter 2021 adjusted EBITDA of $413 million increased 6% compared to the first quarter of 2019, despite operating 21 fewer hospitals as a result of our portfolio rationalization program. We believe this clearly demonstrates our progress so far and the underlying strength and growth potential of our go-forward portfolio. We continue to fuel the portfolio with attractive capital investments based upon defined growth strategies, and of course, through the determination and hard work of our hospital leadership teams across the country. The results of the quarter demonstrate that the transformation of the company that started a few years ago is progressing, and we are excited about all of the opportunities in front of us as we look toward the future. In the medium term, we continue to target 15% plus adjusted EBITDA margin, positive annual free cash flow generation and reducing our leverage below 6x. During the last quarter, we did lower our leverage, and we made a number of other improvements across our capital structure, which Kevin will highlight later. Now I'd like to spend a minute on strategic initiatives and the opportunities in front of us, especially as our divestitures have been completed, and we are completely focused on our core portfolio. We have been making investments in these markets over time to enhance our competitive position and to drive long-term growth. Our company's growth objective is to advance opportunities for both inpatient and outpatient care development, based upon each market's unique characteristics and opportunities. On the inpatient side, we've recently opened two new hospitals, in Indiana and Arizona, and both are performing quite well. Another new hospital will open in Fort Wayne later this year and one additional de novo campus and Tucson early next year. And over the past 3 years, we've added nearly 300 new beds to the core portfolio, along with more than 50 new surgical and procedural suites to meet increased demand and to drive higher acuity. We have also added several new service lines at hospitals throughout our portfolio. On the outpatient side, we recently completed a comprehensive study of several key markets to identify our best investment opportunities in ambulatory access and services, including more primary care, specialty care and urgent care locations as well as freestanding ERS and ambulatory surgery centers. In terms of progress, we opened our 14 freestanding ER during the first quarter, with two more locations scheduled to open this year. We have also added two additional ASCs to the portfolio so far this year and we will add a de novo center in our Knoxville market this summer. Adding all of this together, we continue to manage a very robust development pipeline of opportunities that we believe align well with our inpatient services, expands our outpatient access more broadly across our markets, and that improves our overall market position. We continue to think strategically about capital investments and how they can drive high impact, high-growth returns as we deliberately build out and advance our networks. We are also investing in what we call Connected Care Strategies. We have been regularly sharing progress updates on our proprietary transfer center operations since 2017. We continue to see impressive results from this initiative, and we are leveraging the visibility it provides into areas for facility expansion, physician recruitment or service line enhancements will enable us to provide care for even more patients within a region. We are also implementing proprietary patient access centers, which initially provide centralized scheduling services for our primary care practices. We are seeing good initial results, including volume improvement with nearly 600 providers now being served by these centralized scheduling centers. Over time, our goal is to use these scheduling hubs to enable outbound patient outreach to close gaps in care and to provide other services to ensure that patients can more easily navigate the health care system and receive the services they need. We believe all of our investments are generating the intended results and positioning us for greater success in the long run. I'm extremely proud of the progress we've made in so many areas, thanks to the strong leadership of our local market executives, the support of our corporate team, and most importantly, the incredible care provided by the physicians, nurses and other clinicians who continue to put their patients first by providing safe, high-quality care in their community. They continue to earn our respect and admiration every single day. With that, let me turn the call over to Kevin. Kevin Hammons: Thank you, and good morning, everyone. As Tim just mentioned, it was a strong start to the year. We delivered good financial performance, continued meaningful improvements across our capital structure and made additional strategic progress during the first quarter. Net operating revenues came in at $3,013 million on a consolidated basis, down 0.4% from the prior year due to divestitures. On a same-store basis, net revenues increased 9.8%. This was the net result of a 7.2% decrease in adjusted admissions and an 18.3% increase in net revenue per adjusted admission. Similar to the back half of 2020, our net revenue per adjusted admission benefited from increased acuity, higher rates and better payer mix. Adjusted EBITDA was $495 million, up 60.2%. This included $82 million of pandemic relief funds. Adjusted EBITDA, excluding the pandemic relief funds, was $413 million, an improvement of 34% over the prior year and an improvement of 6% over the first quarter of 2019. Our adjusted EBITDA margin was 13.7% versus 10.2% in the prior year and 11.6% in the first quarter of 2019. We continue to make progress toward improving adjusted EBITDA margins. During COVID, we experienced various ways of new COVID cases from month-to-month, which has impacted our volumes and increased our operating expenses. Our hospital leadership teams have continued to adjust extremely well to the changing business environment. And that was evident again this quarter. While effectively executing our cost reduction programs, we have seen increased expense related to certain supply costs, contract labor and other expenses related to COVID. With COVID cases declining, we expect these additional costs to decrease. Switching to cash flow. Cash flows provided by operations were $101 million for the first quarter of 2021. This compares to cash flows from operations of $57 million during the first quarter of 2020. Looking at the quarter-over-quarter increase. Cash interest payments were approximately $60 million lower in the first quarter of 2021. The company repaid approximately $18 million during the quarter related to Medicare-accelerated payments due to divestitures, and other increases and decreases, including improved EBITDA and working capital changes were offset. As we look at the rest of the year, we expect our cash flow from operations to improve. During the first quarter, in addition to the first quarter being a historically lighter cash flow quarter, due largely to the resetting of co-pays and deductibles and the timing of certain payments. Our cash flow from operations was also negatively impacted by the COVID peak in January and the weather-related disruptions during February. As such, our strongest net revenue month during the quarter was March. And as a result, we expect our cash collections to improve moving forward into the second quarter. Turning to CapEx for the quarter. Our CapEx was $105 million compared to $99 million in the prior year, keeping in mind that we are operating fewer hospitals than a year ago. We continue to invest capital into our core portfolio to strengthen our existing markets. And we are excited about a number of our recent investments, along with a number of future opportunities that are in the pipeline. We are pleased to have completed our formal divestiture plan, and we continue to receive inbound interest regarding potential transactions, and we will continue to assess the benefits of any future deals. But as we move forward, we are focused – we are most focused on driving growth across our stronger portfolio, which we believe will continue to benefit from our targeted investment focused strategies and improving economic, and population demographics within our markets. In terms of liquidity, at the end of the first quarter, the company had $1.3 billion of cash on the balance sheet. At March 31, the company had no outstanding borrowings and approximately $633 million of borrowing base capacity under its ABL, with the ability for that to increase up to $1 billion. Switching to the CARES Act and the pandemic relief funds. At the end of 2020, we had $104 million of unrecognized pandemic relief funds, of which we recognized approximately $82 million during the first quarter of 2021. As a reminder, we have not included the pandemic relief funds in our full year 2021 guidance. Moving to the balance sheet and capital structure. We've made significant improvements. At the end of the first quarter, we had approximately $11.9 billion of total debt which was approximately $300 million lower compared to the prior quarter. On the capital structure side, as a reminder, through 2020 and the first quarter of 2021, we lowered our debt by over $1.3 billion, reduced our leverage ratio by over 2 turns, down to 6x levered compared to over 8x last year and lowered our annual cash interest by approximately $190 million. In the first quarter, we completed a number of capital market transactions that further lowered annual cash interest and removed near-term maturities. In January, we extended $1.8 billion second lien notes to 2029 and $1.1 billion first lien notes to 2031. Following these transactions, we called the remaining $126 million of 2022 unsecured notes, paying that with cash on hand. On Slide 13 of our supplemental slide presentation, we have included our debt maturity profile at the end of 2019 compared to the end of the first quarter of 2021. During the past few quarters, we've significantly extended debt maturities, paid down debt and lowered our annual cash interest. Our next maturity is now not due until June of 2024. Now I'd like to quickly comment on our full year 2021 guidance. Net operating revenues are anticipated to be $11.7 billion to $12.5 billion, unchanged from our previous guidance. And adjusted EBITDA is anticipated to be $1.65 billion to $1.8 billion, which does not include pandemic relief funds. Overall, the first quarter was a good start to the year. And as a result, we have tightened our adjusted EBITDA range by raising the low end of our EBITDA guidance. As we look forward, we continue to expect our expense savings from our strategic margin program to build throughout the year, with more significant cost reduction in the back half of 2021. We also expect this program to drive incremental savings into 2022 and beyond. Due to this program, along with the net revenue initiatives that Tim mentioned, we expect to achieve our medium term financial goals over the next several years, which will benefit all of our stakeholders. And Ross, with that, I'll turn the – return the call back to you. Ross Comeaux: Thank you, Kevin. And at this point, Mike, we're ready to open the call for questions. We will limit everyone to one question this morning, but as always, you can reach us at 615-465-7000. Operator: [Operator Instructions] Your first question comes from Josh Raskin from Nephron Research. Josh Raskin: Hi, thanks. Good morning. Appreciate you taking the questions. I guess my question is around the operations for rural hospital operators. And if you're seeing any changes in the competitive nature, I'm thinking about sort of this proliferation of urgent care and some new hub-and-spoke models, even telehealth. So I'd be curious to get your perspectives on how sort of rural and even to suburban care as your hospitals are located or being impacted? Tim Hingtgen: Sure, Josh. This is Tim. I'll go ahead and kick it off, and obviously, welcome anyone else to chime in here. In terms of changes to the operations, from a competitive standpoint, again, don't see much influence from other operators entering those markets. I think it's partly because we were well positioned for some of this migration to the ambulatory care settings through our own investments historically, even predating the pandemic as well as our telehealth investment. So I think, in general, the consumer is in what’s remaining of our nonurban portfolio, which as you know, is much smaller than it was even 3 years or 4 years ago. We are not seeing entrants as being a major competitive threat. In the suburban markets, again not seeing a tremendous amount of expansion in the ambulatory space. Again, I think largely because we have really good growth strategies and have positioned ourselves to make those investments to not crowd out others, but to make sure that we are well positioned across our networks that are creating better and broader access. Josh Raskin: Perfect. Thanks. Tim Hingtgen: Thank you. Operator: Your next question comes from Frank Morgan from RBC Capital Markets. Frank Morgan: Good morning. Appreciate the color around guidance, but I was hoping you might be able to give us a little more granularity in terms of just sort of the cadence over the balance of the year and some of your assumptions in the recovery. Anything in particular we should call out in the second quarter? And I know at the very end, you mentioned that some of the cost-saving initiatives will kick in later. But maybe just any color that you could provide about kind of the sequencing and timing there across the year? And I think you called out COVID is one of the factors as well. So, if you had to prioritize sort of between those different elements, which would be the most impactful to help driving those margins higher and getting to that 15% target level? Thanks. Kevin Hammons: Thanks, Frank, and I will take this question. So, as we think about the cadence of adjusted EBITDA throughout the year, we believe that we will sequentially improve each quarter. Certainly, with COVID cases subsiding and some of the recovery, it’s still early in the year, and there are still some uncertainties, but we are seeing the effectiveness and the delivery of the vaccines continue to grow and COVID cases coming down and moderating at a much lower level than they had hit their peak. So with that, we expect to continue to recover a lot of the deferred procedures that have been out there, particularly around some of the deferred higher acuity elective procedures that have not yet come back. And we believe those will start to come back as well. So with that, I think revenue will continue to grow throughout the year. And then as I mentioned, some of the margin improvement program initiatives that we are working on, of course, we have been very successful throughout 2020 with those initiatives. But as we look at the initiatives that are in effect for 2021 and beyond, we believe that some of those will deliver more savings in the back half of the year, which will allow us to continue, as I mentioned, kind of sequentially grow each quarter. Operator: Your next question comes from Brian Tanquilut from Jefferies. Jack Slevin: Hi, good morning. Thanks. This is Jack Slevin on for Brian. Wanted to turn on to margins, you all have put out that 15% plus EBITDA long-term target for margins there. And obviously, ex-COVID – or ex-CARES Act, excuse me, a little bit below 14% in the quarter. Just wanted any color if you could walk us through kind of the steps you see to get there, and particularly how you are thinking about navigating this year with the lower acuity procedures probably coming back online throughout the year and possibly some payer mix headwinds? Tim Hingtgen: Great, Jack. This is Tim. I will start us off. And as always, we try to have a balanced approach as to how we solve most of our problems. So, I will cover the net revenue and top line work that’s underway and ask Kevin to cover more of the expense management. So again, with good balance, that’s where we see the long-term prospects for margin expansion in the company. But starting at a higher level and maybe pulling together some of the comments we made earlier, more concisely to answer this question, we definitely believe in the strength of this stronger portfolio. Larger hospitals, larger markets with good growth potential, a greater percentage of these hospitals in the Sunbelt states, which we all know have more favorable population growth and job prospects. So again, that’s number one. I think some looking forward some opportunity for us particularly as COVID cases subside and a more routine operating environment is restored. Also, the transformation of the company in terms of our focus on driving higher acuity in this better portfolio, leveraging our investments in the transfer centers, building out access points, recruiting the right providers to provide necessary services and reduce out migration or to steal volumes from competition is well underway. I also want to point out that I believe we did a really, really good job of demonstrating margin expansion even before COVID. We exited 2019 with really some good strength and headed into the first quarter of 2020 with some really strong margin numbers up until the pandemic hit in March of 2020. So we believe even predating the pandemic, we were showing strong signs of margin strengthening across the organization. And as I have said, on the macro level, with the normalization of volumes post COVID and as Kevin just mentioned, I see more of the higher acuity elective business by orthopedic procedures really get restored to their pre-COVID levels. We believe that really will drive further revenue and margin expansion. In terms of some other top line revenue growth items, our growth objective is really targeted on both inpatient and outpatient, and I don’t think we can emphasize that enough. We see great visibility through our transfer center model as to where we can add new capital, new services, new providers to really retain more patients within our networks of care, but also to attract more patients from smaller nonurban hospitals within a region. So, we have a really clear line of sight. And throughout the first quarter, Dr. Simon is with me here today. I just spent an incredible amount of time with our regional leaders and our hospital CEOs really getting into the granularity of that data to see where we go in excess to really leverage the experience we gained throughout COVID at treating higher acuity, primarily respiratory illnesses in our critical care units. We don’t want to see, frankly, that higher acuity business flip away. We believe there is opportunities for us to strengthen our foothold and as to what we demonstrated within the regions we serve. Also with the investments in beds and procedural suites that I called out earlier, obviously, as we add new capacity and fill it up, we are getting better fixed leverage coverage. We are expanding our margins just by not adding a lot of fixed cost when we have incremental variable volumes coming into our networks. So, we think that will be a key driver of margin for us going forward. And then as we pointed out, de novo access points on acute care, adding all of these new sites of care will drive incremental revenues and drive margins for the company. So again, a lot of things going on that has us really bullish on our prospects for not just a revenue growth and margin expansion for the company. I will let Kevin cover some of the expense items. Kevin Hammons: Sure. And maybe if I just give a little more color on the expense items and how we are thinking about that and getting to our 15% plus margins. Certainly, as we come out of COVID, we have had some additional cost pressures because of COVID with higher salaries and wages, contract labor and supply costs that we expect those pressures to also subside as COVID cases come down. But as we look back at even the margin improvement program, certainly, we were targeting some of our corporate office costs, some shared service, cost and efficiency opportunities and primarily non-patient facing hospital expenses that we got a really good start to and got traction on in 2020. And we believe that a number of these initiatives are really multiyear initiatives that will continue to drive savings as we move forward and continue to dig deeper into these individual initiatives. Also moving forward, we believe there is more opportunity on the supply expense side with how we are negotiating with vendors, negotiating more contracts on a national basis, taking advantage of our scale and our position now with our refined portfolio of hospitals gives us some leverage on many types of purchase services and some of our supply spending as well as contract labor, which we, again, expect to be able to move lower. So the other thing I would point out is, we have numerous active initiatives, but because we look at this as more of a continuous improvement process as initiatives get completed or removed for the list, we are adding additional initiatives to that list. So, we expect this to again be a multiyear process. Operator: Your next question comes from Ralph Giacobbe from Citi. Ralph Giacobbe: Hi. Thanks. Good morning. I guess first, just given the upside in the quarter and the sequestration benefit, the guidance bump doesn’t seem to kind of fully reflect those updates, so maybe hoping to reconcile there. And then I was also interested in your comments that EBITDA grew 6% over the first quarter of 2019 despite 21 fewer hospitals, certainly impressive. I was hoping maybe to get same-facility revenue and EBITDA growth off that same-facility sort of hospital base using that 1Q ‘19 as the base if you had it? Thanks. Kevin Hammons: Sure. So as we think about the tightening of the range, we started the year with a little wider range of our guidance for EBITDA at $200 million. As the raise on the low end is a combination of our beat for the first quarter as well as we expect the sequestration moratorium to add approximately $40 million to the remaining 9 months of the year, so really just a tightening of the range. It’s still early in the year. So – but we just feel much more confident and certainly confident enough to raise that low end of the guidance and more confident to where we can end up within that range. So that’s a little bit of thinking, and we will continue to watch our guidance and adjust accordingly throughout the year. In terms of comparing back to 2019, our net revenue on a same-store basis, I have that. It was about 5.5% net revenue growth over the first quarter of ‘19. I don’t have an exact EBITDA lift, but it was significant EBITDA lift over the first quarter on a same-store basis as well. Operator: Our last question will be from Kevin Fischbeck from Bank of America. Kevin Fischbeck: Great. Thanks. Wanted to see if – you mentioned a couple of times in the call that you have had some kind of onetime costs related to supply and temporary labor from co. But I was wondering if you could actually kind of give us some sort of ballpark for that number. And then secondly, I think you referred to a view that there was pent-up demand that come back into the system. Are you thinking about it in the context of getting back to normal or are you thinking that because of the pent-up demand, we could see volumes be above normal at some point during the end of the year? Kevin Hammons: Sure. With some of the costs, it’s hard to define an exact cost pressure, because for instance, with salaries and wages, not only was there some wage pressures. Some of that moved to contract labor, and we know that the rates for contract labor are all much higher. But because of COVID, you also had some of your own staff that was out that you are needing to replace or backfill. And as we get beyond COVID, we will have fewer of our own staff that will be out on leave or on sick time, which will also help relieve some of those pressures. And then on the – you also had the impact of the deferral of procedures and just the interruption of business that it gets a little harder to assess the actual cost impact of those. As we move beyond COVID and start to recover a lot of this business, we will be able to leverage some of these fixed costs better and recapture a lot of the revenue without necessarily the same level of expense recapture. Tim Hingtgen: Yes. Kevin, this is Tim. Thanks for the question. In terms of our prospects on deferred care and volume recoveries just to give you the thought process that we are deploying here. We do most of our comparisons, which make sense for the first quarter or at this point, now the second quarter of 2019 on a same-store basis because of the shift in the portfolio that we have covered. And as we pointed out, and as you have heard, I think, from most of our peers, really a strong March, somewhat benefited from some deferred care, likely from the winter event in February and some of the earlier COVID volumes in the quarter, in addition to an extra business day, so really a strong March. We really saw strong lines in March. But more encouraging, we do see that continuing and building momentum into April. The one thing about COVID, it’s taught us all to be very resilient and focused and determined on how we track our patients and get them into the care they need. And the way we have been able to bounce back even more quickly and effectively with every wave of COVID and then the winter weather event, now with vaccinations and patients feeling more confident of coming back into the system for, again what we call the higher acuity elective business, like total joints or spine care, things that really can’t be put off, we are starting to see that business come back. Admissions can get a little choppy to analyze on that book of business because, as you know, much of that care in 2019 was listed as an inpatient only procedure for Medicare patients. Now it is migrated to outpatient. So, we obviously do some adjustments to make sure that we are tracking across both inpatient and outpatient assets of our very important and high acuity orthopedic service lines. But we have got a really clear line of sight on this, adding new doctors, new services, leveraging the transfer center. We believe there are some strong growth prospects in the quarters to come. Operator: I will now turn the call back over to Mr. Hingtgen for closing comments. Tim Hingtgen: Great. Thanks Mike and thanks to you all for spending time with us today. In closing, I would like to mention again just how grateful we are to all of our employees across the organization, our physicians, providers, regional presidents and hospital leadership teams who continue to demonstrate our true purpose of helping people get well and live healthier by providing safe, high-quality care for their communities. I also want to thank our company’s leadership team for their important role in supporting our market and for their continued focus on successful execution. We are pleased with our strong start to the year, and we look forward to updating you on our progress throughout 2021. Once again, if you have any questions, you can always reach us at 615-465-7000. Thanks again, and have a great day. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.