Community Health Systems, Inc.

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 Como, Vice President of Investors Relations.

Thank you, Jay. Good morning and welcome to Community Health Systems Third Quarter 2021 Conference Call. Joining me on today's call are Tim Henschen, 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 legal expenses related to cases covered by the CBR, expenses related to employee termination benefits and other restructuring charges, change in tax valuation allowance, and gain on sale of investment in unconsolidated affiliates. With that said, I'd like to turn the call over to Tim Hinchin, Chief Executive Officer. Thank you, Rod.

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 healthcare 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 variant spread through many of our markets across the Sun Delta states. 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 healthcare 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 healthcare 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 the 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 healthcare 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 healthcare 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 pandemic relief funds, 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 a year and a half 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 team. 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 three 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 Physicians Regional Healthcare System in Naples, Florida. This includes the construction of 100 new beds at our two 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?