Good day, and welcome to Community Health System's Second Quarter 2026 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 a zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Anton Hai, Vice President of Investor Relations. Please go ahead.

The events 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 EBITDA.

our second quarter 2026 conference call, and for your continued interest in CHS. Before we get into the call, I want to acknowledge the ongoing commitment and effort of all of our teammates and thank them for the work they are doing toward advancing our vision. In the operating environment, we have continued to make progress on our top priorities of improving quality to improving leapfrog safety grades and CMS star ratings, that we included 12 of our hospitals achieving a leapfrog A grade and approximately 70% achieving leapfrog A or B grades, we are proud of the recognition coming in from other noteworthy sources. For example, earlier this month, our Lutheran Hospital in Fort Wayne, Indiana, was awarded the American College of Cardiology's Heart Care Center National Distinction of Excellence, the only hospital in the state and one of only 100 hospitals across the country to receive this designation. Also, several of our hospitals were recognized by CMS for achieving zero hospital in some of the nation's best performance in this area, and many others received recognition and designations reflecting the quality care we provide to our patients. These recognitions underscore the significant progress our clinical teams have driven across multiple measures of safety and quality over the past few years, including record achievement in risk-adjusted mortality index, sepsis mortality, and putting positive movement in our recently completed employee surveys shows that we have a very engaged employee base, even as we recognize that we have significant work still to be done. Our ability to continue advancing in each of these areas will drive enhanced financial performance over time and long-term value creation for our organization. Operating performance for the second quarter of 2026 adjusted EBITDA was $380 million in the prior year period on a 9.8% decline in net revenue, primarily reflecting a smaller prior period benefit from newly approved state-directed payment programs, as well as divestitures completed over the past 12 months. Results for the quarter include the benefits from recently approved Medicaid state-directed payment programs in Indiana and Florida, which were offset expected increase in softness and demand for elective surgical procedures among commercially insured patients, which we attribute to continued consumer insecurity related to geopolitical instability prior to your period. Adjusted admissions resulting in a decline in net revenue for adjusted admissions. We believe that the non-ACA-related payer mix in the first half reflected temporary disruption in demand for health care services in our markets. And in fact, we were encouraged by the improving volume and surgical trends. we witnessed ex-softer surgeries and unsavorable paramix we experienced this year to date. Before handing it over, I want to reiterate how proud I am of the progress we are making as an organization to navigate a dynamic operating environment and emerge position for long-term success and improve financial results. At this point, I will turn the call over to our Chief Financial Officer, Jason Johnson, to review financial results and other information in greater detail.

Thank you, Kevin, and good morning, everyone. Financial results came in below our internal. Execute well on the controllable aspects of our business, including strong cost and progress on our overall volume trends, reflecting continued softness in elective procedures, and combined EBITDA contribution from our previous guidance, 4% year-over-year. Same-store inpatient admission, while same-store net rate benefits from an adjusted admission, a serious decline, 0% increase in benefits expenses, a percentage of net revenues, 70 basis points, and represented 5.6% of net revenue, and outpaced our forecast for 5% to 8% growth. Anesthesiology and radiology continues in this regard. The increase in anesthesia specialist fees is primarily due to higher salary net revenues from the use of 200 paid to repurchase approximately $368 million of the 4.75% senior secured notes due to 2031, and $231 million in Surgent, Birmingham. These acquisitions are a financial performance. We will continue to evaluate more to 11.7, EBITDA in a range of 1.3, continuing to come to our hospitals, which is driving higher-costs to provide care with minimal related net revenue. With our revised guidance, we are sending a similar impact in the second half, along with continued softness and elective surgery volumes, resulting in lower midpoint for adjusted edu. This concludes our prepared remarks, so at this time we will...

We will now begin the question and answer session. To ask a question, you may press start in 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, Please press star, then two. Please limit yourselves to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The question comes from Ben Hendricks with RBC Capital Markets. Please go ahead.

Hi, this is Michael Marion for Ben. Thanks for taking my question. I believe you mentioned a $20 million headwind related to the EPTC expiry in the quarter and guidance contemplates a similar run rate for the remainder of the year. What gives you confidence that the EPTC headwind doesn't worsen through the balance of the year, given that four queues typically your highest margin quarter, and we're seeing a higher mix of bronze plan selections with very high deductibles?

$90 million, $110 million, and the adjusted EBIT impact would be between $20 million and $30 million. And then in the second quarter, comfortable with our increased range, which now sits between $50 and $75 million of impact on an annual basis. And I think that pure self-tape may be metal down or tear down.

And Tim Keelit from Jefferies. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. Maybe, Jason, as I think about the guidance that you gave, given what we've seen in the first half of the year, could you help me bridge to that guide as we think through the back half of the year and anything you'd call out in terms of moving pieces that we need to figure or factor through our models for Q3 and Q4 separately.

Yeah, $65 million. And then on the benefit side, we layered in the PP benefits and states that we're not Indiana year-end at the high end from the benefit is the amount that we just recognized in the second quarter.

I understand. And then maybe, Kevin, as I think about the guidance cut, I mean, I understand the payer mix headwind here, but when I think about the free cash flow or the operating cash flow adjustment that you made, it looks to be a little bigger. So just curious how you're thinking about the drivers of that and what you're able to do. I know some of that is AR-related, so just curious if you can share with us, you know, some of the challenges you're facing on the cash flow side, just making it look worse than the payer mix headwind that you called out in the email line.

Thank you, Brian. You know, one of the challenges is really the slowdown, and then if there were...

Our next question comes from AJ Rice with UBS. Please go ahead.

Hi, everybody. Just maybe to drill down on what you're seeing in the surgical volumes a little bit more, I know you called out a couple of service lines. Would you say that the surgeries that you're seeing the softness in or surgeries that traditionally are viewed as more elective and postponable procedures? Is that what you're seeing? And then can you break it down between is this a phenomenon of what you're seeing around the public exchanges or is it broader than that? And then also another element of it is you have, I know you have standalone ASEs versus your hospital surgery, inpatient, outpatient. Is there any distinction between what you're seeing in the freestanding surgery centers with what you're seeing in the hospital-based surgeries?

Softness and service line softness is trending towards in delay or at least defer for periods of time, you know, get a cortisone shot, maybe are picking up. But it is kind of orthopedic MRIs, outpaced prior year. We still meet the procedures that are delaying the follow-up.

Then follow-up, maybe just ask about your uncompensated care. I know you gave the percentage of uncompensated care as a percent of revenue up significantly year to year. I wondered if, do you have any color on the percent of your admissions that are uninsured this year versus last year? And also I was wondering, did it step up significantly from Q1 to Q2?

Sure. So we were, you know, approximately, you know, roughly a 20% increase or so in self-pay visits.

And was that different than first quarter materially, or was first quarter sort of similar to second quarter?

It is.

Okay. Interesting. All right. Thanks a lot.

Our next question comes from Jason Casorla with Guggenheim. please go ahead.

Great. Thanks for taking my question. Maybe can you just walk through some of the mechanisms on the medical specialist fees, right? You've done a lot of work there to insource to help offset industry-wide pressures, but it does seem like these costs will pressure you regardless if volume trends are favorable or unfavorable to your enterprise. So I guess just like any updated thoughts on the medical specialist feedback drop, like if you can revisit some of those subsidies, if volumes remain pressured, or anything else to help offset the growth there would be helpful.

Yeah, so the income guarantees.

Okay, got it. And maybe could you guys comment on your thoughts around the proposed Medicare OPPS rule, the outpatient rule, and focus more so on, like, the 340B proposal, the provision in there, If that were to be finalized, like how you're balancing better, like OPTS rates against, you know, from that position against maybe any impacts to potential divestitures or otherwise. Just any thoughts on the proposed rates would be helpful.

So the for-profit hospitals did receive a pretty significant, I think it's close to a bump in effective January 1st, 2027. And, yes, the poor private hospitals who had received a benefit during the additional money that was paid them out of 340B, we are faced with having to pay that back begins next to 440B money.

This comes from Stephen Baxter with Wells Fargo. Please go ahead.

Yeah, hi, thanks. Just to kind of ask for a little bit more detail on the payer mix and service mix challenges, I guess would you say that those are, you know, largely or almost entirely driven by what you're talking about in terms of the exchange dynamics and the commercial elective procedures, or would you say that that kind of extends maybe into the medical, you know, side of the business as well? Like, I'm wondering if you could talk more about what you're seeing for, you know, employer-based coverage and demand there and maybe how that compares to the demand growth that you're seeing in Medicare and Medicaid in the quarter. Thank you.

Yeah, you know, I think the, you know, be about the same or continue to actually increase fairly. There is also, in terms of kind of the insured patients, economic headwinds with co-pays and deductibles, the emergency room, the amount of uninsured care that we're seeing are self-paid businesses coming through the emergency room. It's not the...

Okay, and then if we were to set aside, you know, the exchange headwinds in the back half and, you know, the moving parts on some of the Medicaid dollars? Like, how should we think about what guidance assumes in terms of, like, underlying performance? Do you assume these dynamics improve at all throughout the balance of the year, or would you say you've reflected something closer to what you saw in the first half now? Thank you.

Yeah, this is Jason. It really does look, you know, similar to the first half. We, deductibles.

Andrew Malk with Barclays. Please go ahead.

I think I heard at one point that the exit rate on surgeries was encouraging. Can you elaborate on that comment and, you know, how that's informing your back half outlook?

Second quarter, we did see positive year over year.

I appreciate the comments that consumer insecurity is driving lower elective surgeries overall. I think I've heard both sort of like macro concerns around gas prices as well as deductibles. Like, is there a view internally on, like, what's the bigger driver of this affordability issue?

So a couple things. We look at kind of the Consumer Confidence Index. It was low in as being a leading indicator in the second quarter, you know, continued softness. And that Consumer Confidence Index continues to appear, and I believe it's at a 12-month low right now. It's down around the lows of when we were daring. Getting to that, a couple things, communities in the middle, about 64 communities sit below one of the biggest drivers. Early in the year, we were expecting a rate increase in the market that's probably having a little bit of a muted impact, and we're seeing higher inflation not coming down like we had anticipated earlier in the year.

Great. Thank you.

Our next question comes from John Ransom with Raymond James. Please go ahead.

Hey, good morning, everybody. You know, one thing we've been focused on is the silver to bronze migration in the ACA. Is that something that you saw in the quarter? And more broadly, has the collectability on self-pay deteriorated, or do you think that's possible?

You know, we don't have complete, you know, what this year. I do think we are seeing business in the bronze plan this year, kind of patient by patient, that. In terms of collectability of self-pay, we only collect a few pennies on the dollar and, of course, on that, self-pay business.

Okay. And then just the comment on the ACA, I think initially you said like $100 million, you know, $100 million is revenue and $20 to $30 of EBITDA. So the attach rate was, you know, 25%, whereas some of your peers talked about much higher, decremental margins. I think tenant was close to 100%. Can you just talk about kind of your current thinking if you lose $100 of ACA revenue?

How does that translate into EBITDA losses?

Yeah, our initial guidance. Thank you.

That's very helpful.

This concludes our question and answer session. I would like to turn the conference back over to Kevin Hammons for any closing remarks.

You can always reach us at 615-465-7000. Have a good day, everyone.

The conference is now concluded. Thank you for attending today's presentation. you may now disconnect.