Community Health Systems, Inc.

Hello and welcome to the Community Health System's fourth quarter and full year 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad, and to withdraw from the question queue, please press star, then two. I would now like to hand the call to Anton High, Vice President of Investor Relations. Please go ahead.

Thank you, MJ. Good morning and welcome to the Community Health System's fourth quarter and year-end 2023 conference call. Joining me today on this call are Tim Henschen, Chief Executive Officer, Kevin Hammons, President and Chief Financial Officer, and Dr. Miguel Dine, 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 FDC. 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, gain 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 divested locations. With that said, I will turn the call over to Tim Henschen, Chief Executive Officer.

Thank you, Anton. Good morning. Thank you for joining our fourth quarter and your 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 healthcare 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 made 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 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 are 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 Grandview GI ASC in Birmingham, Alabama, and completed an ASC acquisition in La Porte, Indiana. 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 two 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, filling 1,500 physicians in clinical support, technician, and other roles. The impact was real, with a $260 million reduction in contract labor in 2023 compared to the prior year. Also, as you know, in 2023, we rapidly and successfully insourced 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 insourcing ED and hospitalist medicine, initiatives are underway to insource 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 post-op 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. Binet 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. Binet?