Community Health Systems, Inc. Previews Third Quarter 2016 Operating Results
10/26/16
The Company anticipates net operating revenues for the three months
ended
Net cash provided by operating activities for the three months ended
The consolidated operating results for the three months ended
On a same-store basis, consolidated net operating revenues for the three
months ended
The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues, as well as larger than anticipated reductions to reimbursement from state supplemental programs. These results were also affected by a failure to achieve anticipated expense reductions as the Company experienced increases in health insurance costs, costs of state supplemental programs, medical specialist fees, and implant supply costs, among other expenses.
The Company is also providing a preliminary update to its 2016 annual
guidance for Adjusted EBITDA to reflect changes to projected
consolidated operating results for the year ending
About
The Company’s headquarters are located in
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this press release other than statements of historical fact, including statements regarding projections, expected operating results, and other events that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similar expressions, are forward-looking statements. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this press release.
These factors include, among other things:
- general economic and business conditions, both nationally and in the regions in which we operate;
- implementation, effect of, and changes to, adopted and potential federal and state healthcare reform legislation and other federal, state or local laws or regulations affecting the healthcare industry;
-
the extent to which states support increases, decreases or changes in
Medicaid programs, implement health insurance exchanges or alter the provision of healthcare to state residents through regulation or otherwise; - the success and long-term viability of health insurance exchanges, which may be impacted by whether a sufficient number of payors participate;
- risks associated with our substantial indebtedness, leverage and debt service obligations, including our ability to incur additional indebtedness;
- demographic changes;
- changes in, or the failure to comply with, governmental regulations;
- potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legal proceedings;
- our ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further impacted by the increasing consolidation of health insurers and managed care companies;
- changes in, or the failure to comply with, contract terms with payors and changes in reimbursement rates paid by federal or state healthcare programs or commercial payors;
- any potential additional impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets;
-
changes in inpatient or outpatient
Medicare andMedicaid payment levels; - the effects related to the continued implementation of the sequestration spending reductions and the potential for future deficit reduction legislation;
-
increases in the amount and risk of collectability of patient accounts
receivable, including the impact of the implementation of ICD-10 and
decreases in collectability which may result from, among other things,
self-pay growth in states that have not expanded
Medicaid and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles; - the efforts of insurers, healthcare providers and others to contain healthcare costs, including the trend toward value-based purchasing;
-
our ongoing ability to demonstrate meaningful use of certified
electronic health record technology and recognize income for the
related
Medicare orMedicaid incentive payments; - increases in wages as a result of inflation or competition for highly technical positions and rising supply and drug costs due to market pressure from pharmaceutical companies and new product releases;
- liabilities and other claims asserted against us, including self-insured malpractice claims;
- competition;
- our ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcare workers;
- trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty hospitals;
- changes in medical or other technology;
- changes in U.S. generally accepted accounting principles;
- the availability and terms of capital to fund additional acquisitions or replacement facilities or other capital expenditures;
- our ability to successfully make acquisitions or complete divestitures, including the intended disposition of certain hospitals and other investments, our ability to complete any such acquisitions or divestitures on desired terms or at all, the timing of the completion of any such acquisitions or divestitures, and our ability to realize the intended benefits from any such acquisitions or divestitures;
- our ability to successfully integrate any acquired hospitals, including those of HMA, or to recognize expected synergies from acquisitions;
- the impact of seasonal severe weather conditions;
- our ability to obtain adequate levels of general and professional liability insurance;
- timeliness of reimbursement payments received under government programs;
- effects related to outbreaks of infectious diseases;
- the impact of the external, criminal cyber-attack suffered by us in the second quarter of 2014, including potential reputational damage, the outcome of our investigation and any potential governmental inquiries, the outcome of litigation filed against us in connection with this cyber-attack, the extent of remediation costs and additional operating or other expenses that we may continue to incur, and the impact of potential future cyber-attacks or security breaches;
-
the effects of the spin-off of QHC that was completed on
April 29, 2016 on our business, including our ability to achieve the anticipated benefits of the spin-off; - any effects of our previously announced adoption of a Stockholder Protection Rights Agreement;
- any effects related to our previously announced exploration of strategic alternatives; and
-
the other risk factors set forth in our other public filings with the
Securities and Exchange Commission .
The Company cautions that the preliminary results for the three months
ended
Information on Non-GAAP Financial Measures
EBITDA is a non-GAAP financial measure which consists of net (loss)
income attributable to
Adjusted EBITDA is not a measurement of financial performance or liquidity under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities or any other measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. This calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table reconciles expected Adjusted EBITDA for the three
months ended
Three Months Ended | |||||||||||||
September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
Adjusted EBITDA | $ | 465 | $ | 661 | |||||||||
Interest expense, net | (233 | ) | (242 | ) | |||||||||
Benefit from (provision for) income taxes | 29 | (38 | ) | ||||||||||
Loss from operations of entities sold or held for sale, net of taxes |
(2 | ) | (5 | ) | |||||||||
Other non-cash expenses, net | 7 | 39 | |||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures |
(88 | ) | (304 | ) | |||||||||
Net cash provided by operating activities | $ | 178 | $ | 111 | |||||||||
The expected numbers for the period ended
A reconciliation of the Company’s projected 2016 Adjusted EBITDA, a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measure is omitted from this press release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain adjustments required for such reconciliation without unreasonable effort, including interest expense, net; provision for (benefit from) income taxes; other non-cash expenses, net; other changes in operating assets and liabilities and other adjustments that would be necessary to prepare a forward-looking statement of cash flows prepared in accordance with GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
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Source:
Community Health Systems, Inc.
W. Larry Cash, 615-465-7000
President
of Financial Services and Chief Financial Officer