Community Health Systems (CHS) may have beat Wall Street's Q2 consensus estimates for both revenue and earnings, but a slowdown in volumes and worse-than-expected acuity mix soured its investors.
The public for-profit—which also announced the upcoming retirement of CEO Tim Hingtgen—told analysts on its Thursday morning earnings call that it began seeing an unexpected drop in commercial elective procedures.
That decline in volumes exceeded typical seasonal factors such as patients meeting annual deductibles or flu activity, explained Kevin Hammons, CHS’ president, chief financial officer and the planned CEO stand-in following Hingtgen's departure.
When questioned on the dip, he attributed it to "external factors" such as "a consistent decline in consumer confidence" from March through June. CHS' Medicare business, where deductibles are lowest, has remained largely intact, which he said underscores patients' financial decision-making as a key factor.
And, specifically for Arizona, Texas and "possibly" Florida, Hammons also pointed to "well-documented instances of individuals in the immigrant community not participating in some normal everyday things. ... I know hospitals are no longer considered a sanctuary location, and there is concern even among immigrants with legal status—there's some fear in that community that's likely caused, at least in some of our markets, some softness in the volume."
Hammons noted that the company is seeing some volume recovery in late June and July, "although the levels are not where we had maybe originally anticipated." As a result, CHS tightened its earnings guidance for the full year while acknowledging that an underlying assumption of 2% to 3% adjusted admissions growth was dropped to 0% to 1% adjusted admissions growth (CHS is currently at 1% year-to-date adjusted admissions growth).
CHS' stock was down during after-hours trading occurring shortly after its results were released. The decline continued Thursday through the earnings call, and as of the afternoon is trading more than a quarter under the price of its Wednesday close.
One Big, Beautiful Bill cuts quantified
In contrast to comments from fellow for-profit health system Tenet Healthcare saying Wednesday it was too early to measure the financial impact of Republicans' major domestic policy law, CHS told investors its expecting a roughly $300 million to $350 million EBITDA hit to land during the next 13 years due to reduced total Medicaid reimbursement.
Hammons explained that, due to the bill's structure, CHS will see no impact through 2026, an immaterial impact beginning in 2027 and then reimbursement reductions "building from there." The system devised its estimate by reviewing its hospitals on a state-by-state basis based on their expansion status and current provider tax rates.
Hammons also warned that estimate is relatively isolated from other potential impacts from the bill, such as provisions like work requirements that would impact enrollment in Affordable Care Act (ACA) plans; the potential expiration of ACA premiums at the end of the year; payouts from the $50 billion rural healthcare fund, due to "uncertainties of how those monies will be distributed; or any strategic mitigating actions CHS could take to offset the legislation's financial impacts, such as potential service line changes.
"In the upcoming months, CHS will support industry efforts to aggressively pursue legislative and administrative fixes to the bill," Hammons said. "We assume the opportunities to do so will increase as voters better understand how the cuts affect their household."
Conversely, CHS is positioned to benefit from restored interest deductions under the budget reconciliation, which Hammons said would lower annual cash taxes by roughly $40 million to $60 million starting next year.
Same-store revenues up, adjusted EBITDA slips
The public for-profit logged net operating revenues of $3.13 billion for the quarter, above the $3.02 billion estimate. That’s a 0.2% dip from the second quarter of 2024 though same-store net operating revenues rose 6.5%, reflecting divestitures the company underwent during the past year.
The revenues outline a 7.4% year-over-year decline in admissions and an 8.3% decline in year-over-year admissions. However, same-store admissions rose by 0.3% while same-store adjusted admission fell by 0.7%.
Net income attributable to stockholders was $282 million ($2.09 per share), as opposed to the $13 million net loss (-$0.10 per share) a year prior. Those decrease to a $0.05 net loss per share for Q2 2025 and $-0.17 net loss per share for Q2 2024 when excluding adjusting items related to early extinguishment of debt and asset sales.
Adjusted EBITDA in the most recent quarter dipped slightly from last year's $387 million to $380 million, which the company in a release attributed to "lower outpatient volumes, lower acuity and unfavorable changes in payor mix, partially offset by increased reimbursement rates, a higher net benefit from supplemental reimbursement programs and increased non-patient revenue."
Across the first half of 2025, CHS’ net operating revenues have increased by 0.2% year over year, same-store net operating revenues are up 5% and as-reported net income has improved by $324 million ($2.43 per share). Adjusted EBITDA for the opening six months of 2025 was $756 million compared to the first half of 2024's $765 million.
“The Company continues to make good progress with its high priority strategic initiatives such as investments into growth projects and physician recruitment,” Hingtgen said in a release announcing the performance. “We remain confident that the organization is on the right trajectory for the long term.”
Hingtgen to retire in September
The numbers landed alongside the announcement of Hingtgen’s plans to retire from his CEO and board member roles on Sept. 30. Kevin Hammons, CHS’ president and chief financial officer, will step into the interim CEO position at that time, while Senior Vice President and Chief Accounting Officer shuffles into the temporarily vacant chief financial officer slot.
Hingtgen, who is “anticipated” to enter a consulting agreement with CHS’ management team upon retirement, had been with the company for 18 years and CEO for four and a half years. He said in the announcement that he decided to step down “for personal reasons, including a desire to spend more time with my family and to pursue a few dreams I have for my life.”
Hammons, who has been at CHS for over 28 years, has been neck-deep in the company’s finances, strategies and operations.
Notably, he’s credited as “the driving force behind CHS’ portfolio optimization project,” which in 2025 alone has seen the divestiture of ownership interests in six hospitals. And, earlier this week, the system announced it would be selling off ambulatory lab service assets to Labcorp for $195 million.
“The Board of Directors is confident that Tim, Kevin Jason and other Company executives will work closely together to ensure a seamless transition of leadership,” Board Chairman Wayne Smith said in the announcement. “Kevin and Jason will excel in their interim roles and in supporting our most important responsibility of providing quality care for patients.”