Community Health Systems’ third-quarter performance blew past Wall Street’s expectations with year-over-year same-store revenue gains and shareholder earnings that landed on the right side of zero.
The Franklin, Tennessee-based company also touted a strengthened payer mix and expectations to end 2025 with sustainable positive free cash flow. That, plus signs pointing toward higher Medicare rate growth, early talks on additional divestitures, and $28 million received this quarter for the settlement of prior litigation, will give leadership the leeway to invest in the company's growth, efficiency and quality of care, executives said.
"We've made such great progress over the last probably nine quarters in a row on free cash flow trending positively," Kevin Hammons, president and interim CEO, said during Friday morning's earnings call. "Now that we're getting to kind of crossover from being negative to positive free cash flow, I think that's going give us a lot more opportunity."
Friday's trading session ended with CHS' shares selling at more than 25% the prior day's close.
The company reported net operating revenues of about $3.09 billion. That’s above the consensus revenue estimate of $2.99 billion and a narrow, 0.1% decline from 2024’s third quarter.
However, CHS has divested its partial or full ownership interest in six of its hospitals during 2025 alone—movement that does not include the Friday announcement of a new definitive agreement to sell the three-hospital Commonwealth Health to Tenor Health Foundation. On a same-store basis CHS saw a 6% year-over-year net operating revenue gain, as well as a 5.6% increase in net revenue per adjusted admission
Part of that revenue improvement stems from a strengthening payer mix that began to pick up steam in July and is expected to continue into the year's final quarter, Hammons said. Much of the improvement came from commercially insured patients, "although we did see improvement in exchange as well—but again, the exchange business is a relatively small component of our overall network."
About a third of the net revenue per adjusted admission jump came from Medicaid state directed payment programs that were recently approved, executives said.
Admissions and adjusted admissions at its hospitals respectively dropped by 6.6% and 7.7% compared to the prior year, but, on a same-store basis, rose 1.3% and 0.3%. However, same-store surgeries declined 2.2% and ED fell 1.3%.
Here, Hammons acknowledged a continuation from last quarter's volumes stumble, which he again attributed to decreased consumer confidence in their markets as well as "the immigration climate" in markets like Arizona and Texas. That said, outpatient elective surgeries have improved from the second quarter's lows, he said, and the reduced volumes from immigration concerns has little effect on CHS' EBITDA since much of that care was uncompensated.
Executives said the "mid single digit" same-store net revenue growth per admission similar to this quarter's 5.6% increase should be relatively sustainable amid Medicare rate increases, commercial rate increases and an expectation of high acuity as "softer" outpatient surgery volumes recover.
Net income attributable to the company’s stockholders was $130 million, or 96 cents per diluted share. That’s a clear improvement over the third quarter of 2024’s $391 million net loss, or a loss of $2.95 per share, and better than the loss of 28 cents per share investors were expecting to hear.
After excluding adjustments for losses from early extinguishment of debt and impairment loss from its divestitures, CHS logged a $1.27 net income per diluted share for the quarter. The company’s adjusted earnings before interest, taxes, depreciation and amortization was $376 million, compared to $347 million the year prior.
“The refinancing that we completed in August, along with completed and pending divestitures, provides additional runway and liquidity to continue executing on our strategic initiatives and further deleverage,” Hammons said in a Thursday release on the numbers.
Looking ahead, Hammons said CHS could see some tailwinds that it "can't quantify at this point" from Medicaid state directed payment programs in states like Georgia, Florida and Indiana, as well federal funding from the $50 billion Rural Health Transformation Fund "that should be incrementally positive for us."
More immediately, "there's also potentially an opportunity" if ACA exchange enrollees concerned they may not be able to afford coverage next year without subsidy extensions seek to book electives in the fourth quarter, Hammons noted.
"It's a relatively small component of our net revenues, less than 5%," he said. "So I don't think it's a real material needle mover for us, but it potentially could be a slight positive."
Now three quarters through 2025, CHS has logged about $9.38 billion of net operating revenues. That’s up 0.1% from the first nine months of 2024 and 5.5% higher on a same-store basis. Net income year to date is $399 million, or $2.97 per diluted share, compared to the prior year’s $446 million net loss, or a loss of $3.38 per diluted share.
Editor's note: This story was updated to include commentary from CHS' quarterly investor call.