Community Health Systems (NYSE:CYH) expects patients to continue delaying some surgeries into next year as economic pressures and insurance costs weigh on demand, Chief Executive Officer Kevin Hammons said during a company presentation.
Hammons said clinic visits rose nearly 8% in the third quarter and orthopedic MRIs and other screenings increased, but those visits were not translating into surgeries at the same rate. Government-insured patients have continued to undergo surgeries, he said, while patients with commercial coverage face greater concerns about copays and deductibles.
“That again leads us to believe that this is more of an economic decision on the patient’s part and why it’s being deferred,” Hammons said.
The company did not see its usual seasonal pickup in commercial business beginning in the third quarter and incorporated an expectation of a weaker-than-normal fourth-quarter increase into its updated guidance, he said. Hammons added that the company has limited visibility into when deferred patients will return unless they are on the schedule.
Insurance mix and policy outlook
Hammons said a significant portion of the increase in emergency room visits came from uninsured patients, who also accounted for almost half of the third-quarter increase in adjusted admissions. Lower demand for higher-acuity services has weighed on margins and revenue growth, he said.
Chief Financial Officer Jason Johnson said the company has observed a roughly one-for-one increase in uninsured patients alongside a reduction in exchange-covered patients, based on its analysis of the population as a whole rather than individual patients. Those patients have continued to use emergency services, he said.
Johnson expects a potential further headwind from the expiration of enhanced premium tax credits, but said it could be smaller than the $110 million impact associated with reaching a full 12-month effect. He said the company is monitoring open enrollment and cited premium increases of approximately 13%, compared with about 20% in the prior year.
On Medicaid, Johnson said the company believes many beneficiaries will qualify for exemptions from work requirements or meet them. He identified more frequent eligibility redeterminations and how states administer them as a key risk.
Hammons said it was too early to determine the full policy implications of the midterm elections, but he expected negotiations over restoring enhanced premium tax credits and delaying or eliminating some Medicaid cuts.
Costs and growth plans
Same-store operating expense per adjusted admission rose 1.3% in the third quarter, excluding provider taxes that have a revenue offset, Johnson said. Medical specialist fees were an exception to broader cost controls, rising 14% year to date on a same-store basis, driven by anesthesia and radiology.
Johnson said the company has taken actions expected to generate $100 million in annual savings, with $15 million to $20 million expected in the fourth quarter. The measures include corporate and shared-services costs and supply-chain purchasing.
Hammons said outpatient and ambulatory care present the largest growth opportunities over the next several years, although shifting some services out of hospitals could also free capacity for higher-acuity inpatient care. The company will continue investing in quality, patient experience and physician retention even if elective procedures recover slowly, he said.
Recruitment is focused on cardiology, orthopedics, general surgery and primary care. Hammons said recruiting a physician can take a year or more, though bringing a local physician into the company’s network can provide a faster lift because the doctor may bring an existing patient panel.
Debt and payments
Johnson said Community Health Systems had launched an exchange offer for its $1.244 billion of 6.875% second-lien notes due in 2029, offering first-lien 2035 notes with a 10.25% coupon. He said the exchange would extend maturities and that the company planned to address its separate $600 million first-lien tranche due in the first quarter of 2029 within the next year.
The company is still waiting for the Centers for Medicare & Medicaid Services to approve a waiver related to its 2026 Florida supplemental payment, Johnson said. He also said Community Health Systems expects $25 million to $30 million in first-year Rural Health Transformation Fund awards, with cash expected in 2027 and income recognition spread over multiple years because the awards are largely for capital projects.
About Community Health Systems (NYSE:CYH)
Community Health Systems, Inc. is a U.S. healthcare company that, through its subsidiaries, owns, leases and operates general acute care hospitals and related healthcare facilities. Its hospitals serve local communities, with a focus on markets outside major urban centers. The company’s facilities provide a range of services, including emergency care, inpatient and outpatient treatment, surgery, diagnostic imaging and other clinical services. Related outpatient facilities extend access to care beyond the hospital setting.
