Community Health Systems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Community Health System's first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Ross Colwell, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Mike. Good morning and welcome to Community Health System's first quarter conference call. Before we begin the call, I'd like to read the following disclosure statement. 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 followed 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 those 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 gain or 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 CBR, and change in tax valuation allowance. With that said, I'd like to turn the call over to Wayne Smith, Chairman and Chief Executive Officer.

Mr. Smith. Thank you, Ross. Good morning and welcome to our first quarter conference call. Joining me today are Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer, Tim Hingeton, our president and chief operating officer, Kevin Stockton, our regional president for our western region, and Kevin Havin, executive vice president and chief financial officer. The remarkable events of the past several weeks have deeply affected all of us, significantly altering our lives, jobs, businesses, and the economy. We've made necessary sacrifices, and that's especially true for essential workers across many industries. On the front lines, physicians, nurses, other caretakers, and support personnel have further earned our tremendous respect and appreciation. I am incredibly proud of the entire healthcare community and grateful to everyone across the CHS organization for their professionalism and compassion in our work to confront the COVID-19 pandemic. Our hospital teams have been organized, resourceful, and most importantly, ready and available for every patient who needs our support. and they still are. Our regional operational leaders, hospital executives, and corporate support teams have worked around the clock leveraging our resources into a comprehensive, coordinated, rapid, and agile response. Our goals have been very clear from the beginning. Safety first. That's the mantra across our entire company, and there's never been a time when it matters more. We have focused on the safety of every patient whether positive for COVID-19 or not. We have worked to protect our medical teams and healthcare workers from exposure by implementing screening and testing capabilities, ensuring adequate personal protective equipment despite sometimes challenged supply availability. We have worked to flatten the curve in our communities by partnering with local officials and health departments and by doing our part to help educate the public with important information. Next, we have focused on operational readiness at all times, and frankly, this has not always been easy in such a dynamic crisis. But complex challenges also brought forth the best in our problem-solving abilities, and so far we've been able to manage through every difficult issue. For CHS, operational readiness requires two tracks. First was the necessary preparedness for the care of the COVID-19 patients and potential surge conditions in the communities we serve. The second track simultaneously has teams working to ensure we would be ready to recapture deferred appointments, procedures, and surgeries as soon as it's safe to do so. In a few minutes, Lynn and Tim will provide you with more details regarding our planning and our ongoing operational response. Our third goal is to rapidly adapt to new conditions Some of the changes we've implemented over the past two months will make us stronger. We've learned ways to improve processes, strengthen our supply chain, deepen important relationships in our communities, and in some cases, we've changed the way we interact with our patients, including focused work to accelerate telehealth capabilities across our nearly 3,000 physician and mid-level providers. Finally, we have worked to protect our business and competitive position. Incredible efforts have been made to ensure CHS will emerge from the public health crisis with every possible advantage. These activities include working to preserve as many jobs as possible and supporting our valued employees, ensuring adequate liquidity and cash flow for operations, advocating for legislative actions, including stimulus and relief packages to help America's hospitals, and collaborating with vendors, payers, and other partners in ways that support our business going forward. One more thing before I move on to the quarter's results. Several years back, the CHR's CARES Fund was established to help employees suffering hardships due to unforeseen circumstances, including natural disasters like tornadoes and hurricanes or major medical crisis. Now we've expanded our CARES Fund to help those affected by a COVID-19 crisis. Our corporate officers, regional presidents, members of our board have taken voluntary salary reductions These efforts, along with other charitable donations from members of our team and even some of our partners, have provided over $3 million of additional funding to our CHS care funds. I want to thank everyone who has contributed to this worthy cause. And the fund is serving its intended purpose, with a number of employees across our affiliated hospitals already applying for assistance. Now let me talk a minute about the quarter, and Kevin will go into more detail shortly. As you know, CHS made considerable progress in 2019, including strong performance across our net revenue growth initiatives, as well as the company's strategic margin improvement program. And all that was driving very good adjusted EBITDA growth in 2020. If you will recall, despite a number of divestitures, our adjusted EBITDA on a consolidated basis increased 4% during the third quarter of 2019 and increased 7% during the fourth quarter of 2019. Looking at the first two months of 2020 through the end of February, our adjusted EBITDA had increased 12%. The company was certainly off to a strong start in 2020 prior to the impact of COVID-19. As we neared the middle of March, as states began implementing shelter-in-place orders and hospitals were required to suspend elective surgeries and certain other services, our volumes were immediately and negatively impacted. That trend continued throughout April. As a result, the COVID-19 pandemic impacted our financial performance during the first quarter, and we expect the second quarter impact to be even more challenging. While these near-term pressures continue, and we cannot fully predict what will happen next or how long recovery will take, We remain organized about recapturing our business and optimistic about the future of the hospital industry, our company, and the country. In terms of the CARES Act, we appreciate support for the hospital industry. The initial grant will help offset a portion of lost revenue and increased expenses resulting from COVID-19 pandemic. We're pleased to be working with other business leaders across the country as part of the President Trump's Great American Economic Revival Group which is tasked with restoring economic opportunity for US citizens and our nation as we begin to overcome the public health crisis. As it relates to the company's liquidity, we pushed out our debt maturities during the fourth quarter of 2019 and the first quarter of 2020, strengthening our liquidity. The CARES Act also will help improve our cash position. And it's worth noting that with the divestitures that we have communicated today, the closing of these transactions will complete our announced divestiture program and generate additional cash proceeds. Looking forward, about what to expect in the weeks ahead, including the pace at which healthcare utilization returns. Potential changes to the company's payer mix, which could be impacted by unemployment levels and the loss of employee-sponsored health insurance, are difficult to predict. And as shelter-in-place orders are lifted, We will closely monitor to see if the COVID-19 curve continues to flatten in our communities. What we do know is that CHS is a strong and resilient organization that has always managed to solve problems, adapt and change when necessary, and to focus our teams on the important purpose of taking care of people, our patients, and each other, whatever the circumstances. The weeks ahead will be no different. In a number of our markets, we're beginning to reopen services, and our teams are doing that in a careful, phased approach so that we can remain ready for whatever comes next. We will continue to do our best for everyone who counts on us. So now I'd like to turn the call over to Dr. Lynn Simon, who has helped organize and lead key aspects of our COVID-19 response. Lynn?