Community Health Systems, Inc.

Good morning, everyone, and welcome to the Community Health System's 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 High, Vice President of Investor Relations.

Thank you, MJ. Good morning, and welcome to Community Health System's second quarter 2023 earnings conference call. Joining me on today's call are Tim Henchen, Chief Executive Officer, and Kevin Hammonds, 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 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'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, 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 Hitchens, Chief Executive Officer.

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 healthcare 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 three 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 Bervera Health. This healthcare system includes three 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, Seminole, Oklahoma, and two other small health systems in West Virginia enable us to deliberately focus our resources in markets that we deem as most investible. and that can produce greater growth and returns over the long term. Proceeds from the Bervera 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 and 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 one-year anniversary and is delivering strong operational results, and in fact, exceeding its year one 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 in 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 two other high growth markets, Foley, Alabama and Knoxville, Tennessee. 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 Lutheran 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 31st amid severe financial challenges. APP was contracted for ED and hospitalist 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 prevents 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 in 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 insourcing such a large number of programs in approximately one-quarter of our market and all at once was not in our immediate plans, we viewed this as an attractive opportunity to stand up a scalable in-house solution with long-term benefit for CHS. While our existing capabilities in 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 was our best recruitment year of the past five 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 RN status this year and moved into nursing roles. And nearly 400 more nurses have joined our hospital teams 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 this all over to you. Thank you, Tim, and good morning, everyone.