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Community Health Systems, Inc. CYH is well-poised for growth on the back of improving same-store volumes, favorable changes in the payor mix and lower expenses for contract labor. Strategic improvements and divestitures are expected to unlock value for the shareholders.
Let’s delve deeper.
CYH’s Tailwinds
On a same-store basis, adjusted admissions improved 3.1% year over year in the last reported quarter. This played a major role in increasing adjusted EBITDA by 10.9% year over year to $428 million. For the last two years, the company’s occupancy rate increased. With a growing senior population and increasing cases of diseases, the occupancy rate will likely keep climbing.
The company’s revenue per adjusted admission is witnessing significant growth, which will support its top line. CYH doesn’t shy away from divesting non-core assets to optimize its hospital portfolio and improve margins. It recently completed the sale of ShorePoint Health — Port Charlotte and certain assets of ShorePoint Health — Punta Gorda to AdventHealth in Florida for $260 million. Offloading the Punta Gorda facility removed uncertainty tied to restoration costs from Hurricanes Helene and Milton and revenue losses.
Last year, it partnered with Denim Health to integrate conversational AI technology into its Patient Access Center (PAC), which handles calls for almost a thousand CYH-affiliated primary care providers. CYH is streamlining agent workload, which can result in more savings for the company. With improving labor trends, contract labor expenses are decreasing, which will help the company reduce losses.
Community Health expects improving pricing and volumes to support its performance. It expects adjusted EBITDA to be in the range of $1.45-$1.60 billion in 2025. Also, it foresees net cash from operating activities to be between $600 million and $700 million this year.
CYH’s Headwinds
Declining patient days and the average length of stay are major headwinds for the company, affecting its profits. Patient days tumbled 4.6% year over year in 2023 and 5.3% in 2024. Similarly, the average length of stay fell by 4.3% in 2023 and 2.2% in 2024. The company anticipates net loss per share to be between 55 cents and breakeven in 2025.
As of Dec. 31, 2024, it had cash and cash equivalents worth only $37 million, while long-term debt amounted to $11.4 billion. Its net debt to EBITDA of 9.11X is significantly higher than the industry average of 3.29X. Its net interest expense increased 3.6% in 2024 to $860 million.